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Climate Policy
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Agricultural commodities and climate change

Kirsty Lewis & Claire Witham
a a a

Met Office Hadley Centre , Fitzroy Road, Exeter , EX1 3PB , UK Published online: 28 Nov 2012.

To cite this article: Kirsty Lewis & Claire Witham (2012) Agricultural commodities and climate change, Climate Policy, 12:sup01, S53-S61, DOI: 10.1080/14693062.2012.728790 To link to this article: http://dx.doi.org/10.1080/14693062.2012.728790

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B research article

Agricultural commodities and climate change

KIRSTY LEWIS*, CLAIRE WITHAM
Met Ofce Hadley Centre, Fitzroy Road, Exeter, EX1 3PB, UK

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The agricultural commodity market is sensitive to variations in weather and climate, which can disrupt supply and cause price uctuations. Some of the key positive and negative impacts of climate change on agricultural commodities, using the examples of wheat and barley, are identied; of particular signicance are temperature changes, water availability, and CO2 fertilization. Although they are not exempt from the negative impacts of climate change, higher latitude regions of production, including Canada and Russia, will benet the most from climate change. The impacts on other important production regions, such as parts of Europe, the US, and Argentina, will be more mixed. Market stability in all regions will also be affected by changes in climate and weather extremes. To increase resilience to the effects of weather events and climate change on the agricultural commodity market, countries should diversify their sources of supply, encourage more countries to grow and export the relevant commodities, and support crop research and climate adaptation. Policy relevance Climate change will substantially affect future food security and the price of agricultural commodities. This study takes a broad approach to identify the key aspects of the agricultural commodities market that are vulnerable to climate change and suggests ways in which policy makers might improve its resilience. Keywords: adaptation; climate change; climate impacts; food production; food security; international trade; integrated assessment; resilience

1.

Introduction

It is likely that the impacts of weather events and climate change will be felt across the globe, not least because of the connections and dependencies that exist between all countries. Agricultural commodities and more generally the global commodity market will be particularly affected by climate change and in several ways. To understand how, some basic issues are addressed, such as how climate change affects the various aspects of food production and which regions in the world will be most affected. Owing to the immense size and range of the agricultural market, a top-down approach using the examples of wheat and barley is taken here in order to identify the key impacts of climate change on the market. The methodology used in the analysis was developed based on the authors experience of evaluating the potential impacts of climate change in other areas and is similar to that used by Easterling et al. (2007). However, whereas Easterling et al. (2007) summarizes and draws conclusions from recent work on the effect of climate change on agriculture, the present analysis attempts to identify any relevant knowledge gaps that may exist from the structure of the agricultural commodities market itself. Unlike other studies of climate impacts (e.g. Nelson et al., 2010), the aim of this analysis was not to quantify them from a range of projections, but rather to learn more about the whole agricultural commodities system and to identify the climate change effects of most relevance. Section 2 describes the

B *Corresponding author. E-mail: kirsty.lewis@metofce.gov.uk

CLIMATE POLICY 12 (2012) S53S61
http://dx.doi.org/10.1080/14693062.2012.728790 # 2012 Crown Copyright ISSN: 1469-3062 (print), 1752-7457 (online) www.tandfonline.com/tcpo

S54 Lewis and Witham

data used and highlights some of the methodological assumptions about world regions and trade ows. The main sensitivities of wheat and barley to weather events and climate change are identied and described in Section 3, and a discussion is provided in Section 4. Finally, in Section 5, the main ndings are summarized and some policy recommendations are offered.

2. Agricultural commodities
Owing to the complex nature of the global market for agricultural commodities, the rst step in understanding how climate change may affect trade was to identify the main production regions globally. Data on trade, including agricultural commodities, was taken from the UN Comtrade database, and was collated by the UK Department for Business Innovation and Skills.1 Because of limitations regarding the collection of global trade data for each product sector in each country, the UN Comtrade data represent 90% of world trade and are produced by combining all the trade of the major exporting nations (e.g. countries from the Organisation for Economic Co-operation and Development, the EU, and the Association of Southeast Asian Nations, with the other leading trading nations of Brazil, Russia, and China). Some exports in the database are classed as from Other regions (e.g. Other Africa), the most signicant of which is Other Asia. In Lewis et al. (2010), the commodities classied under the category Agriculture, hunting and services were examined, and three subgroups were chosen for investigation: (i) vegetables, fruit, and nuts; (ii) cereals and grains; and (iii) livestock. Because of their importance for food consumption globally, the subcategory of cereals and grains was further divided into groups according to their relevant biological properties (e.g. photosynthetic properties and other climate dependencies). Cereals and grains were further distinguished according to the particular photosynthetic pathways used for carbon xation, which is signicant because C3-type grasses are able to benet from higher concentrations of CO2 in the atmosphere, but C4-type grasses derive no such benet. The impact of climate change and, in particular, the enrichment of the atmosphere with CO2 will therefore have different effects on each type of grass (Slack and Hatch, 1967). In this analysis, only wheat and barley (both C3-type grasses) are considered.2 As a result of the limitations of the available data, it was not possible to provide further information on differences in the provision of cereals and grains for human consumption and that for animal feeds or biofuels. Thus, the production of crop types was considered as a whole, regardless of their intended use. The examples of wheat and barley are used here to illustrate the general approach used and conclusions reached in Lewis et al. (2010), in which a more comprehensive analysis of the other different agricultural commodity types can be found (i.e. vegetables, fruits and nuts, and livestock). Figure 1 shows the export per country of wheat and barley as a percentage of the total world export in 2008. The export of wheat and barley is distributed widely across the Northern Hemisphere at midlatitudes, with Argentina and Australia also contributing from the mid-latitudes of the Southern Hemisphere. Tropical countries do not gure in the global export market. The largest exporters to the global market are the US ( 25%), followed by Canada and France (both 15%), and then a group that includes other parts of Europe, the Russian Federation, Australia, and Argentina. A country can experience the impact of climate change even if it does not alter the weather in that country. For example, 40% of the wheat and barley imported to the UK is from Canada. Thus, changes in Canadas climate could affect wheat and barley production, which in turn could have an impact on the UK economy. Equally, climate change in countries such as Russia, which supply very little wheat and barley to the UK, could also affect the UK economy as changes in supply affect global prices in the market as a whole.

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FIGURE 1 The export per country of wheat and barley as a percentage of the total world export in 2008. Note: Countries contributing less than one percentage of total export are coloured grey. Source: UN Comtrade database (available at http://comtrade.un.org/db/).

3. Agricultural sensitivities and climate change 3.1. Overview

Table 1, which draws heavily from Gornall et al. (2010), provides an outline of the sensitivities of wheat and barley to the weather and climate. For the second stage of analysis, key weather variables including temperature and precipitation, as well as more extreme events such as storms and drought, were considered. The sensitivities for each variable were described relative to the current practices and technology used in the production of each commodity, and identied using both a literature review and the views of appropriate experts. The sensitivities of each of the commodities were merely noted, and no attempt was made at this stage to quantify either their relative likelihood/magnitude or the possibility of any future change in them. Projections of climate change for key climate variables from the Met Ofce Hadley Centres HadCM3 global climate model ensemble3 set of climate runs (Murphy et al., 2004) were examined in order to clarify the current state of knowledge regarding the climate and future climate change, as well as to identify some of the gaps in it. These model runs were also compared with the spread of projections from the Intergovernmental Panel on Climate Changes Fourth Assessment Report (IPCC AR4) multi-model ensemble (Meehl et al., 2007). The focus was primarily on the 2040s timescale for the A1B business-as-usual emissions scenario (see Nakicenovic and Swart, 2000). However, the choice of emissions scenario makes little difference at this kind of timescale.4

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TABLE 1 Sensitivities of wheat and barley to changes in weather and climate Variable Temperature Sensitivities Crops are sensitive to growing season temperatures (Battisti and Naylor, 2009). At higher latitudes, warmer temperatures increase both the length of the growing season and the area of land suitable for arable farming (Maracchi et al., 2005; Tuck et al., 2006; Olesen et al., 2007). In areas where temperatures are already close to the physiological maxima for crops, such as seasonally arid and tropical regions, higher temperatures lead to increases in both heat stress on crops and water loss by evaporation. This, in turn, leads to a negative impact on yield (Gornall et al., 2010) Extreme temperature There are key temperature thresholds beyond which crop physiology is altered, and short periods of intense heat can destroy entire crops (Porter and Gawith, 1999; Wheeler et al., 2000; Schlenker and Roberts, 2009). The timing of temperature extremes with respect to growing season is critical. For

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wheat, temperatures above 358C during owering have severe yield-reducing effects (Wollenweber et al., 2003). Seedling growth of barley is inhibited at temperatures above 328C, and mortality may occur above 358C (Smillie et al., 1978). Grain growth is also restricted by temperatures above 358C (Savin and Nicolas, 1996). Precipitation and water availability All arable crops need water. The security of water supply is essential to the production of crop yields. Historically, many of the largest falls in crop productivity have been attributed to anomalously low precipitation events (Kumar et al., 2004; Sivakumar et al., 2005). A decrease in the number of rainy days causes water stress and leads to decreases in yield, while a greater number of rainy days in drier areas leads to increases in yield (Tao et al., 2004). Drought Heavy rainfall and ooding Drought leads to reduced yield for all crops (Li et al., 2009). Heavy rainfall events that lead to ooding can wipe out entire crops. Heavy rainfall towards the end of the growing season, which leads to ear and fungal disease infections, has been linked to lower grain quality (Kettlewell et al., 1999). Flooding can delay farming operations and prevent harvesting (Falloon and Betts, 2010) Storms/high impact weather Sea-level rise/storm surge Severe storms (including storm surges) can cause direct, potentially devastating, damage to crops (Webster, 2008) In low-lying coastal areas, rising sea levels threaten to inundate agricultural lands and salinize groundwater. Short-lived storm surges can cause devastation, with salinated agricultural land and rendered unusable for planting (Stover and Vinck, 2008) Large-scale circulation The El Nin o Southern Oscillation (ENSO) affects temperature and precipitation patterns globally. The Indian monsoon also has a huge impact on the agriculture of India and Bangladesh due to variations in precipitation and water availability (Kumar et al., 2004) Other C3-type crops (e.g. wheat, barley, oats, and rice) can take advantage of rising CO2 concentrations by increasing their CO2 uptake and improving photosynthesis, which can lead to an increase in yield (Long et al., 2004). C4-type crops (e.g. maize, millet, sorghum, and sugarcane) do not benet from a rise in CO2 concentration (Long et al., 2004). The combination of temperature, precipitation, and humidity affects the success of pests and diseases, which in turn affects arable agriculture. Changes in weather and climate affect different pests and diseases in different ways

Although the focus of the analysis was on climate change, it is important to acknowledge that the climate varies naturally on a number of timescales. Extreme weather events (e.g. drought, ooding, and storms) lead to price and supply volatility in the global market supplies of agricultural commodities, independently of any climate change impacts, and such responses can be expected in the

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future. Hence, it is important to consider the effects of current climatological conditions in regions where agricultural commodities are produced as well as the effects of potential changes in the climate. The key climate change variables analysed for wheat and barley were temperature, extreme temperature, mean precipitation and water availability, heavy rainfall and ooding, drought, storms, and sealevel rise.

3.2. Temperature and extreme temperature

There is general agreement among the many climate models for temperature (Meehl et al., 2007), which provides a measure of condence in the projections of future temperatures. Mean temperatures are projected to increase across the globe, with the largest increases in the high-latitude regions of the Northern Hemisphere. It is likely that most of Canada and Russia will experience signicant warming. There is also a high level of condence that there will be an increase in extreme high-temperature events across all regions (Meehl and Tebaldi, 2004) and that the largest increases in such events will occur at high latitudes in the Northern Hemisphere winter. During the months of June to August, it is probable that the largest increases in maximum temperatures will occur in Canada and Russia. Thus, it is likely that events that are considered extreme today will become more commonplace in the future.

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3.3. Mean precipitation

Although not as accurate as the representation of temperature patterns, the representation of largescale patterns of precipitation is reasonably good in many global climate models (Meehl et al., 2007). There is therefore a measure of condence in the projections of general circulation and largescale precipitation patterns. However, there is less certainty regarding the regional projections, particularly in terms of extreme events such as intense precipitation and droughts. One problem is that most climate models do not resolve monsoon events well, nor their associated rainfall (Randall et al., 2007). There is a reasonable level of agreement between climate models that there will be decreased precipitation in the Mediterranean and Eastern Australia. There may also be an increase in precipitation in the high latitudes of North America, Europe, and Central/North Asia.

3.4. Drought, rainfall intensity, and ooding

Drought is often a result of the combination of low precipitation and high temperatures and can have particularly signicant effects on agriculture. Climate change may increase the risk (by some measures) of drought in already drought-prone regions (e.g. Australia). In a warmer world, the intensity of extreme rainfall is expected to increase, particularly in tropical and high-latitude areas that experience increases in mean precipitation (Meehl et al., 2007). Even in areas where mean precipitation decreases, it is projected that there will be an increase in precipitation intensity, but longer periods between rainfall events (Meehl et al., 2007). A number of studies have claimed that an increase in rainfall intensity may lead to an increase in ooding (McCabe et al., 2001; Watterson, 2005). It is projected that there will be very wet winters over much of Central and Northern Europe due to the increase in intense precipitation (e.g. rainfall, snowfall) during storm events. It is likely that the increase in runoff caused by these events will increase ooding in a number of major river basins in Europe and other mid-latitude regions. Indeed, some of these changes would be extensions of trends already thought to be under way (Meehl et al., 2007). According to the IPCC AR4 projections, by the 2040s there will be an increase in the intensity of heavy rainfall in most areas of the world and consequently in the frequency of damaging ood events.

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3.5. Water availability

In many regions of the world, water stress is already a reality (UNESCO, 2009). Many countries are already utilizing water resources in an unsustainable manner. Rainfall-driven runoff5 is a key contributor to global freshwater supplies. Projected increases in runoff in North America and South Asia may have positive implications for water availability for agriculture, but there may also be associated risks from river ooding. Understanding how these changes are affected by the seasons is important, because without sufcient water storage of peak season ow, water scarcity may affect productivity, despite any overall increases in annual water availability. There is much debate within the scientic community about the extent of global changes in tropical cyclone frequency and intensity under a warming climate. Some of the studies that contributed to IPCC AR4 have suggested it is likely that tropical cyclones will become more intense, with stronger winds and heavier precipitation (Meehl et al., 2007), a claim that is in agreement with recent studies that use high-resolution models. These high-resolution studies also suggest that there may be a decrease in the frequency of future global tropical cyclones (McDonald et al., 2005; Bengtsson et al., 2007; Gualdi et al., 2008). However, there is only limited consensus regarding regional variations in tropical cyclone frequency. Finally, there is a high level of condence that mean sea level will continue to rise as a result of climate change. However, not all mechanisms that drive sea-level rise are currently fully understood (Bindoff et al., 2007), and the projected rates for the rest of the 21st century are subject to a considerable degree of uncertainty. However, signicant increases in sea level can be expected in many coastal areas.

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4. Discussion
The preceding summary of climate impacts on wheat and barley production in the main exporting regions highlights a large number of potentially negative consequences. However, the ability of wheat and barley (C3-type crops) to benet from higher CO2 concentrations and the predominance of these crops at high latitudes indicate that there are some positive consequences to climate change in the short to medium term. Areas suitable for crop cultivation may be extended further north as temperatures increase, there will be fewer frosty days, and crop growth will be enhanced by CO2 enrichment. For some regions (e.g. Europe and South America), water availability considered in the general sense here as total volume of water available for use is a key concern. Climate models suggest that there may be increases in precipitation at high latitudes. Crop production cycles depend on water availability at certain periods during the year. Thus, the actual impact of changes in water availability, averaged over the year, cannot be fully evaluated without taking into account the intensity and timing of precipitation during the growing seasons, for example. However, little is known about such seasonal factors. Further investigation into the effects of seasonal variations in precipitation is therefore required. Although crop yields may be affected by a rise in sea level or the frequency of storms, any such effects in the areas in which wheat and barley are grown are likely to be small in comparison to those caused by changes in temperature and rainfall. The A1B emissions scenarios (Nakicenovic and Swart, 2000) project that temperature will increase continually to 2100. It is reasonable to claim that the negative impacts of such temperature rises on crop yields for wheat and barley will become more signicant in comparison to the positive impacts. Changes in precipitation and water availability are also projected to become more severe towards the end of the century. However, in those areas where wheat and barley are currently produced,

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it is not likely that changes in precipitation and incidence of drought will be as severe as in other parts of the globe. Two exceptions to this may be Europe and Australia, areas where there is a higher probability that there will be a decrease in precipitation and an increase in the incidence of drought. These signals (although more severe) can also be seen if a mitigation (rather than the A1B) emissions scenario is considered.

5. Conclusions and policy recommendations

Some of the ways in which the commodity market is vulnerable to climate change, using the examples of wheat and barley, have been examined. It is likely that there will be a range of negative impacts (particularly in the US, Europe, Australia, and Argentina), from high temperatures, which will damage crops, to an increase in the frequency of drought. There will also be some positive impacts, particularly in Canada and Russia, which are both large wheat and barley export countries. These range from an expansion of areas suitable for crop production to an increase in the length of the growing season. Furthermore, the sensitivities of wheat and barley to changes in the weather and climate that have been highlighted in this study demonstrate the critical role, alongside climate change, that climate variability plays in the agricultural commodities market. A more detailed approach, however, is required to better understand the impact of climate change on agricultural commodities. The key positive and negative impacts must be quantied, in particular how changes in precipitation affect water availability, the seasonal pattern of water availability, and how these relate to the seasonality of agricultural demand. Finally, further quantitative research is needed regarding the correlation of meteorological events such as drought and ooding and the extent to which climate change will affect their frequency. For example, a drought in one export area might coincide with ooding in another area, which may then result in a much larger total impact on crop production than either event would have alone. At the broad level considered in this study, there are a number of responses available to policy makers. First, the import sources for key commodities, such as wheat and barley, can be diversied. This will reduce vulnerability to the extreme events that affect individual production areas and will also even out the positive and negative impacts of climate change. Second, trading relationships with countries such as Canada and Russia, which are set to see the most positive effects of climate change, could be strengthened. Ensuring good trading relationships with those countries best positioned to supply wheat and barley in the long term will help to offset some of the negative effects that climate change will have as other regions, such as the US or Argentina, become less favourable. Third, more countries could be encouraged to produce agricultural commodities for export. Although sourcing agricultural commodities from a wide range of geographical locations is important for an individual country, a reduction in supply from one area will push up prices across the whole market. Encouraging more countries to produce agricultural commodities would offset this pricing effect and would also increase the resilience of the global market to absorb shocks at individual locations. Fourth, at a national level, vulnerability to weather and climate events could be reduced by establishing a surplus of critical commodities. This can be done in the years when positive meteorological conditions dominate and prices are lower. Finally, although improving resilience to climate variability and extreme events is important, climate change is the change in the long-term measures (e.g. temperature and precipitation) that will affect the suitability of land for crop production. Thus, policy makers should invest in supporting adaptation measures (including crop science research) so that the benets of climate change can be maximized and its disadvantages minimized.

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Notes
1. 2. 3. 4. The latest available data were for 2008. For the cases of rice (a C3-type grass) and maize (a C4-type grass), see Lewis et al. (2010). An ensemble is a group of parallel model simulations. For a discussion of some of the key uncertainties in climate change modelling and the projections for the 2040s and 2100, see Lewis et al. (2010, Ch. 4). 5. Runoff is net water availability, after precipitation and evaporation and any changes in soil moisture storage are taken into account.

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