'Risky Business' report

by Arvin Donley
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A study looking at the potential wide-ranging consequences of climate change has concluded that, in a worst-case scenario, agricultural yields in the U.S. could plummet by as much as 70% by the end of the 21st century.

The report, titled “Risky Business,” which was released in July, attempted to quantify the risk for climate change to the U.S. economy in five key sectors, including agriculture. The report concluded that the U.S. economy could suffer damages running into the hundreds of billions by the end of the century due to climate change.

The study was commissioned by influential business leaders and other government officials, including hedge fund billionaire Tom Steyer, former New York City Mayor Michael Bloomberg and former Bush administration Treasury Secretary Henry Paulson.

“I have had a fair amount of experience over my career in attempting to understand and manage risk,” Paulson said, alluding to the 2008 global financial collapse, during a news conference addressing the report. “In many ways the climate bubble is actually more cruel and perverse.”

The agricultural sector was represented by Greg Page, executive chairman and former Cargill CEO, on the high-level “Risk Committee” that developed the scope of the report and approved its findings.

Page, in a teleconference with reporters, said Cargill and its competitors will be dealing with significant economic exposure to the impacts of climate change, including commodity price volatility in the coming years.

The report noted: “A defining characteristic of agriculture in the U.S. is its ability to adapt. But the adaption challenge going forward for certain farmers in specific counties in the Midwest and South will be significant. Without adaption, some Midwestern and Southern counties could see a decline in yields of more than 10% over the next 5 to 25 years should they continue to sow corn, wheat, soybeans and cotton, with a 1-in-20 chance of yield losses of these crops of more than 20%.

One of the major concerns listed in the report is that the central Corn Belt may be at significant risk for decreased production moving forward. The Midwest region accounts for 65% of national production of corn and soybeans. The report stated that under a “business as usual” scenario, and assuming no significant adaptation by farmers, some states in the region, like Missouri and Illinois, face up to 15% likely average yield loss by the end of the century. Assuming no adaptation, the Midwest region as a whole faces likely yield declines of up to 19% by mid-century and 63% by the end of the century.

Yet, the report notes that while the agricultural industry will clearly be affected by climate change, it also is probably the best equipped to manage the risk.

“Based on what we’ve seen in the past, we believe that farmers faced with changing climate and weather patterns will do what they’ve always done – they will adapt,” Page said. “Adaptation of agricultural productivity to our changing climate is difficult to predict and the complexity increases the further out in time we go from the baseline. But the adapting response we expect will occur include double cropping, changes in crop phenotypes, and the list goes on in ways in which agriculture and its supply chain partners come together to adapt and mitigate some of the potential climate scenarios that have been projected.”

Page noted that the upper latitudes of North America – North Dakota, South Dakota and the Canadian Prairies – are expected to be less impacted in the coming years. He said corn production will likely continue to shift northward.

“I grew up near the Canadian border in central North Dakota, which at that time was strictly a barley and wheat culture,” Page said. “The only decision in the spring was to decide which type of wheat to plant. Today it’s amazing to see how much corn is being raised right on the Canadian border.”

Page said one of Cargill’s biggest investments this year was a canola crushing facility in Alberta, Canada.

“When I got out of college 40 years ago, the thought of building a canola plant in that location was out of the question,” Page said. “As agriculture has evolved and plant genetics have evolved, the range of places Cargill needs to go to serve farmers has really widened significantly. We’ve seen also more investments in the higher latitudes of Russia.”

He said several prediction models actually show agriculture productivity rising over the next decade, but then falling back in the latter years of this century as more parts of the United States become prone to drought conditions.

Cargill says dialogue on topic important

While there’s some debate – even within Cargill – whether climate change is occurring due to human behavior (releasing increased amounts of carbon dioxide into the atmosphere, creating a greenhouse effect) or is a natural cyclical trend in which average global temperatures will soon moderate, the company said it was important to participate in the examination of this issue.

“Cargill chose to participate in this conversation – even in the face of climate change uncertainties – because we believe it is an important dialogue to have today in order to prepare to accommodate a range of climate change scenarios,” Cargill said in a statement. “Cargill sees climate change as a risk influencing our ability to create a more food-secure world. All the things that are challenging about producing food for a growing, more affluent population become more interdependent when faced with the range of possible impacts of a changing climate. In a period of accelerated climate change, the question is whether the food systems upon which we rely can adapt.”

Regarding Cargill’s participation in the study, Page said, “We sometimes jokingly refer to ourselves as the world’s largest debate society because whether it’s genetic engineering or climate science, we have a broad array of views. One thing we all agree on would be that it would be entirely too arrogant to dismiss climate change as a possibility and therefore do nothing about it.”

Of course, the key words in any report of this nature are could and potential. Page emphasized that the report has a wide range possible outcomes as the result of climate change, with some weather prediction models in the report being more extreme than others.

As for his personal opinion on the climate change issue, Page said: “I believe that there are high levels of carbon dioxide that do create a greenhouse effect, and as a result of the greenhouse effect, there is warming. What we don’t know with great certainty is how trapping energy as a result of the greenhouse effect manifests itself in our weather and the speed in which it is going to evolve.”

To view the full report, go to www.riskybusiness.org.

Risky Business’ conclusions

The ‘Risky Business’ report included four key conclusions about the potential impact of climate change over the next 85 years:

By 2050, between $66 billion and $106 billion worth of coastal property will likely be below sea level, rising to between $238 billion to $507 billion by 2100.
Extreme storms and hurricanes will likely cause damages exceeding $42 billion annually along the U.S.’s eastern seaboard and Gulf Coast.
Labor productivity of outdoor workers, such as construction, utility maintenance, landscaping and agriculture, particularly in the Southeast U.S., could shrink by as much as 3% due to the projected number of days with temperatures topping 95 degrees.
Agricultural yields could plummet by as much as 70% due to extreme heat waves.