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Abstract

Higher weather volatility may be reflected in higher incidences of weather shocks. Weather shocks could potentially affect the supply of agricultural commodities and their prices. In this study, the effects of weather shocks on agricultural commodity prices in Central Asia are investigated at the provincial scale using monthly data for the period of 2000-2010. The study uses an estimation method, where the idiosyncratic components of the variables are analyzed using Feasible Generalized Least Squares (FGLS) panel regression in the presence of cross-sectional dependence and serial autocorrelation. The analysis indicates that weather volatility and, especially, the fluctuations in the availability of irrigation water have statistically significant effects on wheat prices in Central Asia. Weather shocks, involving lower than usual temperatures and precipitation amounts, could create favorable conditions for higher wheat prices in the region.

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