Drought, Livestock Holding, and Milk Production: A Difference-in-Differences Analysis

We identify the effects of the 2015-16 El-Niño-induced large-scale drought on smallholder farmers’ livestock holding and milk production. The drought reduced milk production and livestock holding by 28.5% and 8.7%, respectively. Heterogenous impact analysis suggests that asset-rich households sold livestock and financed feed purchases, likely insulating milk production from the drought. In contrast, assetpoor households kept their livestock at all costs and absorbed all the decline in milk production. Our findings have important implications for formulating safety net and adaptation programs targeting smallholder farmers and the livestock sector in a rapidly changing climate.