Impact of Climate Change on Productivity and Technical Efficiency in Canadian Crop Production

Abstract

There is a wide consensus that throughout the 20th century climate has changed globally, with many parts of the world facing increases in average temperatures as well as an increased frequency and intensity of extreme weather events. While the existing climate models can predict future changes in climate with a high degree of confidence, the potential impacts of climate change on agricultural production and food security are still not well understood. In this work, we investigate the link between climate change, output, and inefficiency in Canadian crop production using provincial data for the period of 1972–2016. This study has built a unique climate dataset from station-level weather data and uses a panel stochastic frontier model to explore the effect of climatic conditions on crop production and inefficiency. The results reveal that climatic variables are significant predictors of both the maximum potential output (frontier) and technical inefficiency. The combined effect of higher temperatures and lower precipitation, as reflected in a lower Oury index, is a downward shift of the crop production frontier. While greater variability of daily temperatures during the growing season is found to have no statistically significant effect in the frontier equation, greater variation in rainfall results in a downward frontier shift. The results also show that weather shocks measured as a deviation from historical weather normals are significant predictors of technical inefficiency.