Decomposing Weather Impacts on Crop Profits: the role of Agrochemical Inputs Adaptation

Résumé

The costs of climate change on agriculture depends critically on farmers' adaptation. In this paper, we investigate how farmers adapt their input mix in response to weather fluctuations during the growing season using individual panel data from Meuse (France) between 2006 and 2012. Specifically, we estimate structural models of profit-maximizer farmers with crop-specific yields and input-specific demand functions, conditionally on farm and year fixed effects. The results show that weather fluctuations affects crop yields but that farmers adapt their fertilizers and pesticides applications to limit the negative impacts. The effects are heterogeneous among crops and inputs. Temperatures and precipitations affect also the inputs productivity and reduce the substitution between the inputs. We use our estimates to simulate the impacts of climate change and show that farmers' profits in Meuse will reduce by 3.02% in 2050 under a RCP 4.5 scenario, principally due to a direct effect on plant growth. Society could however benefit from adaptation as the reduction in damages due to agrochemicals' negative externalities represent twice the market costs bared by the agricultural sector. (with Raja Chakir)