Weather extremes and their impact on crop transportation networks: Evidence from U.S. Midwestern elevators.

Abstract

The grain price margins between buyers and sellers (i.e., basis spread) is influenced by the infrastructure used to transport crops from collection points to ports, which can be disrupted by weather extremes like floods and severe storms. Such disruptions are expected to become more frequent, potentially increasing food insecurity and impacting farm incomes. On average, the U.S. accounts for one-third of global corn and soybean production from 2012/13 to 2020/21, so the infrastructure to move crops from the main growing region to the nation's ports is critical to global crop and food markets. Despite the critical nature of these issues, there is limited research specifically examining the effects of weather extremes on the U.S. crop transportation network. This study investigates how weather extremes disrupt crop transportation networks, and, in turn, how those disruptions affect the basis spread of corn and soybeans. It uses basis spread data from nearly 5,000 U.S. midwestern corn and soybean elevators spanning from 2012 to 2020, along with natural disaster declarations to represent weather extremes affecting crop transportation. Using a three-step process, it calculates least cost transportation routes to a port, adjusts for weather disruptions, and integrates disaster, transportation cost, and control variables into a fixed effects, panel data model that explains variation in basis spread. Results show natural disasters, particularly flash floods and winter storms, negatively affect basis spread. The cost effects of natural disasters disrupting crop transportation routes further decrease basis spread. Strengthening crop transportation infrastructure to withstand flooding and winter storms could reduce disruptions in this network. These findings underscore the value of Federal and State policies that prioritize investments in resilient transportation infrastructure, particularly in regions prone to flash floods and winter storms. Strengthening this infrastructure could not only reduce the economic costs of weather disruptions but also affect farm income and food security.