I’ve been hearing concerns about famine stemming from the war in Ukraine. When thinking about how bad that situation is likely to be, the most important thing I don’t know is the price elasticity of wheat: how much more wheat do farmers plant, given some increase in price? This is the sort of thing which I expect economists have already measured pretty well. Does anyone know of a good source?
[Question] Elasticity of Wheat Supply?
I am not sure that is going to be too informative as some other issues might dominate. Also, I don’t think it’s correct to think of some measure of wheat supply elasticity at a global level—in that it probably masks more than it informs. Local supply elasticities would be relatively known (I would think) but the bigger problem there is transportation. Can you get the increases output in one place to the markets where supply has been diminished due to the war in Ukraine. Given the state of transportation constraints in shipping (but maybe this could be off-set by the air cargo repurposing of prior passenger planes) I suspect that will have a larger impact than the reduced output (and shipping) from Ukraine.
This paper, published 2010 so a bit dated, has a number of different estimates for elasticity so might give you some ideas.
This indicates a range of .05 to .40. That’s congruent with my experience in the ag industry; farmers tend to be risk-averse concerning price volatility and as such rarely scale up total production massively.
You can hedge against that volatility to some extent by signing purchase contracts in the spring during planting, but buyers obviously offer such contracts based on their own desire to not be stuck buying high at harvest time, so the hedging can’t totally resolve the problem.
There’s also the agronomy of it to consider in some cases; sustainable crop cycles don’t always allow for agile reallocation of land.
PDF download link.