Recipient Organization
NORTH DAKOTA STATE UNIV
1310 BOLLEY DR
FARGO,ND 58105-5750
Performing Department
(N/A)
Non Technical Summary
Extreme and prolonged droughts in the MRB exacerbate the problems of congestion and delays within the transportation network, reduce crop yields, hamper agricultural trade, and threaten food security. Specifically, they have an imminent effect on farm income, rural prosperity, and the economic well-being of communities both within and beyond the farm gates in the U.S. heartland. The project seeks to assess the resilience of the supply chain systems of corn and soybeans, the drought-induced impediments in the network under uncertainty, and the resulting impacts on trade, food security, and farm income. We will assess the implications of droughts on (1) production in the MRB, (2) transportation from the Midwest to the Gulf Coast and Pacific Northwest, (3) global trade, welfare, and food security, and (4) the variations in soybean and corn basis values and farm earnings. The research will shed light on the drought resilience of the Mississippi River system, focusing on agricultural shipments and international trade. Our findings will inform federal policies that prepare the nation's food and transportation systems for the adverse effects of drought shocks. Consequently, this research project will provide essential knowledge on the functioning of farming and transportation systems under trade uncertainty and enhance market efficiency and performance.
Animal Health Component
50%
Research Effort Categories
Basic
50%
Applied
50%
Developmental
(N/A)
Goals / Objectives
We will assess the drought resilience of corn and soybean supply chains from domestic producers in the Midwest to transportation via the Gulf Coast and Pacific Northwest. The effects of climate change are increasingly felt as extreme and unpredictable weather patterns increase in frequency and leave their marks across the United States. Extensive research has focused on production agriculture and called for concerted mitigation and adaptation efforts. In contrast, there is limited evidence regarding the drought resilience of global agricultural supply chains and transportation systems. The U.S. transportation system is particularly vulnerable to extreme weather, evidenced by the severe droughts in 2022, which were caused by a lack of rain in the Mississippi River basin (MRB) and led to historically low water levels in the Mississippi River. The draft reduction caused barge backups and groundings on this major transportation highway. Our research will generate new knowledge regarding the resilience of soybean and corn supply chains to climate shocks. More specifically, the project will address the following objectives:Operationalize an ecohydrological model for the MRB to predict corn and soybean productions and stream flows under drought scenarios caused by climate change,Assess corn and soybean transportation from producers to export markets under drought-induced production and transportation uncertainty, and examine the implications of transportation impediment in the MRB on grain shipment,Measure the impact of drought-induced agricultural production and transportation disruptions at the Mississippi River on global trade, welfare, and food security, andExamine the impact of drought-induced transportation impediments on commodity prices and farm income.
Project Methods
Module 1. We will develop a SWAT model to simulate crop (corn and soybean) production and stream flows in the MRB. An accurate simulation of corn, soybean, and other crops in the Corn Belt region is critical to modeling the MRB hydrological processes, and SWAT meets the need as one of the world's most widely applied ecohydrological models meets the need. The SWAT model features climate, crop growth, hydrologic, nutrient cycling and transport, and many agricultural and water resource management operations such as irrigation, water diversion, and conservation practices (Gassman and Wang, 2015). We will use the projected precipitation to drive the SWAT model to predict the county-level corn and soybean production in the MRB under various drought scenarios. The future projections may be divided into the near-term (2020-2059) and the long-term (2060-2099) periods. The subsequent transportation and international trade economic models will use the ensemble of the simulated county-level crop productions driven by ten selected General Circulation Models (GCM) weather projections.Module 2. In our model for grain movement through a network of logistical options from farm to marketplaces, harvested grains can be stored on-farm at the beginning or delivered to a country elevator, essential for farmers more than 50 miles away from a container yard, a barge terminal, a rail shuttle facility, or a crushing or processing facility. On-farm stored grains are not transported during harvest. Country elevators present marketing options for farmers and serve as feeder elevators to barge terminals and shuttle elevators. Shuttle elevators use railroads to transport grains. A base-case scenario is first established using historical data. The model minimizes the expected transportation and storage costs across all drought scenarios. The results of this model will shed light on (1) the economic impact of varying drought conditions on agricultural transportation modes and costs, (2) the preparedness of the current inland grain shipment network and infrastructure for extreme droughts, and (3) the impacts of transportation impediment on trade and exports of corn and soybeans.Module 3. To understand how transportation disruptions can lead to a reallocation of trade flows and affect economic welfare and access to food and feed, we will rely on a theory-consistent structural gravity model, which we will estimate following state-of-the-art empirical methods. We will modify the standard three-way gravity model by introducing the U.S. port from which the shipment is made. The structural gravity framework allows us to estimate the partial equilibrium trade effects of the production and transportation disruption scenarios and assess the direct and indirect equilibrium effects on trade (quantity and price) by updating the multilateral resistance terms based on the estimated impact on port-level trade flows. We plan to assess the impact of transportation disruptions on food security by applying modern panel data regression techniques. We will illuminate the implications for food security and the adjustment mechanisms at play. We will conduct a retrospective evaluation using national and household-level food security data from FAO-STAT and the International Food Policy Research Institute to achieve this.Module 4. The basis is essential for producers when deciding which elevator to sell. Elevators typically present prices to producers about future prices. Even though producers can hedge their price risks via a futures contract or a put option, there may be a situation where in the futures price might be higher than the cash price at the time of sale. We will estimate the impact of the Mississippi drought scenarios on corn and soybeans. We will also run a counterfactual analysis using historical data to estimate whether the drought had not occurred. Using the counterfactual and the observed measure, we will assess the income impact for producers. In addition, we will estimate the effect of drought-induced transportation impediments along the Mississippi River on the farm sector's welfare. To do so, our empirical strategy relies on panel data models with fixed effects that exploit spatial and temporal variation in drought-led transportation impediments. The primary outcome variable of interest is farm income. One clear advantage of the spatial econometric specification over the traditional regression model is that the drought effect is naturally spatial, and the rippling impact of congestion at a node is likely not confined within the boundary of a county but spreads through the river network.