Severe water scarcity across major wheat-growing regions could have a significant impact on global wheat prices as climate change increases the frequency and extent of drought, according to a new international study published in Earth's Future.
Researchers combined climate data, crop production areas and global commodity prices to examine the relationship between drought and wheat markets worldwide. The study found that the extent of severe water scarcity could explain about 74% of annual fluctuations in global wheat prices from 2000 to 2021.
Among the study's co-authors is Jørgen E. Olesen, professor and head of the Department of Agroecology at Aarhus University.
The researchers developed an indicator called Severe Water Scarcity, or SWS, which measures the proportion of global cropland experiencing drought during periods when crops are most sensitive to water shortages. The measure accounts for drought occurring across multiple agricultural regions simultaneously or within a short period.
The study found that wheat had a substantially stronger relationship between water scarcity and prices than maize. Researchers did not identify a comparable relationship for rice.
On average, about 5% of the world's wheat-growing area experienced severe water scarcity in a given year. That share increased during particularly dry years, exceeding 15% in 2000, 2010, 2012 and 2020.
Climate modeling indicated that severe water scarcity is likely to affect larger portions of the world's wheat-growing regions as global temperatures rise. At about 2 degrees of global warming, the model projected an average wheat price of approximately $273 per metric ton. At 3 degrees of warming, the projected average increased to about $364 per metric ton, roughly three times the inflation-adjusted global wheat price recorded in 2010.
The researchers noted that drought is one of several factors affecting wheat prices. Energy and fertilizer costs, grain stocks, trade policies and geopolitical conflicts also influence global markets.
However, the study identifies widespread drought as a climate-related factor that can be quantified and linked to global wheat price fluctuations. The findings indicate that simultaneous drought across major production regions can transmit the effects of local water shortages through international commodity markets.
The researchers said the findings have implications for food security because wheat is a staple food for billions of people. They suggest future food security assessments should consider not only gradual changes in crop yields but also recurring drought events affecting multiple major production regions at the same time or within short periods.
Source: Aarhus University, "New research: Climate change could triple the price of wheat"