The Effect of the El Nino Southern Oscillation on U.S. Corn Production and Downside Risk

El Nino Southern Oscillation (ENSO) teleconnections imply anomalous weather conditions around the globe, causing yield shortages, price changes, and even civil unrests. Extreme ENSO events may cause catastrophic damages to crop yields, thus amplifying downside risk for producers. This study presents a framework for quantifying the effects of climate on crop yield distributions. An empirical application provides estimates of the effect that ENSO events have on the means of U.S. county-level corn yield distributions, as well as the probabilities of catastrophic crop loss. Our findings demonstrate that ENSO events strongly influence these probabilities systematically over large production regions, which has important implications for research and policy analysis in the production, risk management, climate change, and civil unrest literatures.Climate, El Nino Southern Oscillation, Maximum Entropy, Risk Management, Yield Distribution, Crop Production/Industries, Environmental Economics and Policy, Production Economics,

A Mixed Effects Model of Crop Yields for Purposes of Premium Determination

Farm income is highly variable due to annual price and yield uncertainties. The federally subsidized crop insurance program is an important tool for managing this risk, and has grown from a relatively modest program to one that encompasses the majority of productive cropland in the country. The success of this program depends on identification of actuarially fair insurance premium rates, which in turn depends on accurate estimation of farm-level yield distributions. We use the confidential U.S. Department of Agriculture Risk Management Agency (RMA) panel dataset to estimate farm-specific distributions of yields and actually fair crop insurance premiums. Our ongoing work includes using the difference between our estimated actually fair premiums and RMA's to predict which insurance contracts farmers select. Ultimately, we will predict potential efficiency gains from using our empirical model for premium determination.Yield, Crop Insurance, Policy, Mixed Model, Agricultural and Food Policy,

Agricultural Arbitrage, Adjustment Costs, and the Intensive Margin

Farmland and capital are an important and rapidly expanding component of the agricultural economy, and empirical evidence suggests that these assets are quasi-fixed in that adjustment costs are incurred when holdings are altered. Increased interest in the rate of return for investing in farmland suggests that an important consideration is the effect of adjustment costs on this return. A novel theoretical model is developed that ties together contributions from the farmland pricing and adjustment cost literatures, and the first order conditions for a utility maximizing decision maker are rearranged into intertemporal arbitrage equations that are similar in spirit to traditional finance models. The common assumptions that land and capital are quasi-fixed assets, and that production is characterized by constant returns to scale are tested and the evidence supports these assumptions. An empirical application of the arbitrage equations provides evidence that risk aversion and adjustment costs are jointly significant components of agricultural production, and that adjustment costs generate significant changes in the rate of return to farmland. The results have important policy implications as sluggish supply response due to quasi-fixity can lead to dramatically inflated commodity prices, and an accurate measure of the farmland return can help determine how far the extensive margin will expand or contract in response to a variety of policy scenarios, such as the subsidization of corn for ethanol, an increase in the variety of subsidized crop insurance products, or the introduction of new revenue support programs such as ACRE.Arbitrage, Adjustment Costs, Farmland, Asset Pricing, Capital, Cost Function, Risk, Production, Agricultural Finance, Consumer/Household Economics, Crop Production/Industries, Farm Management, Financial Economics, Land Economics/Use, Production Economics, Risk and Uncertainty,

Global urban environmental change drives adaptation in white clover

Urbanization transforms environments in ways that alter biological evolution. We examined whether urban environmental change drives parallel evolution by sampling 110,019 white clover plants from 6169 populations in 160 cities globally. Plants were assayed for a Mendelian antiherbivore defense that also affects tolerance to abiotic stressors. Urban-rural gradients were associated with the evolution of clines in defense in 47% of cities throughout the world. Variation in the strength of clines was explained by environmental changes in drought stress and vegetation cover that varied among cities. Sequencing 2074 genomes from 26 cities revealed that the evolution of urban-rural clines was best explained by adaptive evolution, but the degree of parallel adaptation varied among cities. Our results demonstrate that urbanization leads to adaptation at a global scale

The Effect of Climate on Crop Insurance Premium Rates and Producer Subsidies

Likely climate change impacts in the U.S. include damages to agricultural production resulting from increased exposure to extreme heat. However, considerable uncertainty remains regarding impacts on the performance of the Federal Crop Insurance Program. Here we utilized a large panel of corn yield data to predict the effect of a 1oC uniform increase in temperature on premium rates and subsidies for the Group Risk Plan. We found a statistically significant increase in rates, which is primarily driven by increased exposure to extreme heat. These increases induce large increases in subsidy payments, the incidence of which is spread disproportionately across regions

The Effect of the El Nino Southern Oscillation on U.S. Corn Production and Downside Risk

El Nino Southern Oscillation (ENSO) teleconnections imply anomalous weather conditions around the globe, causing yield shortages, price changes, and even civil unrests. Extreme ENSO events may cause catastrophic damages to crop yields, thus amplifying downside risk for producers. This study presents a framework for quantifying the effects of climate on crop yield distributions. An empirical application provides estimates of the effect that ENSO events have on the means of U.S. county-level corn yield distributions, as well as the probabilities of catastrophic crop loss. Our findings demonstrate that ENSO events strongly influence these probabilities systematically over large production regions, which has important implications for research and policy analysis in the production, risk management, climate change, and civil unrest literatures

Information and Firms’ Search Behavior

Information and communications technologies (ICTs) have spread rapidly over the past decade. There has been considerable interest in the effect of such technology on search costs, search behavior and welfare outcomes, particularly in developing countries. This paper investigates the impact of a new search technology, mobile phones, on traders’ search and marketing behavior in Niger. We construct a novel theoretical model of sequential search, in which traders engage in optimal search for the maximum sales price, net transport costs. The model predicts that the introduction of a new search technology, such as mobile telephones, will increase traders’ reservation sales prices and the number of markets over which they search. To test the predictions of the theoretical model, we use a unique market and trader panel dataset from Niger. We show that the duration of mobile phone coverage increases the number of markets over which traders search and their number of market contacts. This result increases nonlinearly in the duration of mobile phone coverage in a particular market, suggesting that the relationship between mobile phone coverage and traders’ search behavior is convex with larger effects accruing over time. This effect is also stronger for larger traders – namely those who trade over longer distances – but does not appear to have differential effects by gender, age, road quality or market size. These results provide important empirical evidence for search theoretic models that assume the existence of a causal link between search costs and search behavior and suggest potential welfare improvements