Air Conditioning for Cows? Determining the Effects of Heat and Cold Stress on Dairy Cattle Using Applied Economics

Abstract

This undergraduate honors thesis uses an ordinary least squares regression model to measure the relationship between temperature and milk output in the dairy industry followed by a partial equilibrium analysis to estimate the welfare impacts of increasing global temperatures. Regression results show that milk output is subject to both heat and cold stress and that there is an optimal temperature for dairy production. However, the average U.S. temperature is currently below the optimal threshold. Thus, rising average temperatures may increase the milk supply nominally as cows spend more time in the thermoneutral comfort zone. However, the increased farm revenue from increased production is offset by lower market prices, resulting in a small negative financial impact for dairy farmers and a $123.1 million increase in consumer surplus. Assuming a warmer base temperature, production would decrease, pushing prices up slightly while cutting $3 million in farm revenue and $50 million in consumer surplus. Keywords: heat stress, cold stress, dairy cattle, applied welfare economics, partial equilibrium, elasticity of demand, climate change, agriculture