Abstract
Yearly weather variability has an impact on agricultural supply and farmer welfare. More accurate weather predictions may increase the net returns for farmers but the indirect environmental impact of forecasts has not been examined. A stochastic bioeconomic model, which includes weather information, examines the impact of agricultural activities on water quality in a large agricultural area affected by the El Nino Southern Oscillation phases. This region is part of the Black Warrior-Tombigbee and the Middle Tennessee-Elk Basins in the Southeast of the United States. The results of the study reveal that if farmers were to use accurate weather predictions, their net returns may increase by 1.64% and the nitrogen loss associated with the agricultural activities would increase by 1.67%. The potential private value of climate uncertainty mitigation exceeds its social cost. In the long run, the net benefit of weather forecast could be approximately $949,450 per year.
