Impact of Extreme Weather Events on the U.S. Domestic Supply Chain of Food Manufacturing

In the United States, like in other countries, the agrifood supply chain faces challenges from a growing population and less predictable weather conditions. Extreme weather events, such as droughts, decrease agricultural yield and harvested areas, impact the domestic trade of agricultural products and, in turn, food manufacturing. We investigate this relationship by estimating the food manufacturing production function in a two-stage process. In the first stage, we assess how drought affects trade in animals and fish (SCTG 01), cereal grains (SCTG 02), and all other crop products (SCTG 03). Next, we estimate a nested production function for processed food at the state level. Our findings indicate that the impact of a drought is far from being confined to the area where it happens. At the national level, we find that a 1% increase in drought in the states producing agricultural commodities reduces their exports to other states by 0.5%–0.7% which, in turn, reduces food manufacturing production by an average of 0.04%. The capacity to shift the origin of import flows, adjust their volume, and substitute agricultural inputs supports the resilience of the food manufacturing sector. We further estimate the 48×48 pairwise dependence across states and by commodity group. While cereal grain production is more spatially concentrated than other crops, the agrifood supply chain can enhance resilience by sourcing from geographically diverse counties within key supplier states and improving multi-state coordination. These findings provide insights for policymakers and industry stakeholders to enhance food system resilience in the face of climate change.