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The Economic Impact of Climate Risk on Extensive Livestock: The Case of Lamb Production in Extremadura, Spain

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  • Esteban Thomasz

    (Faculty of Economic Sciences, University of Buenos Aires, Buenos Aires C112AAQ, Argentina)

  • Ismael Pérez-Franco

    (Faculty of Economic and Business Sciences, University of Extremadura, 06006 Badajoz, Spain)

  • Agustín García-García

    (Faculty of Economic and Business Sciences, University of Extremadura, 06006 Badajoz, Spain)

Abstract

This paper presents an evaluation of the economic cost of precipitation shortage in the production of lamb in Extremadura. Given that the production strategy is based on maintaining a productivity target by supplementing natural pastures in contexts of water scarcity, the approach will be based on the analysis of the cost structure of the sector. A monetized cash flow model will be presented, which allows us to evaluate economic impacts through a financial perspective. The study focuses on a set of 1583 farms associated into the cooperative EA Group. These members have a total of 804,000 animals, which represents more than 40% of total sheep in Extremadura. Results shows a relation between precipitation minimums and feed quantity maximums of the series analyzed. Mayor direct impact is represented by an increase in feed supplementation needs, with an economic estimation of 54 million euros over two years for the whole sector. At the farm level, there is an average reduction of profits of 50% in the case of owned land, and bankruptcy in the case of renting land. In the context of data-driven policy making, this estimate provides a tool for European Policy funding negotiation a in sector which is considered as highly strategic because of its positive impacts on the environment, the generation of employment and maintenance of rural populations in marginal areas and for the production of high-quality food with a minimal use of natural resources.

Suggested Citation

  • Esteban Thomasz & Ismael Pérez-Franco & Agustín García-García, 2020. "The Economic Impact of Climate Risk on Extensive Livestock: The Case of Lamb Production in Extremadura, Spain," Sustainability, MDPI, vol. 12(18), pages 1-19, September.
    • Handle: RePEc:gam:jsusta:v:12:y:2020:i:18:p:7254-:d:408958
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    References listed on IDEAS

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    1. Gonzalo Rondinone & Esteban Otto Thomasz & Ana Silvia Vilker, 2019. "The economic cost of extreme and severe droughts in soybean production in Argentina," Contaduría y Administración, Accounting and Management, vol. 64(1), pages 31-32, Enero-Mar.
    2. Tannura, Michael A. & Irwin, Scott H. & Good, Darrel L., 2008. "Weather, Technology, and Corn and Soybean Yields in the U.S. Corn Belt," Marketing and Outlook Research Reports 37501, University of Illinois at Urbana-Champaign, Department of Agricultural and Consumer Economics.
    3. Jadwiga R. Ziolkowska, 2016. "Socio-Economic Implications of Drought in the Agricultural Sector and the State Economy," Economies, MDPI, vol. 4(3), pages 1-11, September.
    4. Guidry, Kurt M. & Pruitt, J. Ross, 2012. "Damages to Louisiana Agriculture from Natural Disasters," Choices: The Magazine of Food, Farm, and Resource Issues, Agricultural and Applied Economics Association, vol. 27(3), pages 1-6.
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    Cited by:

    1. Ismael Pérez-Franco & Esteban Otto Thomasz & Gonzalo Rondinone & Agustín García-García, 2022. "Feed price risk management for sheep production in Spain: a composite future cross-hedging strategy," Risk Management, Palgrave Macmillan, vol. 24(2), pages 137-163, June.
    2. Daniele, Bertolozzi-Caredio & Barbara, Soriano & Isabel, Bardají & Alberto, Garrido, 2021. "Economic risk assessment of the quality labels and productive efficiency strategies in Spanish extensive sheep farms," Agricultural Systems, Elsevier, vol. 191(C).

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