Global warming impact on agribusiness value chain

The impact of global warming on agriculture is the subject of much research and debate. The current conventional wisdom is that crop production will move towards the poles with countries such as Canada and Russia benefiting from the combined impact of increased temperatures, greater precipitation and the carbon fertilization effect. Meanwhile, countries closer to the equator, such as India and Africa, could be hit the worst as higher temperatures reduce crop yields.The effect, however, will vary significantly by crop as some are more susceptible to temperature increases than others. Overall, the impact on global crop production is uncertain. Wheat, for example, is already geographically constrained as it cannot be grown in tropical climates, is more vulnerable than corn. Any significant effects are likely to lead to major changes to the location of production as well as global trading patterns.

In addition to the impact on the overall level of agricultural production, global warming is also likely to result in more extreme weather patterns, with more droughts and floods which could lead to increased volatility in crop production and markets.

The upcoming fifth report on the topic from the Intergovernmental Panel on Climate Change (IPCC), due in 2014 will hopefully shed more light on the issue. In the meantime, various regional studies are being conducted, including studies on India and Central America which both point to significantly reduced production in each region. Additionally, an interim review commissioned by the World Bank and published in 20122 paints a more worrying picture than some previous assessments.

Global warming will present different challenges and opportunities to different parts of the value chain, some of which are summarized in the table below.

Concern over greenhouse gas (GHG) emissions also figures prominently in agribusiness companies’ environmental strategies, a focus which is slightly surprising given that other sectors emit GHGs far more intensively and agriculture is not included in the UN’s Clean Development Mechanism.