GC13E-04 When Agricultural and Economic Opportunities Dry Up: Drought in the Mississippi River Basin

Abstract: The incidence and severity of droughts has been intensifying in recent decades, posing serious risks for agricultural production. One of the largest agricultural producing regions in the U.S. is the Mississippi River Basin, representing a significant amount of global grain and soybean production. We enhance an economy-wide model, the U.S. Regional Energy Policy (USREP) model, by including disaggregated irrigated and rainfed crop production and land use change, to assess the potential economic and land use impacts of drought in the Mississippi River Basin. Drought yield impacts on crops imposed in the model from 2030 to 2050 are calculated based on data from historical droughts in the U.S. Overall, we find that drought has a negative impact on agricultural production (shown in Figure 1) and that the wider the scope of the drought, either through greater coverage of crops or regions, the greater the damages to agricultural production and the regional economy. Under the most extreme drought scenario, total exports of crops from the U.S. decrease by 8.4 billion USD or 28.04 percent in 2050 relative to a scenario with no drought. We observe that both impacted and unimpacted farmers and regions adopt a combination of adaptation strategies, including agricultural intensification, irrigated crop production, land use change and trade. While irrigation is used to mitigate some of the impacts, many of the impacted regions instead choose to change land use from crops to animal products. However, among the adaptation strategies available, domestic and international trade offers the most effective way to dampen the economic impact from drought, with regions unimpacted by drought exporting agricultural products to impacted regions. This suggests to policymakers that reducing barriers to trade could limit the economic impacts of extreme weather events in the future.