THE IMPACT OF HYDROMETEOROLOGICAL HAZARDS ON AGRICULTURE IN THE U.S. MIDWEST

Abstract

Hydrometeorological hazards can have detrimental effects on agricultural production and farm income. This paper examines how growing season temperature extremes, droughts and flood events affect corn yields, soybean yields, net farm income and crop insurance transfers across 889 counties in the U.S. Midwest over 2002 to 2023. Weather shocks and crop yield losses are linked by a well established biological channel. However, farm income represents a richer set of responses and is more complex. Therefore, the income impact of hydrometeorological shocks do not always mirror yield impacts. Outcome variables may also respond differently to composite drought indices versus raw temperature and precipitation measures. The Palmer Z-index, flood events from the NOAA Storm Events Database, temperature bins and precipitation measures are used to explore the effect of these shocks on agricultural outcomes. The study finds a robust association between days with average temperature above 30 degrees Celsius and reductions in corn and soybean yields of 3.1 percent and 2.7 percent per day respectively. By comparison, an additional five day period of moderate to extreme drought is associated with reductions in corn yields by 2.3 percent and soy yields by 2 percent. An additional day with average temperature above 30 degrees Celsius is associated with a reduction in farm operations income by $2.06 million per county - the largest negative association with income. However, it is not significantly associated with large insurance responses. By comparison, an additional moderate to extreme drought period is associated with an increase in insurance payments of over $1 million per county. The results suggest that insurance buffers moisture shocks more than heat.