Interstate Trade as a Mitigating Factor for the Effects of Climate Change on Illinois Agriculture

Participants

William Ridley, Principle Investigator, Department of Agricultural and Consumer Economics

Co-PIs
Sandy Dall’erba, Department of Agricultural and Consumer Economics
Francina Dominguez, Department of Atmospheric Sciences
Matias Carrasco Kind, National Center for Supercomputing Applications
Amanda Cole, University of Illinois Extension, Christian County Unit

Background

The impacts of climate change are already becoming apparent, with extreme weather events increasing in both number and severity. For Illinois agriculture, the stakes of climate change and its resulting impacts on local weather patterns are high, and designing effective adaptation and mitigation strategies involves recognition of how the effects of increasingly common extreme weather events affect agricultural systems. We focus on the domestic agricultural trade of Illinois counties with the other 47 contiguous U.S. states to assess the role of trade as a mitigation strategy for Illinois farmers in the face of climate change and extreme weather

Approach and Objectives

Our objective is to quantify how droughts and other extreme weather events in other regions of the U.S. impact farm profits at the county level in Illinois, specifically through the channel of interstate trade. As a first step to explore the role of extreme weather events on interregional trade we adopt the gravity model, a commonly used framework in empirical international trade research for analyzing the determinants of trade between two regions. The gravity model allows us to quantify the role of extreme weather events, in both the origin and destination, on trade flows of agricultural products between partners.

To assess the economic impact of climate change on agriculture we use the Ricardian framework, which models the relationship between farmland value and relevant factors such as climate data, while accounting explicitly for the full spectrum of possible adaptation strategies to climate change that a farmer can adopt. Because farm values in a region are dependent on demand for agricultural products in other markets, the combination of the gravity and Ricardian models lets us precisely measure how extreme weather events impact agricultural profits through trade.

The final step consists of conducting a simulation experiment on future agricultural profits in coming decades at the county level in order to illustrate the mitigation benefits of interstate trade. To do this we will use several NARCCAP (North American Regional Climate Change Assessment Program) climate models to assess a range of potential future climate conditions by calculating the expected change in farm profits due exclusively to changes in weather conditions because of changes in both local weather conditions as well as conditions in other markets caused through the channel of domestic trade.

While many recommendations have been offered on climate change adaptation strategies in the agricultural sector, the recommendations are often “global” in nature. An important advantage of our approach lies in its capacity to predict county-specific impacts and to draw attention to the fact that the total impacts from an extreme weather event in one region may generate benefits in other regions and vice versa. We envision that this project will turn methodological advances into useful application and innovative educational and informational approaches.

The goal of this project is to better inform key stakeholders in Christian County, and Illinois more broadly, about the expected impact of extreme weather events on food production and supply chain linkages between Illinois counties and the rest of the U.S. Because of the spatial nature of our research problem, we also plan to make our results available online through an interactive and dynamic data visualization platform showing the economic implications of severe weather events for individual Illinois counties. We hope that this information, complemented with our projections on weather conditions in Illinois in future decades, will help design a more resilient and sustainable agricultural system with results that are relevant to Illinois localities.