Impact of extreme weather events on the US domestic supply chain of food manufacturing

This study examines how drought affects the agrifood supply chain in the United States, focusing on the cascading impacts from agricultural production and interstate trade to food manufacturing. Using state-level data and a two-stage instrumental variable estimation approach, the analysis first assesses the effects of drought on trade in animals and fish, cereal grains, and other crop products, and then estimates a nested production function for processed food. The findings show that drought impacts extend well beyond the areas directly affected. At the national level, a 1% increase in drought in commodity-producing states reduces their agricultural exports to other states by 0.5–0.7%, leading to an average 0.04% decline in food manufacturing output. The study highlights the role of supply-chain flexibility—such as shifting import origins, adjusting trade volumes, and substituting agricultural inputs—in enhancing sectoral resilience. It also finds that while cereal grain production is more spatially concentrated than other crops, resilience can be strengthened through geographically diversified sourcing within key supplier states and improved multistate coordination. Overall, the results provide actionable insights for policymakers and industry stakeholders seeking to reduce food system vulnerability to extreme weather events.