Sensitivity of the United States crop basis and distribution network to precipitation

Abstract

AbstractWe investigate the influence of precipitation patterns on the differences between Missouri corn and soybean elevator prices and nearby Chicago Board of Trade futures prices, also referred to as basis. Basis reflects the crop transportation network costs, and we use basis data to estimate the sensitivity of this network to precipitation. The estimates show that corn and soybean basis differ in terms of the immediate effect of weekly local precipitation. The growing‐season precipitation exhibits a U‐shaped relationship for both crops, reflecting the role of growing‐season precipitation on yields and the sensitivity of transportation system stress to crop volumes. We also find that the basis is affected by river transportation disruptions proxied by regional precipitation, which indicates when water levels might be too high or too low for normal barge traffic. Given the climate projections, there are concerns regarding precipitation's influence on the infrastructure that links Missouri crops to export facilities, crop growing conditions, and collection point disruptions. Hence, this research speaks to both the state of this part of the food system now and the potential impacts of changing weather patterns on the US crop distribution network. [EconLit Citations: Q13, L90].