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Essay example - Weather Phenomenons vs. Crop Prices

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Macro & Microeconomics
Pages 6 (1506 words)
Commodity prices are generally influenced by a number of economic factors, the most common being the demand and supply of the commodity in the market. Nevertheless, the forces of demand and supply are also influenced by other macroeconomic factors such as the prevailing weather…

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Other weather phenomena also affect the prices of the crops commodities in different ways, as will be discussed in the paper.
In its literal meaning, weather refers to a state of the atmosphere, to the extent to which it is cold, hot, dry, wet, stormy, calm, cloudy, or clear. In general terms, it refers to the day-to-day temperature and rainfall activities. According to Arnold (2010), weather is associated with a number of phenomena that influence greatly the prices of crops. The phenomena include droughts, prolonged heavy rainfalls (El-Niño), hurricanes, hailstorms, lightning, clouds, snow, and wind. The objective of this paper is to explore the current weather phenomena and their impact on crop prices.
Drought refers to a period of a dry spell when there is no rainfall. It is one of the major weather phenomena that affect the prices of crops. This is due to the fact that during a dry spell, crops usually dry up in the farms leading to poor harvest. This in turn, will lead to shortage of crops in the market (Bolling, 2000). When such a shortage occurs, the demand of the crops in the market will likely outweigh their supply. This will result in an increase in the price of these crops, as many buyers will be competing to buy them. Such a situation is being witnessed in the Midwest of the USA, where persistent drought has seen the prices of corn increase tremendously over the past few weeks (Sosnowski, 2012).
Johnson (2012) notes that 10-months corn futures and soybeans’ prices hitting unprecedentedly high since 2008 are due to the speculation that the spreading drought currently witnessed in the Midwest of the US will cut the US’s supplies of these crops, as it is the world’s largest producer of the crops. This was after the meteorological department predicted that the Midwest would experience unusually hot and dry spell in the next 10 days, as occasional light showers would be too little for ...
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