Extreme Temperatures and Field-Level Crop Quality, Yield, and Revenue

• Agricultural Economics Workshop

Date and Location

Thursday, April 7, 2022, 4:10 PM - 5:30 PM
Online Meeting, Zoom

Abstract

How does weather affect the revenue of irrigated, specialty crop producers? We decompose the mechanisms by which temperature exposure drives changes in grower revenue: quality and yield. While yield is well-studied, quality matters because of its role in contractual arrangements and price determination. We use proprietary field-level data from a large tomato processor operating in California's $1 billion processing tomato industry. Data consists of yield, quality, price, and grower practices for every field contracted with the processor between 2011 and 2020. We address selection issues that bias estimates of the effect of weather on yield and quality in many settings. In contrast to previous work on irrigated crops, our results suggest that extreme temperatures negatively affect both yield and quality, leading to reduced grower revenue. While the yield effect dominates, failing to account for quality significantly underestimates the true effect of temperature exposure on revenue by up to 20%. We find that estimates using county-level yield data, as opposed to field-level, are attenuated due to omitted variables bias and measurement error. A back-of-the-envelope counterfactual analysis finds that warming trends over the last three decades reduced grower revenue by an average of 1.6% per year.