Progress report for GS22-261
Project Information
The project will investigate the impact of climate change on the U.S. livestock sector and the potential adaptation strategies to cope with climate change. The U.S. livestock sector, especially beef and chicken, are mainly produced in the Southern U.S. and has been threatened by climate change. However, according to IPCC, the Southern US is projected to be hotter with longer and worse extreme heat in the future, which makes the livestock sector less sustainable. The reduction in livestock yield will drive up meat prices, which in turn exacerbates the market situation of the low-income groups. The potential adaptation strategies need to be investigated to cope with climate change impact and protect the disadvantaged groups.
In this study, we will (1) Build econometric models to empirically estimate climate influence on the hog and chicken production in the U.S. and project the changes in production rates under various climate scenarios. 2) Embed the estimated results from objective 1 to the Forestry and Agricultural Sector Optimization Model (FASOM) model to simulate the integrated impact of climate change on the U.S. livestock sector, focusing on the production and price changes, resource reallocation, and farm income changes. (3) Investigate adaptation alternatives to cope with climate change (e.g. changing the mix of livestock and breeds and investing in equipment), and estimate the value of adaptation. (4) Investigate the impact of climate change on the disadvantaged groups and the welfare improvement associated with the adaptation strategies.
Objective 1: Estimate climate impacts on the livestock production in the U.S. and project future impacts under various climate change scenarios
We will build fixed effects panel econometrics models to empirically estimate the climate change impacts on hog and chicken performance, including hog slaughter weight, piglet litter size, piglet survival rate, broiler slaughter weight, rate of lay, and broiler survival rate. Temperature, relative humidity, temperature, and humidity index (THI) (Ekine-Dzivenu et al. 2020) are considered the key explanatory variables as heat stress is the major threat to livestock performance.
Based on the best model selected by cross-validation, the impact of climate change on livestock performance under various emission assumption scenarios will be projected from now to the end of the century using the CMIP6 version projected climate data by IPCC. The projected impacts will be used in Objective 2.
Objective 2: Estimate the integrated impact of climate change on the U.S. livestock sector
The projected impact of climate change on the hog and chicken sector will be embedded into the Forestry and Agricultural Sector Optimization Model (FASOM) model to estimate the integrated impact of climate change on the U.S. livestock sector. The impact of climate change on cattle performance including the calf survival, calf loss rate, beef and milk production based on previous group work (Wang 2020; Fan 2018) will also be embedded. FASOM will simulate the new market equilibrium of the livestock market under various climate change scenarios. A set of comparison scenarios with and without the impact of climate change on crop yield based on previous studies will also be made to investigate the indirect impact of climate change on the livestock sector which is imposed through feed cost changes and the land-use changes.
Objective 3: Investigate the adaptation possibilities and the value of adaptation
FASOM can also simulate the optimal adaptation strategies to cope with climate change given various impacts projected by Objective 1. The potential adaptation strategies include changing livestock and breed mix, altering the land use by livestock, improving livestock management, and investing in cooling facilities (Escarcha, Lassa, and Zander 2018). All potential adaptation strategies are endogenized into the model so that they can be selected as the best fit or tradeoff.
As a comparison, a set of scenarios that do not allow the adaptation will also be examined for each climate case. The difference in the objective function between the with and without adaptation scenarios will be counted as the value of adaptation.
Objective 4: Investigate the influence on the well-being of livestock producers and low-income farmers induced by climate change impact on livestock with and without adaptation
As the market equilibrium price and quantity and the input costs will be changed by climate change impacts, the farm income will be recalculated based on simulated price and quantities. The meat consumption and utility changes of the low-income group will also be recalculated based on market information and price elasticities and utility assumptions from literature.
Research
Approach and methods for Objective 1
Several econometric models will be built to estimate the impact of climate change on livestock production and reproduction rates, including a) poultry egg production, b) broiler finishing weights, c) broiler loss rate, d) hog litter size, e) piglet death rates and f) hog finishing weights.
A panel dataset of the livestock production and reproduction rates will be obtained from the USDA quick stats database at the state level. The finest available time-frequency of the data will be collected. Namely, monthly for poultry data and quarterly for hog and cattle data. The climate data for each state will be recalculated based on the PRISM dataset to match the time-frequency of livestock production and reproduction rates.
In terms of models, the fixed effect panel model with heteroscedasticity handling has been selected as the base model. In terms of explanatory variables, degree days, relative humidity, and THI are selected as the critical variables with nonlinear and piecewise functional forms. The degree days and THI with various thresholds are calculated and used as candidate explanatory variables to give the flexibility of heat stress criteria selection, following Schlenker and Roberts (2009). A cross-validation procedure will be applied to select the model with the best performance.
After selecting the best-performed model, the impact of climate change on each livestock performance character is projected over climate scenarios. The climate data will be calculated based on the CMPI6 collection of results from General Circulation Models (GCMs) under various Shared Socioeconomic Pathways (SSP) scenarios. The impact of climate change on the beef and dairy cattle will also be projected based on the previous studies (Wang 2020; Fan 2018), including the calf survival, calf loss rate, and beef and milk production. The percentage changes in livestock production and reproduction rates will then be calculated, implying how vulnerable and unsustainable the livestock sector is under current technology and management strategies. The percentage changes will also be used by Objective 2 for further integrated analysis.
Approach and methods for Objectives 2 and 3:
Generally, the agricultural component of the Forestry and Agricultural Sector Optimization Model (FASOM) will be used to investigate the integral impact of climate change on the livestock sector (Objective 2) and the optimal adaptation possibilities to cope with climate change plus the value of adaptation (Objective 3). FASOM is a dynamic, nonlinear, and price endogenous programming model for the forest and agricultural sectors in the United States. Its agricultural component simulates land allocation and the resultant consequences for the commodity markets supplied by these lands (Adams et al. 2005). FASOM has been widely used in analyzing the impact of climate change on the agricultural sector, the consequential market response, and the optimal adaptation strategies to cope with climate change (Fei et al. 2021; Fei et al. 2017). This study will embed the projected climate change impact on the livestock sector in Objective 1 into FASOM and simulate the integrated climate change effects following Fei et al. (2021). The impact of climate change on crop yield and water usage has been built into FASOM by Fei et al. (2021), and will also be activated for this study.
For Objective 2, FASOM will be used to simulate the changes in market equilibrium under climate scenarios. The changes in the livestock sector value, production, and prices in each region and more market information will be calculated based on the model solution. A set of comparison scenarios with and without the impact of climate change on crop yield based on Fei et al. (2021) will also be made to investigate the indirect impact of climate change on the livestock sector, through feed cost changes and the land-use changes.
For Objective 3, we will focus on the adaptation strategies selected by the model. We endogenize potential adaptation strategies, including changing livestock and breeds mix, changing the land use by livestock, livestock management, and investing in cooling facilities. The management budget for each livestock and breed species has been built into the model, allowing these budgets to be switched within the convex combination of the historical livestock and breeds mix. Per animal land use (or animal unit month, AUM) is also built-in FASOM subject to the climate change impact on hay and forage yields. The cooling facility investment is a special adaptation strategy. We will first estimate the cost of installing more cooling facility and their offset on the climate change impacts on livestock performance (mainly due to the heat stress reduction). Then estimated cost and benefit will then be embedded into FASOM and operated only if a fixed cost of installation is charged. The adaptation strategies are also active when doing the Objective 2 analysis.
From Objective 2&3, we can estimate the integrated impact of climate change on the U.S. livestock sector and investigate the optimal adaptation strategies to cope with climate change and get sustainable development. If the results indicate the livestock sector is still vulnerable after adaptation, the alarm should be trigged to invest more in livestock technology improvement and make more mitigation efforts.
Approach and methods for Objective 4:
As climate change impacts will change the market equilibrium price and quantity and input costs, the farm income will be recalculated based on simulated market equilibrium price and quantities. The impact on the input cost changes will also be counted in the calculation.
For the meat consumption and utility changes of the low-income group, we will collect the specific price elasticity of meat, eggs, and dairy products and the suggested utility function with food consumption consideration from the literature. The meat consumption changes and the utility changes will then be analyzed using the market information under climate change.
Objective 4 examinate the changes in the well-being of livestock producers and disadvantaged customers affected by climate change's impact on the livestock sector. It is essential to secure farmers' quality of life and disadvantaged groups.
Educational & Outreach Activities
Participation Summary:
Cheng, M., McCarl, B.A. and Fei, C., 2022. Impact of Climate Change on the US Livestock Sector. Presented at AAEA Annual Meeting