The Effects of Extreme Weather on Apple Quality.

A large literature has documented the effects of weather on agricultural yields. However, weather not only impacts the quantity produced, but also the quality of the product. Due to data limitations, the quality effects have primarily been studied using lab experiments for specific attributes, and the financial implications for farmers of a quality effect are less clear. Using a unique longitudinal micro-level data set of Swiss apple orchards that include information on both the quantity produced as well as the quality, we show that the latter can have an even larger effect on farm revenue. Ignoring the quality of the harvested product substantially biases the impact of weather extremes on agricultural income and the potential effects of climate change. Our quality measure is the orchard-year specific price shock. If an orchard gets a lower price for its specific apple variety compared to previous years and compared to other orchards in the same year, we observe the market's valuation of its inferior quality accounting for overall price movements (other orchards growing same variety that year) as well as orchard specific factors (orchard fixed effects). We find that spring frost events induce farm gate price drops and thus revenue reductions of up to 2.05% per hour of exposure.