Many crop-producing regions in the united states experience significant variability in crop revenues due to fluctuations in growing conditions, market dynamics, and evolving policy environments

The Department of Agriculture National Institute of Food and Agriculture awarded North Carolina State University $588,353 on July 1, 2026, under the Agriculture and Food Research Initiative (CFDA 10.310) to conduct econometric research on crop revenue variability and farmer response to revenue shocks.

The project analyzes the effects of weather on corn and soybean revenue variability in the United States, accounting for correlation between price and yield when quantifying impacts of weather events such as the 2012 Midwest drought. The research identifies who bears the burden of farm revenue shocks by examining changes in farm expenses, net income, land values, and spillover effects on nonfarm sectors using weather-induced revenue shocks identified through a shift-share instrumental variable approach. The project also explores how farm revenue shocks affect farmers' investments in productive assets and assesses the impact of revenue shocks on land conversion from uncultivated to cultivated land, with implications for carbon sequestration, water quality, and biodiversity.

Work is performed in Raleigh, North Carolina, with a period of performance from July 1, 2026, through June 30, 2030. The University of California, Berkeley, serves as a sub-recipient, with Aaron Smith developing empirical methods jointly with the North Carolina State University principal investigator to quantify the effects of weather on crop revenue variability, quantify who bears those shocks, and quantify farmer responses to those shocks. The sub-award was obligated on July 27, 2026.

Using rigorous and novel econometric methods, we propose to address four key objectives.first, we aim to analyze the effects of weather on crop revenue variability, with a focus on corn and soybeans in the U.S. Our approach will account for the correlation between price and yield when quantifying the impacts of weather, such as the 2012 midwest drought, on crop revenues. Second, we will investigate who bears farm revenue shocks by examining changes in expenses (cash rent, hired labor, seeds, and fertilizers), net income, land values, and spillover effects on nonfarm sectors. To address endogeneity concerns, we will identify weather-induced crop revenue shocks using a shift-share instrumental variable approach. Third, we will explore how farm revenue shocks affect farmers' investments in productive assets. Fourth, we will assess the impact of farm revenue shocks on land conversion from uncultivated to cultivated land, a process with long-term implications for carbon sequestration, water quality, and biodiversity.