Productivity Implications of Extreme Precipitation Events: the case of Dutch Wheat Farmers

Abstract

The paper applies a stochastic production frontier model to measure factor productivity and assess the impact of large variations in precipitation on production and the technical efficiency of farms that grow wheat in the Netherlands.  A crop level analysis is conducted using an unbalanced panel of 322 farms in 129 regions that grew wheat for at least two years in the period 2002-2013.  In general, higher rates of precipitation were found to reduce wheat production. However, those effects were found to be dependent on the type of soil and the month in which the precipitation was realized.  Heavy precipitation in December and August were found to decrease efficiency, while increasing efficiency in April.  Results show the importance of controlling for local conditions and interaction effects between variables when assessing the implications of extreme weather events.