CLIMATE CHANGE AND CALORIE CROPS - GLOBAL IMPACTS, ADAPTATION AND IMPLICATIONS FOR US AGRICULTURAL COMMUNITIES: COLLABORATIVE RESEARCH WITH COLUMBIA UNIVERSITY AND BOSTON UNIVERSITY

The long term goals of this project are to enhance understanding of the potential consequences of climate change for the economic health of US farmers, and the latter's dependence on the interplay of the direct channel of domestic crop yield impacts, and the indirect channels of the global distribution of yield shocks, domestic and foreign adaptation, and the net effects of these driving forces on international commodity prices.Climate change has the potential to impact farm profitability in three distinctive ways: first, there is an extensive literature documenting how agricultural output, specifically yields, are influenced by changing weather conditions: measures of extreme heat (Schlenker and Roberts, 2009), soil moisture (Ortiz-Bobea et al., 2019), or a combination of the two (Haqiqi et al., 2021) are important drivers. Second, weather might also impact the required inputs, e.g., by lowering labor productivity (Graff Zivin and Neidell, 2012), or requiring more pest control, etc. Both output and input quantities have been examined in a panel setting, where random year-to-year shocks are used in the identification. Using such exogenous random variation has statistical advantages as it allows for a causal identification of the key parameters (Dell et al., 2014). The third important component for farm productivity are prices for both outputs and inputs. Panel models have implicitly assumed prices to remain fixed, which is a defensible assumption when one examines the effect on a small entity like a farm or county. However, climate change has the potential to significantly alter global productivity and thereby change global food prices.Climate change might lower farms' productivity, but it might also lead to higher prices, partially offsetting productivity losses incurred by the farmer. Bringing in these price feedbacks is especially important when modeling the survival of farmers. While farmland has been consolidating over the last three decades, family farms still make up the largest share of agricultural activity (MacDonald et al., 2018). The recent price decline in 2020 lead to an increase in farm bankruptcies (Farm Bureau, 2020). While the ultimate goal of the project is to asses how changing climate conditions will impact US farm survival, we need several steps to model this adequately. Given the integration of global commodity markets, it doesn't just matter what happens in the US but around the world. Specifically, we will extend both panel and error-correction models to get empirical estimates of the weather on yields as well as a novel empirical model that utilizes annual CO2 shocks to identify the role of CO2 in commercially farmed fields. We will also estimate adaptation responses, most notably area shift by estimating the effect of soil quality on productivity, usually captured in the fixed effect in panel models. This will feed into a computational general equilibrium (CGE) model that will generate estimates of commodity price changes, which will turn be used as inputs to force empirical relationships we will identify among farm productivity, global prices, and farm survival.This project will advance understanding of how US agriculture will be impacted by climate change, with a special emphasis on the feedback through international markets, commodity prices, and their effects on farm survival. It will generate fundamental knowledge and practical analytical tools to assess the effects of climate change on U.S. agriculture and food systems, and leverage these to support federal and stakeholder decision making to guarantee these systems' long-run sustainability in an increasingly interconnected world economy. Specifically, the proposed research aims to aid adaptation planning and decision by achieving the following:Goal 1: Quantifying the threat posed by climate change to the economic viability of US agriculture and its ability to satisfy domestic and international food and fiber demands,Goal 2: Advancing understanding of climate adaptation measures, their efficacy, opportunities for and constraints on adoption, and ultimate potential to sustain the economic vitality of US farm operations and rural communities,Goal 3: Identifying potential interactions between adaptations and environmental quality or the natural resource base upon which the agricultural economy depends as a means to consider the longer-run sustainability of US agriculture,Goal 4: Estimating potential outlays in assistance that would need to be provided by the government to ensure farm survival, andGoal 5: Crosscutting federal engagement to disseminate project results and insights regarding the agricultural impacts of and adaptation to climate change domestically and abroad, and manner in which these two elements interact, mediated by the international economy, and what the implications are for US farmers and rural communities.In support of these goals, the project will pursue an integrated program of empirical and simulation modeling research with four specific objectives (with their respective goals indicated in parentheses):Objective 1. Activities: Empirically quantifying the effects of CO2 fertilization on yields domestically and abroad (Goal 1), the implications of new climate change projections for crop yield impacts in different world regions circa 2050 (Goals 1, 5), and the historical relationship between international commodity price movements and indicators of US farm sector competitiveness (Goals 1, 4). Resources: 2 FTEs (BU: 0.5 graduate student in Year 1; Columbia: 1 graduate student in Year 1 and 0.5 graduate student in Year 2).Objective 2. Activities: Quantifying the extent to which farmers in different world regions are likely to adapt by shifting cultivation geographically and from rainfed to irrigated production, accounting for potential barriers to adaptation and ways in which they might circumscribe attempts to moderate climatically-induced crop losses (Goals 2, 5). Resources: 2 FTEs (BU: 1 graduate students in Year 1 and 0.5 graduate student in Year 2; Columbia: 0.5 graduate student in Year 2).Objective 3. Activities: Characterizing the combined effects of climate impacts, offsetting adaptation and potential adaptation barriers on global calorie crop production, international trade and regional welfare (Goals 2, 3, 5). Resources: 2.5 FTEs (BU: 1, 1 and 0.5 graduate students in Years 1, 2 and 3, respectively).Objective 4. Activities: Elucidating how impacts, adaptation and adjustments in international prices jointly affect the competitiveness and profitability of US farmers and the economic vitality of US rural communities (Goals 3, 4, 5). Resources: 2 FTEs (BU: 1 graduate student in Year 3; Columbia: 1 graduate student in Year 3).The small amounts of PI and Co-PI effort on the project (0.02-0.06 FTE annually) will be allocated to management and coordination activities to ensure successful execution of the objectives. Supervision and mentoring of graduate students in their conduct of the substantive research activities outlined in the project narrative will take place as part of PI's and Co-PI's faculty job responsibilities.