Weathering the Storm: Trade Openness and the Resilience of Agricultural Markets Under Increasing Weather Extremes

Abstract

We analyse how a higher level of trade integration in global agricultural markets can mitigate food‐security risks in a world where agro‐climatic events increase both in frequency and intensity. By incorporating stochastically simulated crop‐yield reductions into a partial‐equilibrium model of global agricultural markets, we compare commodity supply, demand and price responses under two alternative trade pathways: a trade‐liberalised world and a trade‐restricted world. By implementing the same sets of yield reductions (input) on these two pathways and comparing synthesised market outcomes (output), we examine the role of trade as a mechanism for ensuring more resilient agricultural markets. Our findings indicate that trade integration could stabilise food availability and mitigate domestic and world price volatility. While trade policies can play a significant role in mitigating food‐security risks in a climate‐uncertain future, they must be complemented by broader policies to enhance global resilience and food security.