What explains agricultural performance: climate normals or climate variance?
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This paper measures the influence of climate normals (average long-term surface wetness and temperature) and interannual climate variance on farms in the United States and Brazil using satellite data. The paper finds that just climate normals or just climate variance variables can explain both net revenues and how much land is used for cropland. However, because they are correlated with each other, it is important to include both normals and variance in the same statistical model to get accurate measures of their individual contribution to farm outcomes. In general, higher climate variance increases the probability that land is used for cropland in both countries and higher temperatures reduce both cropland and land values. Other annual effects were not consistent across the two countries.
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