Abstract
A large literature has documented the effects of weather on agricultural yields. However, weather not only impacts the quantity produced, but also the quality of the product. Due to data limitations, the quality effects have primarily been studied using lab experiments for specific attributes, and the financial implications for farmers of a quality effect are less clear. Using a unique longitudinal micro-level data set of Swiss apple orchards that include information on both the quantity produced as well as the quality, we show that the latter can have an even larger effect on farm revenue. Ignoring the quality of the harvested product substantially biases the impact of weather extremes on agricultural income and the potential effects of climate change. Our quality measure is the orchard-year specific price shock. If an orchard gets a lower price for its specific apple variety compared to previous years and compared to other orchards in the same year, we observe the market’s valuation of its inferior quality accounting for overall price movements (other orchards growing same variety that year) as well as orchard specific factors (orchard fixed effects). We find that spring frost events induce farm gate price drops and thus revenue reductions of up to 2.05% per hour of exposure.
Highlights
Weather impacts both crop yield quantity and quality and is a driving force of farm income volatility[1]
The orchard fixed effects account for time-invariant differences of each orchard and by differencing with other orchards through the inclusion of year-fixed effects we account for market wide price movements
Our results show that idiosyncratic spring frost events induce only minor drops in yields while they cause farm gate price and revenue reductions of up to 2.05% per hour of exposure
Summary
Weather impacts both crop yield quantity and quality and is a driving force of farm income volatility[1]. We use orchard and year-specific price shocks to assess how weather impacts apple quality and farm revenue. Our unique data set gives prices for orchards that each grow one particular apple variety over several years This allows us to construct a causal link between weather and the quality-induced income effect. Our data consists of a unique orchard-level panel dataset on apple yield and price records consisting of 2′462 observations from 1997 to 2014 in Switzerland This allows us to investigate how late spring frost events impact apple quality. Never being quantified in any region for any crop before, these findings on weather induced quality reductions are of particular relevance for agricultural risk and risk management literature and add to the climate change impacts literature, as late frosts are more likely to occur in the future and effects of climate change on crop quality have received limited attention so far[9,13,14]
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