# An Econometric Analysis of Climatic Effects on Total Factor Productivity Across U.S. Dairy Counties

## TL;DR

This study examines how heat stress from climate change affects dairy productivity in U.S. counties, finding that technological progress largely offsets these effects.

## Contribution

The study introduces a detailed statistical model to separate climatic effects from technological progress in dairy productivity.

## Key findings

- Technological advancements drive 2.52% annual total factor productivity growth in U.S. dairy counties.
- Heat stress reduces productivity growth by an average of 0.008% annually, with the largest reduction at 0.08%.
- Adaptation strategies like cooling systems have effectively mitigated heat stress impacts on productivity.

## Abstract

High-yielding dairy cows face increasing heat stress due to climate change. Our study analyzed over four decades of data from U.S. dairy counties to understand the economic implications of this challenge. Using a detailed statistical model, we separated the effects of technological progress from climatic pressures on total factor productivity. Our findings show that while technology is the primary driver of productivity growth, heat stress imposes a modest constraint on this growth. Although nationwide results indicate a low reduction in the rate of productivity growth from heat, our analysis reveals that this impact varies by region. More importantly, the slight overall effect suggests that the U.S. dairy industry has been highly effective in managing these climatic challenges through innovation. This finding implies the sector’s resilience and the success of locally implemented strategies in maintaining long-term stability.

High-yielding dairy cows are particularly vulnerable to heat stress, a challenge that climate change exacerbates. To quantify the impact of climatic variables on productivity, we applied a random parameter stochastic production frontier model to the United States Department of Agriculture (USDA) census data from 1978 to 2022 for 179 dairy counties, allowing us to decompose total factor productivity growth (TFPG). Our analysis indicates that technological advancements were the primary driver of TFPG, amounting to 2.52% annually. While these gains are modestly constrained by heat stress, the average impact on the overall TFPG rate was only 0.008% per year. This minimal impact is consistent with the adoption of strategies such as cooling systems and improved management. Even in the most affected counties, the effect remained slight, with the largest reduction reaching 0.08%. This limited impact suggests that the sector’s adoption of technologies and management strategies appears to have mitigated potential productivity losses. This study highlights that future research is needed to quantify the direct impact of specific on-farm adaptation strategies on dairy productivity to inform well-targeted policy recommendations.