Value of decadal climate variability information for agriculture in the Missouri River basin

Abstract

This study estimates economic value and management adaptations associated with decadal climate variability (DCV) information. We develop a stylized model to illustrate the value of climate information where agricultural decisions are conditional to different sets of DCV information. The decision maker can adjust management given such information where the economic value and associated adaptations are of interest. The framework is implemented within a stochastic programming model that simulates market activities and welfare changes under different probability distributions on DCV phase occurrence in the Missouri River Basin (MRB), the largest river basin in the USA. This basin produces approximately 46 % of the wheat, 33 % of the cattle, and 26 % of the grain corn in the USA. The results show that a conditional DCV information generates net benefits of $28.84 million annually, while the perfect information results in net benefits of $82.30 million. In addition, crop acreage shifts and the extent of irrigation vary with different DCV information. This study shows that the benefits gained from accurate climate information may address the producers’ needs across a range of DCV scenarios characterized by the persistence of the impacts. Most notably, this is the first economic study to our knowledge to investigate the combined occurrence of three DCV phenomena, and the joint and persistent impacts over crop yields. Our results provide compelling evidence for long-term planning of crop mix selection, and infrastructure related to water irrigation mechanisms.

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Notes

  1. 1.

    All deviations are statistically different from zero. See Mehta et al. (2012) for a complete description of the testing approach on both time and spatial scales.

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Acknowledgments

Seniority of the paper is shared between Mario Andres Fernandez and Pei Huang. This research was supported by the U.S. Department of Agriculture National Institute of Food and Agriculture under grant 2011-67003-30213 in the NSF-USDA-DOE Earth System Modelling Program, and by the NOAA-Climate Programs Office-Sectoral Applications Research Program under grant NA12OAR4310097. We are grateful to Katherin Mendoza for providing simulated data from the SWAT model on DCV impacts on crop yields. Part of this work was done at Texas A&M University and Landcare Research New Zealand, we acknowledge the support of these institutions. We also thank Pike Brown, Adam Daigneault, Richard Woodward and ​Witsanu Attavanich, for their helpful comments. We also thank Leah Kearns for editorial assistance. Two anonymous referees provided comments that improved the initial version of this paper.

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Correspondence to Mario Andres Fernandez.

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Fernandez, M.A., Huang, P., McCarl, B. et al. Value of decadal climate variability information for agriculture in the Missouri River basin. Climatic Change 139, 517–533 (2016). https://doi.org/10.1007/s10584-016-1807-x

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Keywords

  • Phase Combination
  • Conditional Information
  • Crop Acreage
  • Decadal Climate Variability
  • Markov Transition Probability