Assessing the Impact of Drought on Dairy Farming in Italy: Economic, Land Use, and Resource Management under Climate Change

Abstract

This study assesses the impact of drought on Italian dairy farms and its interplay with market shocks, while identifying adaptation strategies. An agro-supply economic model is applied to a FADN sample of 930 dairy farms. Farm-level responses are analyzed in terms of land use, economic outcomes, and resource use. Climate data are employed to estimate irrigation water requirements and simulate drought scenarios, while feed prices increase to capture market shocks. Results show that farms are able to maintain incomes and herd size under drought if market conditions remain stable and feed purchases remain accessible. However, when market pressure intervenes, dairy farms reduce herd size and shift towards on-farm feed production, increasing water and production intensity. This strategy led to environmental, social, and economic consequences such as contracting costs, reducing employment, and cutting herd sizes with significant income losses.  Policy action is needed to reconcile resilience with less market dependence.