DYNAMIC EFFECTS OF DROUGHT ON U.S. CROP AND LIVESTOCK SECTORS

Amanda M. Leister, Philip L. Paarlberg and John G. Lee
Authors registered in the RePEc Author Service: Amanda M. Countryman

Journal of Agricultural and Applied Economics, 2015, vol. 47, issue 2, 261-284

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.

Date: 2015
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