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Abstract

This paper studies the effect of climate change on wheat production in Kansas using annual time series data from 1949 to 2014. For the study, an error correction model is developed in which the price of wheat, the price of oats (substitute good), average annual temperature and average annual precipitation are used as explanatory variables with total output of wheat being the dependent variable. Time series properties of the data series are diagnosed using unit root and cointegration tests. The estimated results suggest that Kansas farmers are supply responsive to both wheat as well as its substitute (oat) prices in the short run as well as in the long run. Climate variables; temperature has a positive effect on wheat output in the short run but an insignificant effect in the long run. Precipitation has a positive effect in the short run but a negative effect in the long run.

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