1. Outline Motivation Model Results Conclusions
Short and Long-run Impacts of Climate Changes
on Worldwide Wheat Prices
L. Gutierrez, F. Piras and P.P. Roggero
NRD - UNISS-Dipartimento di Agraria - MACSUR
UNCCD Conference session :
Integrated modelling of climate impacts on food and
farming at regional to supra-national scales,
Bonn 11 April 2013
L. Gutierrez, F. Piras and P.P. Roggero NRD - UNISS-Dipartimento di Agraria - MACSUR
Short and Long-run Impacts of Climate Changes on Worldwide Wheat Prices

2. Outline Motivation Model Results Conclusions
Outline
Motivation
Model
Results
Conclusions and Future works
L. Gutierrez, F. Piras and P.P. Roggero NRD - UNISS-Dipartimento di Agraria - MACSUR
Short and Long-run Impacts of Climate Changes on Worldwide Wheat Prices

3. Outline Motivation Model Results Conclusions
Outline
Motivation
Model
Results
Conclusions and Future works
L. Gutierrez, F. Piras and P.P. Roggero NRD - UNISS-Dipartimento di Agraria - MACSUR
Short and Long-run Impacts of Climate Changes on Worldwide Wheat Prices

4. Outline Motivation Model Results Conclusions
Outline
Motivation
Model
Results
Conclusions and Future works
L. Gutierrez, F. Piras and P.P. Roggero NRD - UNISS-Dipartimento di Agraria - MACSUR
Short and Long-run Impacts of Climate Changes on Worldwide Wheat Prices

5. Outline Motivation Model Results Conclusions
Outline
Motivation
Model
Results
Conclusions and Future works
L. Gutierrez, F. Piras and P.P. Roggero NRD - UNISS-Dipartimento di Agraria - MACSUR
Short and Long-run Impacts of Climate Changes on Worldwide Wheat Prices

6. Outline Motivation Model Results Conclusions
Main Determinants of Prices (and Production)
in World Grains Market
The recent rise in international agricultural commodity prices
has enlivened the debate on what the determinants of
commodity price behavior are and has reawakened interest
in coordinated policy actions at both the national and
international level.
Although numerous factors have been proposed in the
literature as explaining recent commodity price movements,
there is no general consensus on the relative weight that
should be attributed to each of them.
L. Gutierrez, F. Piras and P.P. Roggero NRD - UNISS-Dipartimento di Agraria - MACSUR
Short and Long-run Impacts of Climate Changes on Worldwide Wheat Prices

7. Outline Motivation Model Results Conclusions
Main Determinants of Prices (and Production)
in World Grains Market
The recent rise in international agricultural commodity prices
has enlivened the debate on what the determinants of
commodity price behavior are and has reawakened interest
in coordinated policy actions at both the national and
international level.
Although numerous factors have been proposed in the
literature as explaining recent commodity price movements,
there is no general consensus on the relative weight that
should be attributed to each of them.
L. Gutierrez, F. Piras and P.P. Roggero NRD - UNISS-Dipartimento di Agraria - MACSUR
Short and Long-run Impacts of Climate Changes on Worldwide Wheat Prices

8. Outline Motivation Model Results Conclusions
Main Determinants of Prices (and Production)
in World Grains Market
Growing food demand (Trostle, 2008; Von Braun, 2007;
Krugman, 2011)
Oil prices and Biofuel programs (Mitchell, 2008; Headey and
Fan, 2008)
The decline of commodity stocks (Abbot, Hurt and Tyner,
2008; Mitchell, 2008)
Speculation (Irwin and Merrin, 2010; Gutierrez 2012)
Climate Effects ?
L. Gutierrez, F. Piras and P.P. Roggero NRD - UNISS-Dipartimento di Agraria - MACSUR
Short and Long-run Impacts of Climate Changes on Worldwide Wheat Prices

9. Outline Motivation Model Results Conclusions
Main Determinants of Prices (and Production)
in World Grains Market
Growing food demand (Trostle, 2008; Von Braun, 2007;
Krugman, 2011)
Oil prices and Biofuel programs (Mitchell, 2008; Headey and
Fan, 2008)
The decline of commodity stocks (Abbot, Hurt and Tyner,
2008; Mitchell, 2008)
Speculation (Irwin and Merrin, 2010; Gutierrez 2012)
Climate Effects ?
L. Gutierrez, F. Piras and P.P. Roggero NRD - UNISS-Dipartimento di Agraria - MACSUR
Short and Long-run Impacts of Climate Changes on Worldwide Wheat Prices

10. Outline Motivation Model Results Conclusions
Main Determinants of Prices (and Production)
in World Grains Market
Growing food demand (Trostle, 2008; Von Braun, 2007;
Krugman, 2011)
Oil prices and Biofuel programs (Mitchell, 2008; Headey and
Fan, 2008)
The decline of commodity stocks (Abbot, Hurt and Tyner,
2008; Mitchell, 2008)
Speculation (Irwin and Merrin, 2010; Gutierrez 2012)
Climate Effects ?
L. Gutierrez, F. Piras and P.P. Roggero NRD - UNISS-Dipartimento di Agraria - MACSUR
Short and Long-run Impacts of Climate Changes on Worldwide Wheat Prices

11. Outline Motivation Model Results Conclusions
Main Determinants of Prices (and Production)
in World Grains Market
Growing food demand (Trostle, 2008; Von Braun, 2007;
Krugman, 2011)
Oil prices and Biofuel programs (Mitchell, 2008; Headey and
Fan, 2008)
The decline of commodity stocks (Abbot, Hurt and Tyner,
2008; Mitchell, 2008)
Speculation (Irwin and Merrin, 2010; Gutierrez 2012)
Climate Effects ?
L. Gutierrez, F. Piras and P.P. Roggero NRD - UNISS-Dipartimento di Agraria - MACSUR
Short and Long-run Impacts of Climate Changes on Worldwide Wheat Prices

12. Outline Motivation Model Results Conclusions
Main Determinants of Prices (and Production)
in World Grains Market
Growing food demand (Trostle, 2008; Von Braun, 2007;
Krugman, 2011)
Oil prices and Biofuel programs (Mitchell, 2008; Headey and
Fan, 2008)
The decline of commodity stocks (Abbot, Hurt and Tyner,
2008; Mitchell, 2008)
Speculation (Irwin and Merrin, 2010; Gutierrez 2012)
Climate Effects ?
L. Gutierrez, F. Piras and P.P. Roggero NRD - UNISS-Dipartimento di Agraria - MACSUR
Short and Long-run Impacts of Climate Changes on Worldwide Wheat Prices

13. Outline Motivation Model Results Conclusions
This study developed a methodology for analyzing and
quantifying the impact of the main factors, as shock to
stocks, oil prices, cost inputs, exchange rates and...drought on
wheat prices and production.
The model is composed by 6 sub-models.
Each sub-model analyzes a specific country or region − >.
− > (i.e) the main exporter countries : Argentina, Australia,
Canada, Russia, EU, USA.
L. Gutierrez, F. Piras and P.P. Roggero NRD - UNISS-Dipartimento di Agraria - MACSUR
Short and Long-run Impacts of Climate Changes on Worldwide Wheat Prices

14. Outline Motivation Model Results Conclusions
This study developed a methodology for analyzing and
quantifying the impact of the main factors, as shock to
stocks, oil prices, cost inputs, exchange rates and...drought on
wheat prices and production.
The model is composed by 6 sub-models.
Each sub-model analyzes a specific country or region − >.
− > (i.e) the main exporter countries : Argentina, Australia,
Canada, Russia, EU, USA.
L. Gutierrez, F. Piras and P.P. Roggero NRD - UNISS-Dipartimento di Agraria - MACSUR
Short and Long-run Impacts of Climate Changes on Worldwide Wheat Prices

15. Outline Motivation Model Results Conclusions
This study developed a methodology for analyzing and
quantifying the impact of the main factors, as shock to
stocks, oil prices, cost inputs, exchange rates and...drought on
wheat prices and production.
The model is composed by 6 sub-models.
Each sub-model analyzes a specific country or region − >.
− > (i.e) the main exporter countries : Argentina, Australia,
Canada, Russia, EU, USA.
L. Gutierrez, F. Piras and P.P. Roggero NRD - UNISS-Dipartimento di Agraria - MACSUR
Short and Long-run Impacts of Climate Changes on Worldwide Wheat Prices

16. Outline Motivation Model Results Conclusions
This study developed a methodology for analyzing and
quantifying the impact of the main factors, as shock to
stocks, oil prices, cost inputs, exchange rates and...drought on
wheat prices and production.
The model is composed by 6 sub-models.
Each sub-model analyzes a specific country or region − >.
− > (i.e) the main exporter countries : Argentina, Australia,
Canada, Russia, EU, USA.
L. Gutierrez, F. Piras and P.P. Roggero NRD - UNISS-Dipartimento di Agraria - MACSUR
Short and Long-run Impacts of Climate Changes on Worldwide Wheat Prices

17. Outline Motivation Model Results Conclusions
To analyze the relationship we use the Global Vector
AutoRegression (GVAR) methodology proposed by Pesaran et
al. (2004) and Dees et al. (2007).
Each country model is individually estimated by including
country-specific and global foreign-specific variables.
The specification of the model requires two stages.
First each country VARX model is estimated.
In the second stage we stack all six individual VARX models
and link them using a Trade weight matrix.
L. Gutierrez, F. Piras and P.P. Roggero NRD - UNISS-Dipartimento di Agraria - MACSUR
Short and Long-run Impacts of Climate Changes on Worldwide Wheat Prices

18. Outline Motivation Model Results Conclusions
To analyze the relationship we use the Global Vector
AutoRegression (GVAR) methodology proposed by Pesaran et
al. (2004) and Dees et al. (2007).
Each country model is individually estimated by including
country-specific and global foreign-specific variables.
The specification of the model requires two stages.
First each country VARX model is estimated.
In the second stage we stack all six individual VARX models
and link them using a Trade weight matrix.
L. Gutierrez, F. Piras and P.P. Roggero NRD - UNISS-Dipartimento di Agraria - MACSUR
Short and Long-run Impacts of Climate Changes on Worldwide Wheat Prices

19. Outline Motivation Model Results Conclusions
To analyze the relationship we use the Global Vector
AutoRegression (GVAR) methodology proposed by Pesaran et
al. (2004) and Dees et al. (2007).
Each country model is individually estimated by including
country-specific and global foreign-specific variables.
The specification of the model requires two stages.
First each country VARX model is estimated.
In the second stage we stack all six individual VARX models
and link them using a Trade weight matrix.
L. Gutierrez, F. Piras and P.P. Roggero NRD - UNISS-Dipartimento di Agraria - MACSUR
Short and Long-run Impacts of Climate Changes on Worldwide Wheat Prices

20. Outline Motivation Model Results Conclusions
To analyze the relationship we use the Global Vector
AutoRegression (GVAR) methodology proposed by Pesaran et
al. (2004) and Dees et al. (2007).
Each country model is individually estimated by including
country-specific and global foreign-specific variables.
The specification of the model requires two stages.
First each country VARX model is estimated.
In the second stage we stack all six individual VARX models
and link them using a Trade weight matrix.
L. Gutierrez, F. Piras and P.P. Roggero NRD - UNISS-Dipartimento di Agraria - MACSUR
Short and Long-run Impacts of Climate Changes on Worldwide Wheat Prices

21. Outline Motivation Model Results Conclusions
To analyze the relationship we use the Global Vector
AutoRegression (GVAR) methodology proposed by Pesaran et
al. (2004) and Dees et al. (2007).
Each country model is individually estimated by including
country-specific and global foreign-specific variables.
The specification of the model requires two stages.
First each country VARX model is estimated.
In the second stage we stack all six individual VARX models
and link them using a Trade weight matrix.
L. Gutierrez, F. Piras and P.P. Roggero NRD - UNISS-Dipartimento di Agraria - MACSUR
Short and Long-run Impacts of Climate Changes on Worldwide Wheat Prices

22. Outline Motivation Model Results Conclusions
The GVAR model includes five variables for each
country-specific VARX model: the wheat export prices, the
wheat stock to utilization ratio, the nominal exchange rate
measured as the ratio of the local currency per unit of US
dollar, the fertilizer price and the standardized precipitation
index SPI for which we take the negative values.
The SPI is an index based on the probability of recording a
given amount of precipitation.
The index is negative for drought, and positive for wet
conditions.
L. Gutierrez, F. Piras and P.P. Roggero NRD - UNISS-Dipartimento di Agraria - MACSUR
Short and Long-run Impacts of Climate Changes on Worldwide Wheat Prices

23. Outline Motivation Model Results Conclusions
The GVAR model includes five variables for each
country-specific VARX model: the wheat export prices, the
wheat stock to utilization ratio, the nominal exchange rate
measured as the ratio of the local currency per unit of US
dollar, the fertilizer price and the standardized precipitation
index SPI for which we take the negative values.
The SPI is an index based on the probability of recording a
given amount of precipitation.
The index is negative for drought, and positive for wet
conditions.
L. Gutierrez, F. Piras and P.P. Roggero NRD - UNISS-Dipartimento di Agraria - MACSUR
Short and Long-run Impacts of Climate Changes on Worldwide Wheat Prices

24. Outline Motivation Model Results Conclusions
The GVAR model includes five variables for each
country-specific VARX model: the wheat export prices, the
wheat stock to utilization ratio, the nominal exchange rate
measured as the ratio of the local currency per unit of US
dollar, the fertilizer price and the standardized precipitation
index SPI for which we take the negative values.
The SPI is an index based on the probability of recording a
given amount of precipitation.
The index is negative for drought, and positive for wet
conditions.
L. Gutierrez, F. Piras and P.P. Roggero NRD - UNISS-Dipartimento di Agraria - MACSUR
Short and Long-run Impacts of Climate Changes on Worldwide Wheat Prices

25. Outline Motivation Model Results Conclusions
The country-specific VARX also includes foreign-specific
variables.
The foreign-specific variables are constructed using
export-based weights. The choice of weights based on exports
is undertaken with the rationale that exogenous shocks, as
wheat stocks reductions or exchange rate shocks, could
pass-through on export prices in all countries with the trade
channels.
Thus the model allows country-specific variables to be
affected by foreign variables. For example, wheat export prices
in a country will be also influenced by the world trade
weighted wheat prices of its competitors.
L. Gutierrez, F. Piras and P.P. Roggero NRD - UNISS-Dipartimento di Agraria - MACSUR
Short and Long-run Impacts of Climate Changes on Worldwide Wheat Prices

26. Outline Motivation Model Results Conclusions
The country-specific VARX also includes foreign-specific
variables.
The foreign-specific variables are constructed using
export-based weights. The choice of weights based on exports
is undertaken with the rationale that exogenous shocks, as
wheat stocks reductions or exchange rate shocks, could
pass-through on export prices in all countries with the trade
channels.
Thus the model allows country-specific variables to be
affected by foreign variables. For example, wheat export prices
in a country will be also influenced by the world trade
weighted wheat prices of its competitors.
L. Gutierrez, F. Piras and P.P. Roggero NRD - UNISS-Dipartimento di Agraria - MACSUR
Short and Long-run Impacts of Climate Changes on Worldwide Wheat Prices

27. Outline Motivation Model Results Conclusions
The country-specific VARX also includes foreign-specific
variables.
The foreign-specific variables are constructed using
export-based weights. The choice of weights based on exports
is undertaken with the rationale that exogenous shocks, as
wheat stocks reductions or exchange rate shocks, could
pass-through on export prices in all countries with the trade
channels.
Thus the model allows country-specific variables to be
affected by foreign variables. For example, wheat export prices
in a country will be also influenced by the world trade
weighted wheat prices of its competitors.
L. Gutierrez, F. Piras and P.P. Roggero NRD - UNISS-Dipartimento di Agraria - MACSUR
Short and Long-run Impacts of Climate Changes on Worldwide Wheat Prices

28. Outline Motivation Model Results Conclusions
We present here the impulse response of wheat prices to a
shock of the drought variable (SPI)
The impulse response traces out the response of current and
future values of a variable (wheat export prices and
production) to a (standardized) shock of other variables as in
this case a drought shock.
Analyzing how a variable responds to shocks to other variables
we obtain information on the economic relationships
L. Gutierrez, F. Piras and P.P. Roggero NRD - UNISS-Dipartimento di Agraria - MACSUR
Short and Long-run Impacts of Climate Changes on Worldwide Wheat Prices

29. Outline Motivation Model Results Conclusions
We present here the impulse response of wheat prices to a
shock of the drought variable (SPI)
The impulse response traces out the response of current and
future values of a variable (wheat export prices and
production) to a (standardized) shock of other variables as in
this case a drought shock.
Analyzing how a variable responds to shocks to other variables
we obtain information on the economic relationships
L. Gutierrez, F. Piras and P.P. Roggero NRD - UNISS-Dipartimento di Agraria - MACSUR
Short and Long-run Impacts of Climate Changes on Worldwide Wheat Prices

30. Outline Motivation Model Results Conclusions
We present here the impulse response of wheat prices to a
shock of the drought variable (SPI)
The impulse response traces out the response of current and
future values of a variable (wheat export prices and
production) to a (standardized) shock of other variables as in
this case a drought shock.
Analyzing how a variable responds to shocks to other variables
we obtain information on the economic relationships
L. Gutierrez, F. Piras and P.P. Roggero NRD - UNISS-Dipartimento di Agraria - MACSUR
Short and Long-run Impacts of Climate Changes on Worldwide Wheat Prices

31. Outline Motivation Model Results Conclusions
Results : Impulse Response of Wheat Prices (P)
L. Gutierrez, F. Piras and P.P. Roggero NRD - UNISS-Dipartimento di Agraria - MACSUR
Short and Long-run Impacts of Climate Changes on Worldwide Wheat Prices

32. Outline Motivation Model Results Conclusions
Results : Impulse Response of Wheat Production (Q)
L. Gutierrez, F. Piras and P.P. Roggero NRD - UNISS-Dipartimento di Agraria - MACSUR
Short and Long-run Impacts of Climate Changes on Worldwide Wheat Prices

33. Outline Motivation Model Results Conclusions
Results : Demand-Supply Graph
L. Gutierrez, F. Piras and P.P. Roggero NRD - UNISS-Dipartimento di Agraria - MACSUR
Short and Long-run Impacts of Climate Changes on Worldwide Wheat Prices

34. Outline Motivation Model Results Conclusions
Conculsions and Future works
Adverse weather can induce a reduction of global average
yields for grains and affect prices
The model allows for the analysis of the channels of
transmission from external shocks ( heavy increase/decrease
in oil-based fuel prices, strong depletion in stocks level,
effective exchange rate changes, adverse climate change) to
wheat prices and production.
The model may help to monitor the worldwide wheat
commodity market and to allow for the analysis of the impact
of different shocks at national as well as at global level.
L. Gutierrez, F. Piras and P.P. Roggero NRD - UNISS-Dipartimento di Agraria - MACSUR
Short and Long-run Impacts of Climate Changes on Worldwide Wheat Prices

35. Outline Motivation Model Results Conclusions
Conculsions and Future works
Adverse weather can induce a reduction of global average
yields for grains and affect prices
The model allows for the analysis of the channels of
transmission from external shocks ( heavy increase/decrease
in oil-based fuel prices, strong depletion in stocks level,
effective exchange rate changes, adverse climate change) to
wheat prices and production.
The model may help to monitor the worldwide wheat
commodity market and to allow for the analysis of the impact
of different shocks at national as well as at global level.
L. Gutierrez, F. Piras and P.P. Roggero NRD - UNISS-Dipartimento di Agraria - MACSUR
Short and Long-run Impacts of Climate Changes on Worldwide Wheat Prices

36. Outline Motivation Model Results Conclusions
Conculsions and Future works
Adverse weather can induce a reduction of global average
yields for grains and affect prices
The model allows for the analysis of the channels of
transmission from external shocks ( heavy increase/decrease
in oil-based fuel prices, strong depletion in stocks level,
effective exchange rate changes, adverse climate change) to
wheat prices and production.
The model may help to monitor the worldwide wheat
commodity market and to allow for the analysis of the impact
of different shocks at national as well as at global level.
L. Gutierrez, F. Piras and P.P. Roggero NRD - UNISS-Dipartimento di Agraria - MACSUR
Short and Long-run Impacts of Climate Changes on Worldwide Wheat Prices

37. Outline Motivation Model Results Conclusions
Conclusions and Future works
Enlarging the number of sub-models, i.e. including Brasil,
China and India.
Enlarging the analysis to other commodities as corn and
soybeans
Linking the results to micro-models
Provide a Java graphical interface.
L. Gutierrez, F. Piras and P.P. Roggero NRD - UNISS-Dipartimento di Agraria - MACSUR
Short and Long-run Impacts of Climate Changes on Worldwide Wheat Prices

38. Outline Motivation Model Results Conclusions
Conclusions and Future works
Enlarging the number of sub-models, i.e. including Brasil,
China and India.
Enlarging the analysis to other commodities as corn and
soybeans
Linking the results to micro-models
Provide a Java graphical interface.
L. Gutierrez, F. Piras and P.P. Roggero NRD - UNISS-Dipartimento di Agraria - MACSUR
Short and Long-run Impacts of Climate Changes on Worldwide Wheat Prices

39. Outline Motivation Model Results Conclusions
Conclusions and Future works
Enlarging the number of sub-models, i.e. including Brasil,
China and India.
Enlarging the analysis to other commodities as corn and
soybeans
Linking the results to micro-models
Provide a Java graphical interface.
L. Gutierrez, F. Piras and P.P. Roggero NRD - UNISS-Dipartimento di Agraria - MACSUR
Short and Long-run Impacts of Climate Changes on Worldwide Wheat Prices

40. Outline Motivation Model Results Conclusions
Conclusions and Future works
Enlarging the number of sub-models, i.e. including Brasil,
China and India.
Enlarging the analysis to other commodities as corn and
soybeans
Linking the results to micro-models
Provide a Java graphical interface.
L. Gutierrez, F. Piras and P.P. Roggero NRD - UNISS-Dipartimento di Agraria - MACSUR
Short and Long-run Impacts of Climate Changes on Worldwide Wheat Prices

41. Outline Motivation Model Results Conclusions
Thanks
Thanks!
L. Gutierrez, F. Piras and P.P. Roggero NRD - UNISS-Dipartimento di Agraria - MACSUR
Short and Long-run Impacts of Climate Changes on Worldwide Wheat Prices