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Farmer Adaptations to Climate and Environmental Change

Paper Session

Saturday, Jan. 4, 2020 12:30 PM - 2:00 PM (PST)

Manchester Grand Hyatt, Mission Beach A
Hosted By: Agricultural and Applied Economics Association
  • Chair: Robert Chambers, University of Maryland-College Park

Intertemporal Arbitrage of Water and Long-Term Agricultural Investments: Drought, Groundwater Banking, and Perennial Cropping Decisions in California

Frances Moore
,
University of California-Davis
Jesus Arellano Gonzalez
,
University of California-Davis

Abstract

In arid areas, irrigation water is an essential input into agricultural production. However, rainfall and, correspondingly, surface water supplies, are often highly variable, creating uncertainty over the value of long-term, water-dependent investments in these cropping systems. Moreover, climate change is expected to increase both crop water requirements and the variability of seasonal rainfall, meaning the constraints imposed by variable water supplies are likely to grow in cost as climate change progresses. In this setting, storing water in wet years for use in dry years is valuable. In particular, it would be expected to increase the value of perennial crops, which require large up-front investments that pay off gradually over the life of the tree. We first show, in a simple theoretical model, that given the timing of returns to investments in perennial crops, there is always some level of drought risk above which annual crops will be preferred to perennials. We then demonstrate this effect empirically using a unique institutional setting in which access to a relatively new form of water storage, groundwater banking, effectively created spatial variation drought risk between irrigation districts in Kern County, California. Using a 21-year dataset of individual cropping decisions, we provide evidence that access to a large groundwater banking project, the Kern Water Bank, increased the rate at which farmers switched from lower-value annual crops such as wheat and alfalfa, into high-value perennial nut crops, primarily almonds and pistachio.

Do Climate Signals Matter? Evidence from Agriculture

Pierre Merel
,
University of California-Davis
Matthew Gammans
,
University of California-Davis
Xiaomeng Cui
,
Jinan University

Abstract

The foreseeable impacts of climate change on humans depend critically on the ability of societies to adapt to new climatic signals. Recent literature based on the US experience suggest little to no adaptation to climate trends in crop agriculture. We revisit this question using crop yield data from France and the US, as well as a novel panel econometrics framework that allows yearly outcomes to jointly respond to contemporaneous weather and climate signals, delivering estimates of both short-run (without climatic adaptation) and long-run (with climatic adaptation) warming impacts. In our most conservative model, which strictly relies on trends in climate to identify adaptation potential, we find implicit evidence of adaptation to beneficial temperatures (as captured by growing degree days), extreme heat, and precipitation. The evidence is particularly strong for France, which has experienced temperature trends over the past decades about twice as steep as those occurring in the US corn belt. Counterfactual analysis suggests that in France and the US, climatic adaptation has and can buffer against detrimental warming effects.

Are Yields Slowing Down Due to Recent Climate Trends? Evidence from a Farm-level Panel in France?

Simone Pieralli
,
Massey University New Zealand
Ariel Ortiz-Bobea
,
Cornell University

Abstract

There is a clear slowdown in wheat yields in much of Western Europe. Recent work has linked
this slowdown to ongoing climate trends. However, this literature has not explicitly accounted
for input use, which has been strongly affected by recent reforms of the European Common
Agricultural Policy. For instance, decoupling subsidies from output quantities changed incentives for producers, potentially leading to a reduction in the intensity of input usage. However, each farmer is different and unpacking the effect of individual farmers’ inputs usage on the effect that climate has on yields requires a disaggregated analysis at the farm level. We thus rely on farm level panel data from 18,178 farms in France over 1990-2015 to decompose to what extent the recent slowdown can be attributed to climate trends, input usage and technological change. This work also highlights the interplay between farmer input use and technological change in modulating the role of weather in agricultural production.
JEL Classifications
  • Q5 - Environmental Economics