Effects of drought on crop yields and agricultural revenue in Southern Brazil

Abstract Drought is one of the most significant threats to agriculture, affecting crop yields, farmer incomes, and local economic stability. This study evaluates the effects of agricultural drought on crop yields and revenue in Southern Brazil. Methodologically, we apply a fixed-effects econometric model to a municipal-level panel dataset from 1974-2020. Drought impacts are quantified using count variables derived from the Standardized Precipitation-Evapotranspiration Index (SPEI) to capture the intensity and duration of short- and medium-term events. The results show that droughts significantly reduce crop yields, with extreme droughts having the most severe effects. Moreover, rice was more sensitive to medium-term droughts, whereas maize and soybeans were more affected by short-term water deficits. The study estimates substantial revenue losses, totaling USD 4.56 billion for rice, USD 3.55 billion for maize, and USD 14.30 billion for soybeans over the study period. These findings highlight the critical vulnerability of regional agriculture to different timescales and intensities of drought.