January 24, 2000
Do Not Cite
This study was conducted as part of a National Assessment effort aimed
at evaluating the impacts of climate change and climate variability on
the United States across its various regions and including sectors beyond
agriculture. We set out to understand the potential implications of climate
change for agriculture. Chapter 1 provided an overview of the goals of
the assessment and a broad brush portrait of forces shaping US agriculture
over the past 100 years, where US agriculture finds itself today, and
some of the major forces that will shape agriculture into the next century.
Chapter 2 reviewed previous studies on the impacts of climate change on
agriculture including identification of some of the key findings, how
the literature has developed, and where some of the major gaps remain.
The substantive new work of the agriculture sector assessment was reported
in chapters 3 through 5. Chapter 3 considered the impacts of the future
climate change on production agriculture and the US economy. It reported
a series of crop modeling studies that examined in detail the impacts
of climate change on crop yield with the intent of providing a representative
estimate of climate impacts on US crop yields under 2 climate scenarios
for climates projected to represent the decade of the 2030s and the 2090s.
These results were then combined with estimates of changes in water supply,
pesticide expenditures, livestock, and international trade due to climate
change to understand the combined impacts on the US agricultural economy,
resource use, and the distribution of impacts in the US by producer and
consumer and by region.
Chapter 4 considered the question of climate variability and extreme
events, the chance that climate change may cause the probability of extreme
events to change, and the potential consequences for agriculture. Climate
variability, yield variability and how farmers cope with variability apart
from climate change is the subject of many books. Crop insurance, futures
markets, weather derivatives, and technological options such as irrigation,
storage facilities, and shelter for livestock are intricate parts of the
agricultural system because of weather variability. We, in no way, have
covered this broad literature but have tried to understand the extent
to which climate change could exacerbate or reduce variability.
The subject of Chapter 5 was one of the poorly researched areas of climate
impacts on agriculture, the arena of environment and resource implications.
Soil erosion, the fate of chemical residuals, and the quality and quantity
of soil and water resources are highly dependent on climatic conditions.
Chapter 5 began the process of examining some of these interactions. The
approach we used in this chapter was to focus on some case studies to
illustrate the issues and problems that could arise as we try to manage
resource use and agriculture's relationship with the environment under
a changing climate. We examined the Chesapeake Bay drainage area that
extends through Maryland, Delaware and Pennsylvania, the San Antonio Texas
area where the Edward's Aquifer provides most of the water supply, pesticide
use and its relationship to climate, and the direct impact of climate
on soil. This list leaves many problems unexplored, including such issues
as soil erosion, the potential for climate to change the level of pollutants
such as ozone that are detrimental to crops, the interaction of agriculture
with wildlife habitat, livestock waste issues, and many others.
One of the goals of the assessment was to respond directly to questions
stakeholders felt were important. There remains a considerable gap between
the questions of the stakeholder community with whom we interacted and
the answers we were able to provide. To answer many of these questions
requires a modeling capability and precision that we do not possess. The
most fundamentally difficult conceptual problem is to represent completely
the dynamics of social, economic, and physical interactions in their full
complexity. If we could know and model these dynamics then we could answer
questions such as when will climate change begin to affect the agricultural
sector, when will it be noticed, by who, and how will they react to it?
As individuals, organizations, and local governments react, or not, how
will it change the relative economic position of one farm versus another
or one region versus another? Almost any change provides an opportunity
for those who are prepared for it and adjust early and a threat for those
who fail to adjust. Technical change, a force that generally improves
economic performance, creates losers along with winners. Pollution regulation,
while usually seen as increasing the cost of production in the industries
targeted, can create winners among those companies that have or can create
innovative solutions to meet the environmental regulation, thus allowing
them to win market share against their slower to respond rivals. Whether
climate change generally improves agricultural productivity in the US
as projected in the scenarios we investigated or leads to losses in productivity
as has been projected by some previous forecasts, there will be winners
In this final Chapter we review the principal findings and try to draw
out the implications of these findings for adaptation and adjustment.
We make only a small start in this direction. In this regard, the research
and assessment team we assembled for the task of assessing climate impacts
on agriculture was best suited to describing the impacts of climate change.
To understand what to do requires a far more detailed engagement of those
who are directly involved--the farmers, legislators, research managers,
government program managers, and the local communities who will be affected
and who are the one's whose incomes, livelihoods, and jobs are on the
line. This report is, thus, a start at that process from the side of a
team of researchers.
6.2 Summary of Findings
The new quantitative work we undertook confirmed in many ways the broad
results of previous studies:
- Over the next 100 years and probably beyond, human-induced climate
change as currently modeled is unlikely to seriously imperil aggregate
food and fiber production in the US, nor will it greatly increase the
aggregate cost of agricultural production. Our quantitative results
based on newer climate scenarios and including a broader range of impacts
including changes in water resource, pesticide expenditures, and livestock
confirm the emerging consensus findings in the literature and, if anything,
suggest significantly more positive results than previous studies.
- There are likely to be strong regional production effects within
the US with some areas suffering significant loss of comparative advantage
(if not absolutely) to other regions of the country. In the scenarios
we evaluated the Lake states, Mountain states and Pacific region showed
gains in production while the Southeast, the Delta, Southern Plains
and Appalachia generally lost. Results in the Corn Belt were generally
positive. Results in other regions were mixed depending on the climate
scenario and time period. The regional results show broadly that climate
change favors northern areas and can worsen conditions in southern areas,
a result shown by many previous studies.
- Global market effects can have important implications for the
economic impacts of climate change. The position of the US in the
world agricultural economy, being both a significant food consumer and
exporter, means that changes in production outside the US lead to consumer
benefits from lower prices roughly balancing producer losses. The situation
is reversed if global production changes cause world prices to rise.
As a result, the net effect on the US economy did not change much under
different global impact assumptions. The main effect was to change the
distribution of impacts among producers and consumers. We were unable
to conduct a new assessment of impacts on the rest of the world. Trade
scenarios drawn from previous work showed both small increases and decreases
in world prices.
- Effects on producers and consumers often are in opposite directions
and this is often responsible for the small net effect on the economy.
In the Canadian Center climate scenario the absolute effects on producers
and consumers were nearly balanced. In relative terms, the 4 to 5 billion
dollar losses to producers in the CC scenario represent 13 to 17 percent
loss of income whereas the gains of 12 to 14 billion dollars to consumers
in the HC scenarios represent only a 1.1 to 1.3 percent gain to consumers.
While these losses to producers are substantial, to place this in context,
a good comparison is historical changes in land values, the asset that
would ultimately be affected by changes in climate. Between 1980 and
1983, US agricultural land values fell on the order of 50 percent. The
projected losses due to climate change are projected over the course
of 3 to 4 decades or more and would thus likely inflict far less adjustment
- US agriculture is a competitive, adaptive, and responsive industry
and will adapt to climate change; all assessments reviewed above have
factored adaptation into the assessment. Adaptation improved results
substantially under the Canadian center climate scenario but much less
so under the Hadley center scenario where climate change was quite beneficial
to productivity without adaptation.
- The agriculture and resource policy environment can affect adaptation.
These conclusions are based primarily on our review of the literature.
We did not extensively consider the policy environment and its impact
on adaptation in the new work we conducted. Among the policies to consider
are water markets, agricultural commodity programs, crop insurance,
and disaster assistance.
Several limitations have been present in past assessments. We addressed
some of the most serious of these limitations:
- We used more realistic "transient" climate scenarios that simulated
gradual climate change as a result of gradually increased atmospheric
CO2 and included the cooling effect of sulfate
- We used site-level crop model results combined with a spatial equilibrium
economic model to generate national and regional results that included
more than a dozen crops. We compared this approach with other approaches
that had less crop detail but had other strengths. We investigated trade
links and implications using sensitivity analysis based on previous
estimates of impacts around the world.
- We examined scenarios of change in variability and implications for
the agricultural economy as well as the extent to which climate is a
factor in existing variability in crop yields.
- We considered a more complete interaction of effects such as changes
in water resources and pesticide expenditures.
- We conducted case studies of environmental-agricultural interactions
to examine the potential effects of climate change on the Chesapeake
Bay drainage area and of ground water use in the Edwards aquifer area.
The most important changes in this study of the effects of climate change
on production agriculture are the direct effects on crop yields. We conducted
crop simulations studies at 45 sites across the US that were selected
to be representative of the major production regions and areas that potentially
could be important under climate change. We also compared these results
to a more limited investigation using a model that estimated yields at
over 300 representative sites using a simpler crop modeling methodology.
The specific results we found based on the two climate scenarios we investigated
- Effects on crop yields varied by climate scenario and site, but overall
were far more positive than for many previous studies.
- Winter wheat. Yields increased 10-20% under Hadley,
but decreased by more than 30% under the Canadian Center climate
and yields were more variable under the Canadian climate scenario.
Adaptation helped to counterbalance yield losses in the Northern
Plains but not in the Southern Plains. Irrigated wheat production
increased under all scenarios by 5-10% on average.
- Spring wheat. Yields increased by 10 to 20 percent in
2030 under both climate scenarios. Under the Hadley climate scenario
yields generally increased up to 45 percent higher by 2090, but
under the Canadian Center scenario yields in 2090 showed declines
of up to 24 percent. Irrigated yields were negatively affected by
higher temperatures. Adaptation techniques, including early planting
and new cultivars, helped to improve yields under all scenarios.
- Corn. Dryland corn production increased at most sites,
due to increases in precipitation under both climate scenarios.
Larger yield gains were simulated in the northern Great Plains and
in the northern Lake State region, where warmer temperatures were
also beneficial to production. Irrigated corn production was negatively
affected at most sites.
- Potato. Irrigated potato yields generally fell, and
quite substantially at some sites by 2090, while, under rainfed
conditions, yield changes were generally positive. Adaptation of
planting dates mitigated only some of the predicted losses. There
was little room for cultivar adaptation, because the predicted warmer
fall and winter temperatures negatively affected tuber formation.
- Citrus. Yields largely benefited from the warmer temperatures
predicted under all scenarios. Simulated fruit yield increased in
the range of 20-50%, while irrigation water use decreased. Crop
losses due to freezing diminished by 65% in 2030, and by 80% in
- Soybean. Soybean yields increased at most sites analyzed,
in the range 10 to 20% for sites of current major production. Larger
gains were simulated at northern sites where cold temperatures currently
limit crop growth. The Southeast sites considered in this study
experienced significant reductions under the Canadian climate scenario.
Losses were reduced by adaptation techniques involving the use of
cultivars with different maturity classes.
- Sorghum. Sorghum yields generally increased under rainfed
conditions, in the range 10-20%, due to the increased precipitation
predicted under the two scenarios considered. Warmer temperatures
at northern sites further increased rainfed grain yields. By contrast,
irrigated production was reduced almost everywhere, because of negative
effects of warmer temperatures on crop development and yield.
- Rice. Rice yields under the Hadley climate change scenario
increased in the range 1-10%. Under the Canadian climate scenario,
rice production was 10-20% lower than current levels at sites in
California and in the Delta region.
- Tomato. Under irrigated production, the climate change
scenarios generated yield decreases at Southern sites and increases
at Northern sites. These differential regional effects were amplified
under the Canadian Center scenario as compared with the Hadley center
- The factors behind these more positive results varied but can generally
be traced to aspects of the climate scenarios.
- Increased precipitation in these transient climate scenarios
is an important factor contributing to the more positive effects
for dryland crops and explains the difference between dryland and
irrigated crop results. The benefits of increased precipitation
outweighed the negative effects of warmer temperatures for dryland
crops whereas increased precipitation had little yield benefits
for irrigated crops because water stress is not a concern for crops
- The coincidence of geographic pattern of precipitation and crop
production contributed to differences among crops. Crops grown in
the Great Plains where drier conditions were projected, at least
under the Canadian center model, and crops grown in the Southern
portion of the country, already sometimes suffering heat stress,
were more negatively affected. Heat-loving crops like citrus benefited
while crops that do well under cool conditions such as potatoes
- Another factor behind the more positive results is that previous
studies have been based on 2×CO2
equilibrium climate scenarios with larger temperature increases
than exhibited by these transient scenarios through 2100.
- The crop models and crop modeling approaches were substantially
the same as in previous studies.
The crop results were combined with impacts on water supply, livestock,
pesticide use, and shifts in international production to estimate impacts
on the US economy. This allowed the estimation of regional production
shifts and resource use in response to changing relative comparative advantage
among crops and producing regions.
- The net economic effect on the US economy was generally positive
reflecting the generally positive yield effects. The exceptions were
simulations under the Canadian climate scenario in 2030, particularly
in the absence of adaptation. Foreign consumers gained in all the scenarios
as a result of lower prices for US export commodities. The total effects
(net effect on US producers and consumers plus foreign gains) were on
the order of a $1 billion loss to $14 billion gain.
- Producers' incomes generally fell due to lower prices. Producer losses
ranged from about $0.1 up to $5 billion. The largest losses were under
the Canadian Center climate. Under the Hadley center climate producers
lost from lower prices but enjoyed considerable increase in exports
such that the net effect was for only very small losses.
- Economic gains accrued to consumers through lower prices in all scenarios.
Gains to consumers ranged from $2.5 to $13 billion.
- Different scenarios of the effect of climate change on agriculture
abroad did not change the net impact on the US very much but redistributed
changes between producers and consumers. The direction depended on the
direction of effect on world prices. Lower prices increased producer
losses and added to consumer benefits. Higher prices reduced producer
losses and consumer benefits.
- Livestock production and prices are mixed. Increased temperatures
directly reduce productivity but improvements in pasture and grazing
and reductions in feed prices due to lower crop prices counter these
In terms of improving the coverage of potential impacts of climate change
on agriculture we made significant advances over previous assessments.
One set of our advances involved coverage of resource and environmental
- Agriculture's demand for water resources declined nationwide on the
order of 5 to 10 percent in 2030 and 30 to 40 percent in 2090. Land
under irrigation showed similar magnitudes of decline. The crop yield
studies in general favored rainfed over irrigated production and showed
declines of water demand on irrigated land.
- Agricultures pressure on land resources generally decreased. Area
in cropland decreased 5 to 10 percent, area in pasture decreased 10
to 15 percent. Animal unit months (AUMs) of grazing on western lands
decreased on the order of 10 percent in the Canadian climate scenario
and increased 5 to 10 percent under the Hadley climate scenario.
- The Chesapeake Bay is one of nation's most valuable natural resources
but has been severely degraded in recent decades. Soil erosion and nutrient
runoff from crop and livestock production have played a major role in
the decline of the Bay.
- Potential effects of climate change on water quality in the Chesapeake
Bay must be considered very uncertain because current climate models
don't adequately represent extreme weather events such as floods
or heavy downpours, which can wash large amounts of fertilizers,
pesticides, and animal manure into surface waters.
- In our simulations we found that under the two 2030 climate scenarios
nitrogen loading from corn production increased by 17 to 31 percent
compared with current climate. Changes in farm practices by then
could reduce loadings by about 75 percent from current levels under
today's climate or under either of the climate scenarios.
- The Edwards aquifer area is another region of the country where agriculture
and resource interactions are critical. Agriculture uses of water compete
with urban and industrial uses and tight economic management is necessary
to avoid unsustainable use of the resource. We find:
- Climatic change causes a slightly negative welfare result in
the San Antonio region as a whole but has a strong impact on the
agricultural sector. The regional welfare loss, most of which is
incurred by agricultural producers, was estimated to be between
2.2-6.8 million dollars per year if current pumping limits are maintained.
- A major reason for the current pumping limits is to preserve
springflows that are critical to the habitat of local endangered
species. If springflows are to be maintained at the currently desired
level to protect endangered species, we estimated that under the
two climate scenarios pumping would need to be reduced by 10 to
20% below the limit currently set at an additional cost of 0.5 to
2 million dollars per year.
- Welfare in the non-agricultural sector is only marginally reduced
by the climatic change simulated by the two climate scenarios. The
value of water permits rises dramatically.
- Agricultural water usage declines as a result of competition
from the non-agricultural sector while nonagricultural water use
- Soil organic carbon may be reduced because warming speeds up decomposition
of organic matter, however, increased yields predicted in many areas
may counter this if residue is incorporated into soils. Changes in soils
due to climate change are unlikely to have significant effects on crop
- Microbial activity in soils is diverse and thus likely resilient
to changes in climate.
- Poor soils in Canada limit the extent of movement of cropping
into these areas.
- Soils managed using sustainable production practices, such as
reduced tillage and retaining residues on the soil, produce more
under either drought or excessively wet conditions and therefore
could be a viable adaptation measure if weather becomes more variable.
- Pesticide expenditures were projected to increase under the climate
scenarios we considered for most crops and in most states we considered.
- Increases on corn were generally in the range of 10 to 20 percent,
on potatoes of 5 to 15 percent and on soybeans and cotton of 2 to
5 percent. The results for wheat varied widely by state and climate
scenario showing changes ranging from approximately -15 to +15 percent.
- The increase in pesticide expenditures could increase environmental
problems associated with pesticide use but much depends on how pest
control evolves over the next several decades. Pests develop resistance
to control methods requiring a continual evolution in the chemicals
and control methods used.
- The increase in pesticide expenditures results in slightly poorer
overall economic performance but this effect is quite small because
pesticide expenditures are a relatively small share of production
- The approach we used did not consider increased crop losses due
to pests, implicitly assuming that all additional losses were eliminated
through increased pest control measures. This may underestimate
Another substantial additional contribution of this assessment was to
consider the potential effects of climate variability on agriculture.
- A major source of weather variability is the ENSO (El Nino Southern
Oscillation) phenomenon. ENSO phases are triggered by the movement of
warm surface water eastward across the Pacific Ocean toward the coast
of South America and its retreat back across the Pacific, in an oscillating
fashion with a varying periodicity.
- Better prediction of these events would allow farmers to plan
ahead, planting different crops and at different times. The value
of improved forecasts of ENSO events has been estimated at approximately
- ENSO can vary intensity from one event to the next, thus, prediction,
particularly of the details, of ENSO driven weather are not perfect.
- There are widely varying effects of ENSO across the country.
The temperature and precipitation effects are not the same in all
regions, in some regions the ENSO signal is relatively strong while
others it is weak, and the changes in weather have different implications
for agriculture in different regions because climate-related productivity
constraints differ among regions under neutral climate conditions.
- While highly controversial, at least one recent study projected
changes in ENSO as a result of global warming. We simulated the
potential impacts of this on agriculture and found:
- An increase in frequency of ENSO could cause a loss equal
to about 0.8 to 2.0 percent of net farm income.
- An increase in frequency and intensity could cause a loss
of 2.5 to 5.0 percent of net farm income.
- There are differential effects on domestic producers, foreign
economies and domestic consumers. We find gains to domestic
consumers from increased ENSO frequency and intensity but losses
to domestic producers and to foreign economies.
- In general, climate variability is responsible for significant losses
in agriculture. Droughts, floods, extreme heat, and frosts can damage
crops or cause a complete loss of the crop for the year. Sequential
years of crop loss can seriously affect the viability of a farm enterprise.
- Climate models do not predict extreme events and changes in variability
well, making it difficult to produce meaningful estimates of impacts.
- There are also limits to the ability of crop models to predict
the effects of climate variability as yields can depend on very
specific aspects of climate including for examples, how many days
in a row of high temperatures are experienced, or whether the crop
has been subject to gradual hardening against cold temperatures.
- Changes in mean conditions can affect the variability of crop
yields. We conducted a statistical analysis of the impact of changes
in mean conditions of crop yield variability for several crops.
The results were mixed:
- For corn and cotton and under the climate scenarios we used
yield variability decreased largely due to the increase in precipitation.
- Wheat yield variability tends to decrease under the Hadley
Center climate and increase under the Canadian climate model.
- Soybean yield variability shows a uniform increase with the
Hadley Climate Change Scenario.
6.3 A Resilient and Adaptable Agriculture
The ultimate question for US agriculture over the next several decades
is "Can agriculture become more resilient and adaptable given the many
forces that will reshape the sector, of which climate change is only one?"
US agriculture has, in fact, proved to be very adaptable and resilient
along many dimensions but, to stay ahead in a competitive world, we can
always ask: "Can it do still better?" For the individual farmer, agribusiness
companies, agronomist, or farm-dependent community, it will not matter
whether prices are low because of climate change or because of technological
change. Granted, a changed climate in a locality has somewhat different
implications than a market collapse in Asia or sudden unforeseen demand
because of an agricultural production failure in Russia. But ultimately,
all of these represent a change in the relative economic conditions across
regions. These other types of events and forces create both short-term
variability and shape long-term trends. They present changed conditions
that are potential opportunities for those that act quickly (and in the
right direction) and threats to those who are slow to respond. There,
of course, can be real losses and real gains to different regions, which
for climate change we have tried to illustrate in this assessment. The
challenge for adaptation is to do as well as possible with what the world
presents. Limiting climate change is another option for avoiding negative
impacts involved with climate change but that issue involves much more
than what happens to US Agriculture.
It is clear that we cannot now predict climate change precisely nor can
we predict technology or economic growth around the world decades ahead.
It is therefore worthwhile to step back from specific numerical forecasts
and consider some of the major forces likely to shape agriculture, describing
as best we can the broad directions of these changes, take lessons from
what we have learned in agricultural policy from the last half-century
or so, describe some of the broad challenges for agricultural policy over
the next several decades, and try to fit what we have discovered about
climate change into the broader context of agriculture policy over the
next several decades.
Over the past half-century Federal farm policy has aimed to boost farm
and rural incomes, smooth out the ups and downs of commodity prices, insure
farmers against the inevitable disasters of droughts and floods, feed
the poor, improve productivity, protect natural resources, and come to
the aid of the small farmer. There were great successes--since 1950 US
agricultural productivity doubled, real world food prices fell by two-thirds
making it cheaper to feed the world, and the average US farm household
is now wealthier than the average nonfarm household. There were also contradictory
and costly policies such as supply control with production-based payments
and "conservation" programs that idled land with only minimal environmental
At the brink of a new century, there is a need to be realistic about
the inevitable market and global forces that are simply too powerful to
change and avoid the policy pitfalls of the last half-century. As our
assessment shows there is at least as good a chance, perhaps a better
chance, that climate change will increase agricultural productivity in
the US as decrease it. Although we find improved productivity good for
US consumers, it generally reduces income and wealth among farmers and
What are the trends that will shape agriculture, of which climate change
is only one, and how can Federal farm policy make US agriculture resilient
and adaptable given that we cannot precisely predict any of them?
The inevitable forces, drawn from our discussions with stakeholders:
- Biotechnology and information technology will revolutionize agriculture
over the next few decades. Productivity will increase; prices will fall.
Even if these changes are no more powerful than those of the last half-century,
we may see geographic shifts of 50 or 100 miles in where crops are produced.
The US is well-positioned to lead in developing new technology but many
individual (less successful) farmers will be left behind. Moreover,
the private sector firms that develop this technology have a strong
incentive to market it internationally to capture fully the economic
rents associated with its development. Technology development and distribution
is becoming internationalized, the economic rents going to the developers
of the technology rather than the commodity producers.
- Trade policy, trade disputes (as over genetically modified organisms),
and the development of intellectual property rights (or not) across
the world will have strong effects on how international agriculture
and the pattern of trade develops. There will be constant pressure on
profit margins--only those with exceptional managerial expertise and
who are able to draw on significant resources will survive in bulk commodity
- The industrialization of agriculture will transcend national boundaries,
integrating producers, processors, and suppliers to produce uniform
product and assure supply. There will be ever fewer farms producing
an ever-greater share of production. Despite the resistance of many
in the current generation of mid-size farmers, production under contract
with processors, vertical integration, and other forms of market organization
will dominate most of agriculture. This has already occurred in fruits
and vegetables, poultry, and increasingly in pork and beef production.
- The trends in bulk commodity production have given rise to a popular
view that niche markets and production for local markets can offer refuge
for the family farm. Biotechnology offers the ability to introduce genetic
modifications so that crops and livestock can produce pharmaceuticals
or produce other designer products. In many ways, these markets are
likely to be no less demanding than bulk commodity production. By definition
they are small markets and therefore no one product can preserve all
family farms. Success will breed competition, driving profits down.
Creating markets for new, unique goods will require far more marketing
skill than choosing when to sell a bulk commodity like corn or wheat.
Success will thus demand many new business skills on how to develop
and maintain markets.
- Concern about environmental performance of agriculture will continue
to grow. How to capitalize on and create incentives to reduce pollution
and reap the benefits of agricultural greenspace and landscapes will
be the challenge.
This set of challenges suggests several broad responses:
- Make research work for agriculture. Successful adaptation to climate
change will require successful R&D. Traditional public R&D is
part of the research portfolio but the engine of invention is now in
private firms. Basic research remains the province of the public sector.
The important element for the future is how to encourage and direct
the power of the private research engine to improve environmental performance.
Science-based environmental targets implemented with market-based mechanisms
can provide sound incentives for innovations that improve environmental
performance. Designing market-based mechanisms to deal with non- point
pollution has proved difficult, but more attention is needed to assure
that whatever mechanisms are chosen, they provide incentives for the
private sector to develop and commercialize agricultural technologies
and practices with improved environmental performance.
- A world of change, whether from climate or from other forces, will
be a world of dislocation for some. The lesson from the last 50 years
of agricultural policy is that use of broad based commodity policy to
fight rural poverty is an extremely blunt instrument. These payments
often end up disproportionately in the hands of the wealthiest farmers.
Fifty years ago when the farm population was much poorer than the general
population, the regressive aspects of these policies were minimal but
that is no longer true today. The goal must therefore be to target income
assistance far more carefully to the disadvantaged in the rural areas,
many of whom are not actually farmers on any significant scale. Tying
aid to the business of farming also tends to merely inflate the value
of assets (mainly land) tied to farming. Ultimately, the next generation
of farmers pay a higher price for the land and face a higher cost structure
than if the payments had not been in place. This sets the stage for
another income crisis when the inevitable commodity price variability
leads to a downturn in prices. The 1996 farm legislation got rid of
most of these elements, replacing them with payments that were ultimately
to be phased out after 7 years. Farm sector euphoria over the program
when prices were high turned to disenchantment when prices fell. This
disenchantment risks a drift back to programs that pay people to produce
product that depresses prices, forcing government to buy it up to prop
up prices, dump stocks on the market and depress prices, and pay people
not to produce.
- Climate variability and the potential for it to increase necessarily
focuses attention on risk management strategies. Contract production,
vertical integration, forward markets, private savings, household employment
decisions, and weather derivatives are market responses to risk. These
are likely to evolve further and farmers that are not adept at using
them will need to become so. Farmers can adopt technological solutions
to risk such as irrigation as insurance against drought, or shorter
maturing varieties against frost. However, if adopted primarily to reduce
variability in income these strategies can increase costs and make the
farm uncompetitive with other farms that have accepted the risk and
pooled income variability through savings, contract production, or other
market mechanisms. Crop insurance is also such a response for which
the Federal government now takes some responsibility. Federal crop insurance
contains a devilish public policy dilemma. One aspect of insurance is
what is known in economics as "moral hazard." The existence of insurance
reduces the incentive to undertake technological solutions to risks.
A second is that under a pure insurance program the enrollee pays insurance
each year but over a number of years should expect to get back in loss
payments no more than (s)he paid. If (s)he can expect more, then the
insurance program is also a subsidy program. This may involve cross-subsidization
among enrollees but the subsidizers then tend to drop out or, where
Federally managed, the entire program can run a deficit with tax dollar
support. There is a risk, then, that the desire to create a Federal
insurance program that enrolls a large proportion of farmers will end
up as largely a subsidy program. If climate change causes a drift toward
more frequent disasters in an area, the premiums for farmers in the
area would need to be adjusted upward to maintain the program as a pure
insurance program. Failure to adjust premiums could mean, ultimately,
that insurance is paying out almost every year. It would, however, be
difficult for a Federal program to raise premiums substantially on those
areas that have just suffered repeated disaster years. Ultimately, crop
insurance or a broader form of producer insurance cannot offer much
protection if an area is drifting toward ever less viability.
- Realistic, tough, and market-based environmental and resource programs
are needed. These can be a win-win situation. In the climate scenarios
we examined increased yields and lower prices led to a reduction in
resource use. In the past, acreage reduction programs took vast tracts
of land out of production to boost prices. In the same way, environmentally
targeted programs that reduce production, either through land retirement
or through other types of constraints on production practices, can offset
these climate-induced productivity increases, raise commodity prices,
and restore income levels. These programs can, in addition, be overall
beneficial for the US if the programs are targeted to generate substantial
and real environmental gains. If, as projected in our analysis, use
of water and land resources declines because of climate change, it may
be more feasible to reallocate resources to environmental and conservation
goals. Here, however, we need to keep in mind that our projections are
for reduced resource use compared with a reference. If far greater demand
for resources occurs for other reasons (demand growth abroad) then we
will not see these reductions compared to current levels. Thus, again,
climate change is just one of the factors that needs to be considered.
- Finally, a considerable caution is needed in recommending specific
technological solutions or directions for agricultural research. A decade
ago, the main fear of climate change was drought but in the scenarios
we examined precipitation over much of the country increased, reducing
the number of irrigated acres and the demand for water. Flooding and
excessively wet field conditions may pose a greater threat, at least
as now projected. Rather than bet on one scenario or another, a distributed
portfolio of research is needed representing a variety of perspectives
on how the future might evolve.
The surprising finding in our analysis is that climate change as it affects
agriculture may well be beneficial to the US economy through the next
century. It will, however, create winners and losers and contribute to
dislocation and disruption that imposes costs on localities. That local
and regional effects and issues can differ substantially was illustrated
in our case studies of the Chesapeake Bay drainage area and the Edwards
Aquifer region in Texas. It may well be the case that agriculture or some
types of agriculture will become non-viable in some areas under climate
change. The truly difficult aspect of adaptation and adjustment is to
decide when to make further investments in a particular farming practice
or farming region and when conditions have become so adverse that the
sensible strategy is to find another line of work.