Drought Risk to the Agriculture Sector

By David Rodziewicz

Drought is a perennial and long-term risk that can negatively affect the farm economy through lower yields, loss of crops, reduced farm revenues, and lower sales for farm suppliers. As risks from climate change mount, understanding how drought will affect farmers across the country has become even more important. Drought risk can vary by region, crop type, and production method, and may disproportionately affect some farmers more than others. Although many farmers have crop insurance to protect against losses, insurance does not cover all of their crop’s value, and even insured farmers face losses from drought. These losses can negatively affect farm finances, resulting in financial strain that may spill over into the broader agricultural economy.