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Abstract
Climate change and food security have become critical issues in the agricultural policy
agenda. Although global warming is expected to increase both the frequency and
severity of heat stress on dairy cattle, there are very few economic studies focusing on
this issue. This paper contributes to the literature by integrating the frontier methodology,
commonly used in applied production economics, with heat stress indexes used
by animal scientists but largely ignored by economists. Our econometric models are
useful to quantify gross benefits expected from adaptation to climatic conditions represented
by the Temperature Humidity Index (THI) and alternatively by the Equivalent
Temperature Index (ETI). Stochastic production frontier analysis is used to
measure technical efficiency for an unbalanced panel of 103 dairy farms located in
Florida and Georgia. Five alternative model specifications are evaluated. The results
reveal that both THI and ETI have a significant nonlinear negative effect on milk production.
The climatic indexes when incorporated in the frontier specification absorb
some of the output shortfall that otherwise would be attributable to inefficiency. The
results indicate that using fans combined with sprinklers is an effective adaptation to
offset output losses stemming from heat stress conditions.