Climate change is expected to increase the frequency and severity of extreme weather events such as droughts. While droughts are known to reduce crop yields, their impacts on livestock systems are more complex and evolve over time. Producers may respond to drought conditions by liquidating herds, including breeding stock, which alters supply dynamics throughout the meat value chain. These shifts may occur through multiple, overlapping channels, including increased feed costs and direct physiological effects on animals such as heat stress. We estimate the short- and long-term effects of drought-related environmental stress on the U.S. beef value chain, using the Drought Severity and Coverage Index as a composite measure of realized drought conditions. We interpret our findings as capturing the total effect of drought conditions on livestock market dynamics. Results show that producer prices increase significantly with a lag following drought events, while livestock futures markets respond earlier. Retail beef prices are also affected, but the impact on consumers is dampened and more delayed. These findings suggest that drought-related supply disruptions are a key contributor to rising U.S. beef prices.

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