Dynamic Aspects of the Impact of the Use of Perfect Climate Forecasts in the Corn Belt Region

Abstract

A general equilibrium model is linked to a decision model to determine the impact of perfect growing season forecasts for corn produced in the Corn Belt region over a 10-yr period. Five different timing scenarios are examined to determine the effect of different orderings in the occurrence of good and bad crop years over this period. The use of the climate forecasts is shown to have both positive and negative financial and economic effects depending on the specific year within any given scenario. The expected present value of changes in net surplus (consumer plus producer surplus) varied from $1.270 to $2.917 billion from the use of the perfect forecasts over different 10-yr planning horizons. Consumers are the clear winners (positive values) and producers are the losers (negative values) over the entire horizon.