Assessing the effects of climate change on agricultural production and profitability

Abstract

The dissertation is concerned with comparing the effects of climate change on agricultural production and profitability, across alternative climate change scenarios. The research objectives include estimating the effects of climate change on crop yields and simulating the effects of climate change on farm profit. In the first major step of this dissertation, a historical relationship between weather and crop yields was estimated using a principal components regression (PCR) model. Long-run climate change predictions generated from three climate change scenarios were incorporated into the estimated PCR model to predict crop yields through 2050. The PCR model was estimated for several northern and southern U.S. states at the county level. This result is consistent with the expectation that a probable impact of global climate change, should it occur as predicted, would be to shift some cropping patterns from the southern U.S. to the northern U.S.. In the second major step of this dissertation, predicted crop yields were used to generate farm profits in several northern and southern U.S. states using a dynamic simulation approach. Farm profits were generated by allowing acreage response with the consideration of crop rotation. By incorporating the Bellman equation in the crop rotation model, optimized acreage responses among multiple crops were determined based on their relative profitability. The results showed that acreage response alone is not able to eliminate the differences in production and profitability effects between warm and cold climate scenarios.