Does Climate Variability Affect Agricultural Trade?

Climate change potentially affects the specialization of production and trade in agricultural markets. Previous studies suggest that changes in temperature and precipitation trend levels have a significant impact on yields, production, and commodity prices. This paper estimates the short-run and long-run effects of climate intra-annual anomalies variability, using temperature and precipitation, on agricultural trade across regions and economic levels. We employ ARDL-based mean-group type estimators on a panel data from 1962 to 2014 covering 102 countries. Our modelling controls for income, comparative advantage in land, productivity, and trade membership. We find a heterogeneous response to climate variability across our estimation panels. Precipitation affects total world agricultural exports, in particular livestock and dairy products; while temperature affects dairy and eggs exports. At the regional level, temperature has negative effects in the short-run in some regions, and a mixed influence in the long-run. Precipitation shows diverse regional impacts in the short and long-run. Further, we find that in the long-run, high-income countries are significantly affected by temperature and precipitation, while temperature positively affects developing countries. These findings on how agricultural export patterns are vulnerable to variations in climatic conditions could be used in further projections considering climate change as a determinant of agricultural trade