How risk preferences and perceived yield distributions affect farmer adaptation to climate change

Agricultural producers' risk preferences and perceptions of climate change risks play a role in shaping their adaptation decisions. This research elicits farmers' subjective crop yield distributions and links farmers' risk preferences and subjective beliefs to adaptation decisions under changing weather conditions. Based on detailed interviews with 44 Michigan corn farmers, this exploratory study finds that in the absence of water management practices and holding crop genetics constant, farmers anticipate increases in both the mean and variance of corn yields. They expect that adopting irrigation and, to a lesser degree, tile drainage will further increase mean yields. Adopting drought-resistant seed varieties, by contrast, will only slightly increase the mean while also reducing variance. Even though all the farmers interviewed were risk averse, when choosing water management technologies to adapt to weather risk, they preferred ones that offered perceived yield gains. Reduction in crop yield variance and degree of risk aversion played minor roles. These findings suggest that policies and extension programs promoting climate adaptation technologies should emphasize potential yield gains ahead of production risk reduction.