Assessing the Effects of Climate Change on Farm Production and Profitability: Dynamic Simulation Approach

Ruohong Cai, John Bergstrom, Jeffrey Mullen and Michael E. Wetzstein

No 103420, 2011 Annual Meeting, July 24-26, 2011, Pittsburgh, Pennsylvania from Agricultural and Applied Economics Association

Abstract: In this paper, a dynamic optimization model was developed to simulate how farm-level realized price and profitability respond to yield change which was induced by climate change. Producers' acreage response was included in the dynamic model considering crop rotation effect. In the crop rotation model, a modified Bellman equation was used to dynamically optimize the net present value of farm profit for a five-year interval. This simulation process was repeated through the year 2050. Then yield, price, and acreage response were compiled to generate realized profit. Results generally indicated that reduction in crop yields due to climate change results in reduced farm profitability for most of the states studied. Predicted climate change is more likely to pose a problem for agricultural production and profitability in the southern U.S. states as compared to the northern U.S. states. Our results also suggest that acreage response alone is not sufficient to ameliorate the potential negative effects of global climate change on agricultural production and profitability. The results of this research are expected to provide a foundation for future related research to aid producers' crop rotation decisions in an unstable price environment.

Keywords: Agricultural Finance; Crop Production/Industries; Environmental Economics and Policy; Farm Management; Land Economics/Use; Production Economics; Productivity Analysis; Risk and Uncertainty (search for similar items in EconPapers)
Pages: 51
Date: 2011
New Economics Papers: this item is included in nep-agr, nep-cmp, nep-ene and nep-env
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://ageconsearch.umn.edu/record/103420/files/R ... 0AAEA%20meetingA.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea11:103420

DOI: 10.22004/ag.econ.103420

Access Statistics for this paper

More papers in 2011 Annual Meeting, July 24-26, 2011, Pittsburgh, Pennsylvania from Agricultural and Applied Economics Association Contact information at EDIRC.
Bibliographic data for series maintained by AgEcon Search ().