Farm-level impacts of prolonged drought: is a multiyear event more than the sum of its parts?

A multiyear discrete stochastic programming model with uncertain water supplies and inter-year crop dynamics is developed to determine: (i) whether a multiyear drought's impact can be more than the sum of its parts, and (ii) whether optimal response to 1 year of drought can increase a producer's vulnerability in subsequent years of drought. A farm system that has inter-year crop dynamics, but lacks inter-annual water storage capabilities, is used as a case study to demonstrate that dynamics unrelated to large reservoirs or groundwater can necessitate a multiyear model to estimate drought's impact. Results demonstrate the importance of analysing individual years of drought in the context of previous and future years of drought. Copyright 2010 The Authors. Journal compilation 2010 Australian Agricultural and Resource Economics Society Inc. and Blackwell Publishing Asia Pty Ltd.