With the food supply chain disruptions that have come from COVID-19, weather, and other factors, there has been a lot of discussion about how to increase resilience and security of food supply. There is common view that more local food production-consumption systems would be more resilient. That may be true if it is layered on top of the existing food supply chains, but not if one envisions local food instead of the existing food system.
I wrote about this in my 2013 book, The Food Police:
“It would be foolish to invest all your retirement savings in a single stock. The financial experts tell us to diversify. And if we shouldn’t keep all our financial eggs in one basket, the same goes for the real ones. One of the things that makes farming unique compared to other businesses is its unusually large reliance on the weather. An unexpected drought, a rain at the wrong time, an early freeze, or a hail storm can devastate a whole farming community or even an entire region. While farmers protect themselves financially against these kinds of risk by buying crop insurance, what about the food consumer?
In a world of extensive food trade, there is little need to worry about the consumers of Northville if their farmers face a flood because Northville consumers can readily buy from elsewhere. But a world where the locavores have tied the hands of farmers in Northville, Southville, Eastville, and Westville to supply only their local consumers is one where a weather disaster in one location could have dire effects on the consumers that live there. After all, agriculture is a business that requires long production lags. A farmer can’t produce potatoes on a whim – it takes months of planning and foresight. The world sought by the locavores isn’t more food secure, it’s much riskier - both in terms of the availability of food and the prices we’d have to pay. ”
Against that backdrop, I was interested to read this new paper by Sandy Dall'Erba, Zhangliang Chen, and Noé Nava just published in the American Journal of Agricultural Economics. They look at trade across the United States and explore how interstate shipments, and farmer’s profits, are affected by weather.
“Our results indicate that crop grower’s profit is sensitive to local weather conditions and is positively affected by exports. The latter, in turn, significantly increase when destination places experience a drought, a result confirmed in all the robustness checks we performed on our gravity estimates. Because a sudden drought in destination places reduces their crop production but not the demand from their livestock and food manufacturing sectors, imports increase. Inversely, a drought reduces the capacity for a state to export, and further investigations through a decomposition of the intensive and extensive trade margins allow us to highlight that droughts decrease the exported volume and value more than the number of destinations places to which a state exports.
We also estimate the capacity for trade to mitigate the adverse effect of future weather conditions and discover that it is worth $14.5 billion (in 2012 prices). Indeed, a $11.2 billion nationwide loss in crop growers’ profits is expected when trade is disregarded, as this traditional approach exacerbates the local impact of future local weather conditions. However, when trade is accounted for, its presence turns our projections into a $3.3 billion gain, or a 3.4% percent increase in annual profit. ”
In our quest to increase resilience through local foods, let’s not also forget about the impact of local weather on our ability to feed ourselves solely through local sources.
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P.S. One of the authors of this latest paper let me know he has another working paper directly addressing a different aspect of local foods issues.