Bad for yields does not mean bad for farmers' profits

Yes, we do predict large negative impacts to U.S. crop yields from global warming.  Yes, there are many reasons why things might not get as bad as we predict.  But the evidence, I think, is pretty clearly bad for crop yields.

So, in response to Grist and the position by the American Farm Bureau on climate change, one may wonder:  Why would farmers oppose the climate bill if they have so much to lose from potential global warming? 

There is a simple answer:  a big hit to crop yields does not imply a big hit to farmers' profits.  In fact, if the rest of the world is unable to make up for U.S. losses, a big hit to yields is probably a very good thing for farmers profits.  At least for the corn-soybean guys in the Midwest.

You see, the demand curve for basic grains is very steep.  We've estimated an elasticity of about 0.05 (also see this paper). So if yields worldwide get cut by 50%, and no additional supply comes online to replace that loss, prices will go up 1000%, and farmers revenues will go up 500%.  Farmers' profits will go up by a lot more than 500%.

So, while climate change is looking bad for buyers of basic grains, like North Carolina hog farmers and the urban poor in developing nations, those who grow basic grains will do very well.  The incentives are very clear: opposing climate change legislation is good for corn growers' pocketbooks.