Breakfast commodities and global warming effects

Abstract

This paper investigates global warming in the breakfast index commodities by comparing the statistical properties of the prices of the commodities and their relationship with temperature from a regional perspective. Empirical results indicate that temperature deviations are individually mean reverting and display long memory behavior; however, in breakfast commodity prices mean reversion is only observed in the case of orange and wheat with the log prices. This evidence suggests that food commodities ares more vulnerable to shocks, with a higher exposure to the poorer population segments due to their high demand elasticity. Furthermore, the results of the cointegration analysis confirm the evidence of impact in prices of temperature deviations, especially for wheat and cocoa. For the rest of the cases, shock duration is expected to be short-lived with a smaller risk for the global economy.