How Extreme Weather Events Affect Agricultural Trade Between US States

The U.S. is largely self-sufficient in agricultural food production, supported by a well-developed storage and interstate trade system. However, extreme weather events put increasing pressure on agriculture, potentially impacting the country’s ability to provide food for its growing population and underscoring the importance of maintaining a resilient food supply chain. 

A new study from the University of Illinois Urbana-Champaign, published in the Proceedings of the National Academy of Sciences, looks at U.S. interstate trade for agricultural products, analyzing how weather events in one area can have wide-ranging effects on food production.

“With climate change, we're going to experience more intense and more frequent extreme weather events such as drought and flooding, which impact agricultural output. It’s important to prepare for ways to mitigate climate shocks to food manufacturing,” said lead author Hyungsun Yim, a doctoral student in the Department of Agricultural and Consumer Economics (ACE), part of the College of Agricultural, Consumer and Environmental Sciences at U. of I.

Sandy Dall’erba, professor in ACE and founding director of the Center for Climate, Regional, Environmental and Trade Economics (CREATE), is co-author on the paper.

“Our work is the first to map how extreme weather shocks in any given state affect the local yield and, in turn, propagate to any food manufacturing state in the country,” Dall’erba stated. “For example, a severe drought in Midwestern grain-producing states will transmit along the supply chain and affect the largest food manufacturing states such as California, Texas, Illinois, and New York.”

The U.S. produces 80% to 85% of domestic food for consumption, so adaptation strategies depend on domestic crops, national weather conditions, and a reliable transportation network. About 57% of grains and 77% of livestock in the U.S. are used as inputs for domestic food manufacturing, while a smaller share is sold directly to households, and the rest is exported to other countries. 

Yim and Dall’erba obtained data from the U.S. Bureau of Transportation Statistics about state-to-state trade flows for crops, livestock, and fruits and vegetables over two decades. They combined this information with weather data on temperature, precipitation, and extremes (drought and wetness) to compute their results.

They investigated climate shocks such as the 2012 drought that took place in the Midwestern grain-producing states and had significant impacts on domestic trade flows. Iowa, Illinois, and Nebraska typically produce 34% of grains traded in the U.S., but in 2012 their production share dropped significantly. 

As a result, Nebraska had to increase its imports of agricultural commodities to feed its livestock, and Texas shifted parts of its grain imports to new sources such as Kansas, Oklahoma, and Louisiana. The price of wheat, corn, and soybeans increased by up to 20%, affecting food manufacturers across the country.

Overall, the researchers found that a 1% increase in drought in the states producing agricultural commodities reduces their domestic exports by 0.5% to 0.7%, and this in turn reduces food manufacturing production by an average of 0.04%.

“The latter figure, which indicates the size of the effect on food production, is rather small, showing the resilience of the agrifood supply chain,” Dall’erba noted.

The findings can help states bolster their preparations to mitigate the effects of climate shocks on food production, guiding investments in infrastructure and strategic crop reserves.

“If we can project future drought intensities, we can estimate critical trade corridors that would be impacted by those events,” Yim said. “For example, if there is a production shock in Nebraska, California might have to shift quickly to source grains from other places. That kind of planning involves multi-state coordination to manage storage facilities and transportation infrastructure such as railroads, highways, and riverways.”

Dall’erba added that the interstate transportation system needs to adapt to climate-driven shifts in production.

“Future agricultural production is expected to take place northward and closer to the Colorado Rockies compared to current locations. The process is already ongoing as growing crops in higher latitudes and altitudes is a way to mitigate the increase in temperature induced by climate change,” he said. 

The interstate dependence highlighted in this research also has implications for crop insurance and disaster relief programs, the researchers said. 

The paper, “Impact of extreme weather events on the US domestic supply chain of food manufacturing,” is published in PNAS