Drought, livestock holding and milk production: A difference-in-differences analysis

Climate change is making El-Niños—phenomena that cause heavy rain, flooding and drought in many regions—more frequent and intense. Therefore, understanding the effects of El-Niño-induced climatic events is essential for designing effective coping and adaptation strategies. We identify the impact of the 2015–16 El-Niño-induced large-scale drought on smallholder farmers’ livestock holding and milk production using nationally representative data collected before and after the drought. We show that drought reduced milk production and livestock holding by 25.8 and 8.4 per cent, respectively. Heterogeneous impact analysis using different thresholds of assets suggests that asset-rich households sold livestock and financed feed purchases, which insulated their milk production from the drought. However, we find that asset-poor households also sold livestock. Our findings have important implications for formulating safety net and adaptation programs targeting smallholder farmers and the livestock sector in a rapidly changing climate.