Dynamic Effects of Drought on U.S. Crop and Livestock Sectors

Abstract

This study investigates the long-term adjustments to drought by crop and livestock sectors using a dynamic partial equilibrium quarterly model of the U.S. agricultural economy. Results show that short-term drought effects including increases in crop and forage prices are in tandem with decreased live cattle prices resulting from drought-induced beef cattle herd liquidation. Crop price increases in the long run cause livestock inventory reductions, leading to fewer animals moving through the U.S. meat supply chain and increased livestock prices. Longer-term market adjustments cause a significant decrease in consumer surplus, and prolonged drought amplifies and extends the model-predicted results.

Dynamic Effects of Drought on the U.S. Beef Supply Chain

“…Shocks are based on the differences between yields in the World Agricultural Demand and Supply Estimates (WASDE) report issued prior to crop years 2011 and 2012 (May) and yields given in the January reports after crops have been harvested to capture the difference between the anticipated yield and the realized yield. Source: Leister et al (2015).…”

“…For example, crop producer effects of drought include the changes in returns on sales as well as the value of the crop loss due to drought (Ding et al 2011). Leister et al (2015) conclude that while the sales increases in crop sectors did not compensate for drought-related crop losses in 2011, their model-predicted price increases in 2012 were large enough to result in a net welfare gain for crop producers at the national level in 2012. Dhoubhadel et al (2015) employ a stochastic equilibrium displacement model (EDM) to understand the potential effects of waiving the U.S. Environmental Protection Agency (EPA) Renewable Fuel Standard (RFS) mandate on livestock and crop sectors in the context of crop-related drought shocks for 2012.…”

Supply chain diversity buffers cities against food shocks

“…Using annual timescale food inflow supply networks (crops, live animals, feed, and meat) for the cities of the United States, we extract the annual domestic food inflow subgraph of each metropolitan area for the period 2012-2015, which is the period with available data 26 and when food production systems were substantially impacted by drought and agricultural production shocks on the Great Plains and western United States 27,28 . In this model a shock occurs when food inflows drop by more than the intensity threshold (ranging from 1% to 15%) for a duration of a year, with the drop measured against the average inflows of the four-year time period.…”

“…Shock cooccurrence is due to multiple factors, such as the tendency of droughts to impact large areas and of industries to collocate in space and to form strong interdependencies 27,28 . Even though drought and extreme heat may have a more immediate impact on crop and pasture losses, those losses can quickly propagate to other food sectors, for example, by reducing the crop inputs required to produce animal feed and by inducing livestock culling 27,28 . The contextual details of a cascading shock are hard to predict, making it important that the model consider both single and also cooccurring shocks.…”

Livestock Under Climate Change: A Systematic Review of Impacts and Adaptation

“…A shift in seasonal patterns, from hotter and drier climates, causes significant yield reductions and alterations in the temporal pattern of grassland production and grazing systems [30,56]. Increasing temperatures decrease pasture production, and result in poorer quality of forage species [29,31]. Similarly, higher temperatures are associated with increased lignification in plant tissues and decreased digestibility of forage directly affecting forage supply [8,47].…”