Modelling the impact of prices and climate change on farmers’ crop land use decisions

Important research has been done to consistently identify the impacts of climate change on agricultural outcomes. However, farm adaptive responses to climate change have been largely overlooked. The objective of this study is to explore how prices and climate change affect farmers’ land use allocation decisions. We first develop a structural framework of multi-output production technology with land as a fixed allocatable input, where farmers optimize their land use according to observed climate patterns and prices. Enriched with an identification strategy to address unobserved heterogeneity, our framework is then applied to French crop farms to measure adaptive responses to climate change and prices. Our findings indicate that both prices and climate change substantially influence French arable farmers’ crop land use decisions. An increase in recent average temperatures trends during the growing season is found to increase the farm land allocations to winter cereals and oilseed crops. As it implies farmers to drop crops that are less commonly grown (e.g., protein and root crops), climate change may result to a less diverse crop production system in the absence of adequate policies.