Drought, Livestock Holding, and Milk Production: A Difference-in-Differences Analysis
Climate change is making El Niños more frequent and intense. Therefore, understanding
the effects of El-Niño-induced climatic events is essential to designing effective coping and
adaptation strategies. We identify the impact of the 2015-16 El-Niño-induced large-scale drought
on smallholder farmers’ livestock holding and milk production using nationally representative
data collected before and after the drought. We show that drought reduced milk production and
livestock holding by 25.8% and 8.4%, respectively. Heterogenous impact analysis suggests that
asset-rich households sold livestock and financed feed purchases, which insulated their milk
production from the drought. In contrast, asset-poor households kept their livestock despite the
severe drought and absorbed all the decline in milk production. Our findings have important
implications for formulating safety net and adaptation programs targeting smallholder farmers
and the livestock sector in a rapidly changing climate.