Climate change and agriculture

As we navigate the future of agriculture, efficient price discovery could be a key agent for positive change.

“The goal of forecasting is not to predict the future but to tell you what you need to know to take meaningful action in the present”

Paul Saffo, Futurist; Consulting Associate Professor, Stanford University

Key points

• The effects of climate change—higher temperatures, extreme weather, shifting water patterns, increasing carbon dioxide (CO₂) and rising sea levels—can have profound effects on agriculture.
• Efficient price discovery could be one of the most important tools and agents for positive change at our disposal as we navigate the shifting future of agriculture.
• In an environment of higher agricultural prices, food scarcity and volatility, the market mechanism could curb such challenges, as higher prices could spark new technologies, greater innovation, more effective conservation and improved policies.

Attempting to forecast a phenomenon as complex as climate change and its long-term effects on agriculture is a daunting task. The smallest variations in assumptions can, and often do, set off boundless unforeseen ‘butterfly’ effects. Rather than propagate visions of impending doom—with sensationalised references to peak agriculture and food wars—or conversely deny any climate impacts, we choose to focus on the facts at hand. A recurring theme that we continue to support is a properly functioning, unbiased natural resources market where physical and fundamental price signals are set and agricultural products valued appropriately. If prices are set properly and capture the full cost of production, efficient price discovery could be one of the most important agents for positive change as we navigate the shifting future of agriculture.

Impact of climate change on agriculture

The consequences of climate change—higher temperatures, extreme weather, shifting water patterns (attributable to droughts and floods), increasing carbon dioxide (CO₂) and rising sea levels—can profoundly affect agriculture. To illustrate this point, a farm can be viewed as an outdoor factory without ceilings or walls, where weather is the single most important variable that cannot be controlled. Understandably, this lack of stability can prove challenging, as efficient food production relies on predictability.

If temperatures rise higher or fall lower than the optimal range for a crop, pollination and flowering, as well as root and structure growth, could be adversely affected. The timing of temperature shifts is equally as important, as prolonged heat late in the season or an early frost could significantly impede yields. Research estimates that with a global warming scenario of 4 degrees Celsius, the probability of the top four maize producers experiencing a 10% production loss is as high as 86%.[1] Considering the top four maize-exporting countries account for over 80% of the market, the global consequences of this scenario could be dire, even if the actual effects are only a fraction of that figure. Other studies echo these narratives. While farmers can make some adaptations, such as growing crops more suitable for warmer temperatures, it is important to recognise that our current food system is the product of decades of development. Demand for staple crops, such as corn, rice, soybean and wheat, cannot be easily substituted or hastily displaced.

Similar to challenges presented by extreme temperatures, farmers also encounter obstacles relating to both the overabundance and lack of water. Plants cannot take root in flooded fields, and crops cannot grow in parched soil. The total frequency of global floods in 2021 was 48% higher than the average number of floods over the 30-year period from 1991 to 2020.[2] This trend is not isolated to 2021. Flood frequency has increased significantly since the 2000s, rising fourfold in the tropics and twofold in the northern latitudes.[3]

Climate change can have impacts beyond flooding; it can trigger more intense precipitation events, as well as droughts owing to higher evaporation. The rise in temperatures is causing a depletion in groundwater, which is essential to many agricultural areas, including the Midwestern United States. Extreme weather and water volatility can also contribute to topsoil erosion, as floodwater washes away topsoil and winds carry it away during droughts, setting off an adverse spiral of events.

Pandora’s box and silver linings

There are numerous impacts that climate change can have on the agricultural complex, and we are still very early on in understanding the effects. For instance, higher CO₂ emissions may have some benefits, as CO₂ causes plant stomata to narrow, potentially improving water-usage efficiency and stimulating photosynthesis. However, other studies have shown that increased CO₂ can lower nutritional values despite hastening growth.[4] Higher temperatures could beget better growing conditions in temperate regions by expanding plantable areas, extending growing seasons and improving crop yields. However, those higher temperatures could also create an explosion of faster-spreading new pathogens and weeds in established agricultural regions.

All the models and forecasts in the world would not be able to adequately predict the true impacts of climate change. Yet, the risks are skewed asymmetrically, and prices are biased higher. When decades of relatively stable growing conditions are disrupted and displaced, it is hard to imagine a positive net outcome.

Agriculture’s role in climate change

Agriculture is both a victim and perpetrator of climate change. Food production leaves an undeniably substantial footprint on the environment, affecting greenhouse-gas emissions, wildlife habitats, biodiversity and water resources. Approximately half of the world’s habitable land is used for agriculture, with livestock farming taking a 77% share of this available land, while only contributing 37% of the world’s global protein. From a biodiversity perspective, 94% of mammal biomass (excluding humans) is derived from livestock, while 71% of bird biomass is derived from poultry livestock. The impact of agriculture on water has been detailed in a previous blog, but an additional point remains—78% of global water eutrophication (the contamination of water with nutrient-rich pollutants via the run-off of fertiliser) is caused by agricultural practices. Additionally, agriculture and food production are responsible for 25% of global greenhouse-gas emissions.[5]

As natural habitats are converted to farmlands, the transformation of grasslands and the deforestation process release large quantities of CO₂.[6] It is even more troubling that agriculture is responsible for almost half of all methane emissions, with livestock accounting for half of that total.[7] Although methane remains in the atmosphere for a shorter period of time, it is 80 times more powerful than CO₂ in its warming effect.[8]

The path forward

Some of the projections described above may never materialise, or scenarios may evolve in ways we cannot even begin to imagine today. Is the solution to ignore the science and data and continue with our current way of life? Should we deny billions of people the same diets that have been afforded to developed economies? The reality is that mankind has always resolved problems with innovation and adaption. However, when the effects of climate change collide over the coming decades, there is a material risk that agricultural production could face intense headwinds, at a time when the global population is set to rise. The outcome could be higher agricultural prices and a period of scarcity and volatility. In that environment, the market mechanism could become one of our best defences, as higher prices could spark new technologies, greater innovation, more effective conservation and improved practices and policies.

[1] Source: Tigchelaar, M., Battisti, D.S., Naylor, R.L., & Ray, D.K. (2018). Future warming increases probability of globally synchronized maize production shocks. Environmental Sciences. https://www.pnas.org/doi/10.1073/pnas.1718031115

[2] Source: 2021 Global Natural Disaster Assessment Report. (2022, October 14). ReliefWeb. Retrieved November 10, 2022, from https://reliefweb.int/report/world/2021-global-natural-disaster-assessment-report

[3] Source: Najibi, N., & Devineni, N. (2018). Recent trends in the frequency and duration of global floods. Earth System Dynamics. https://doi.org/10.5194/esd-9-757-2018

[4] Source: Ebi, K., Anderson, L., Hess, J., Kim, S., Loladze, I., Neumann, R.B., Singh, D., Ziska, L., & Wood, R. (2021). Nutritional quality of crops in a high CO2 world: an agenda for research and technology development. Environment Research Letters. https://iopscience.iop.org/article/10.1088/1748-9326/abfcfa#:~:text=Higher%20CO2%20concentrations%20increase,rice%2C%20and%20other%20C3%20plants.

[5] Source: Ritchie, H., & Roser, M. (2020). Environmental Impacts of Food Production. Our World in Data. Retrieved November 10, 2022, from https://ourworldindata.org/environmental-impacts-of-food https://ourworldindata.org/environmental-impacts-of-food

[6] Source: World Economic Forum. (2020, November 12). 23% of Earth’s Natural Habitats Could Be Gone by 2100, Study Finds. https://www.weforum.org/agenda/2020/11/earth-natural-habitats-destroyed-biodiversity-loss

[7] Source: Ritchie, H., & Roser, M. (2020). Environmental Impacts of Food Production. Our World in Data. Retrieved November 10, 2022, from https://ourworldindata.org/environmental-impacts-of-food

[8] Source: Environmental Defense Fund. (n.d.). Methane: A Crucial Opportunity in the Climate Fight. RetrievedNovember 10, 2022, from https://www.edf.org/climate/methane-crucial-opportunity-climate-fight

Authors

Newton global natural resources team

Insights from the Newton global natural resources team