Abstract
In the United States, like in other countries around the world, agri-food security is challenged by a growing population and less predictable weather conditions. Extreme weather events such as droughts and extreme rainfall increase the volatility of agricultural yield for producers. This means changes in comparative advantages, in the domestic trade of agricultural products and, in turn, in the manufacturing of food products since the former are necessary inputs in the production of the latter. We investigate how locally sourced agricultural inputs are substituted with inputs imported from other states. We construct a structural framework for manufactured food production as a function of labor, capital and agricultural inputs. We first estimate a model for the trade in animals and fish (SCTG01), one for cereal grains (SCTG02), and one for the other agricultural products (SCTG03) which is composed mainly of fruits, vegetables and soybeans. It will constitute the first step of our two-stage analysis. In the second stage, we will estimate a nested production function for processed food at the state level. Our combination of two structural models allows us to quantify the extent to which food manufacturing in any single state is dependent on local weather shocks affecting the production of locally grown inputs and of weather shocks taking place in faraway locations where the remaining inputs are imported from. The findings provide details on the key linkages in the domestic food supply chain and are informative for the design of policies aiming at mitigating the impacts of climate change on the U.S. food and agricultural sector.
