Foreign yield shocks and domestic price variability: the case of maize in developing countries

Abstract

International trade helps to smooth food price swings caused from seasonal imbalances between domestic supply and demand. Trade also increases the possibility of importing price volatility from abroad. This concern looms large in the face of increased crop yield variability associated with climate change. We assess the extent to which maize yield shocks in exporting countries exacerbate the intra-seasonal variability of maize prices in a cross section of 75 markets in Africa, Asia, and Latin American countries during 2000-2018. We find that extreme below-trend reductions in maize yields in exporting countries are associated with increased intra-annual maize price variability in the focus countries. In contrast, above-trend maize yields in exporting countries are associated with reduced variability.