Weather Impacts and Input Adaptation: Farm-Level Evidence on Corn and Wheat Yields in Italy

The objective of this paper is to evaluate how weather affects Italian corn and wheat yields and to assess the short-run input adaptation behaviour of farmers using a recently proposed structural model that incorporates fertilizer and pesticide use. In this way, we are able to distinguish between the ‘direct’ weather effects (i.e. the agronomic impacts of weather changes on plant growth) and the ‘indirect’ effects mediated through farmers' input choices (i.e. adaptation impacts). We use a large representative panel dataset of Italian corn and common wheat producers covering the period from 2008 to 2022 sourced from the Italian Farm Accountancy Data Network (FADN), matched with data on temperatures and precipitation at a high spatial and temporal resolution. Our results indicate that corn is vulnerable to temperature increases and we find significant damages already at the sample median temperature, while we find no significant negative effects of temperature increases on wheat yields at the sample median temperature. We show that farmers do adapt their fertilizer and pesticide use to in-season temperature shocks, but with varying effects depending on the crop. At the sample median temperature, adaptation through input use reduces by approximately 11 per cent the direct agronomic negative effects for corn and provides a small positive effect for wheat. Scenario analysis shows significant yield reductions for corn and no reductions for wheat in 2050. However, for non-marginal temperature increases, the input adaptation effect declines for both crops, highlighting the need for alternative and complementary adaptation strategies in the long term.