At the heart of the agriculture industry are coffee shops where farmers gather to chat. I believe the unwritten rule is to start every meeting with a discussion about the weather. There is a reason for that. While there are many factors, the weather plays a large part in the success of the agriculture industry, and Canada’s agriculture industry is susceptible to climate change. The earth is warming, and many experts agree that we will continue to see more extreme weather events and warmer temperatures. The Aquanomics model by GHD, a global engineering and architecture service firm, projects a loss of $108 billion to the Canadian GDP from 2022 to 2050 caused by droughts, floods, and storms. Flooding could cost the economy $30 billion by 2050. The model predicts that manufacturing and distribution will be the hardest hit at $50 billion in total output losses, with agriculture 5th on the list at $3 billion in output losses by 2050. Regardless of the economic impact, the agriculture industry could be in for some changes, which is nothing new.
Impact to Production
The impacts to the agriculture industry could be numerous and will present challenges as well as opportunities. It is predicted that high-latitude countries such as Canada will see more warming than the global average. This is in part due to more southern locations already being ice-free. Land is less reflective than ice, so there will be more change as ice melts in northern regions. The table below shows a few of the potential impacts.
Financial Impact on Producers
With a shift in climate affecting the growing season, a producer’s finances have the potential to be impacted in a few different ways highlighted below.
Commodity prices
Prices are susceptible to shifts in supply. An increase or decrease in potential acres for certain varieties could impact the supply. Increased losses due to storm frequency could also be significant.
Land Values
A recent article by our economists indicates that the current ratio can impact farmland values. Should certain areas see weather conditions improve or deteriorate profitability for extended periods, current ratios could be impacted, and land values in turn.
The impact of reliable moisture is immediately evident when we look at cultivated land values from our Farmland Values Report. The average value of irrigated land in southern Alberta is $16,600/acre while the average dry land value in the same region is $5000/acre. In West Central and Southwest Saskatchewan, the average irrigated acre is $6500/acre. Average Dry land values in West Central and Southwest Saskatchewan are $2500/acre and $2900/acre respectively. Irrigable acres selling for roughly two and three times more than dry land show that reliable moisture is sought after. Its not a stretch to think that a shift in rainfall patterns could impact future values. There are more factors affecting farmland values than just water, but its clearly part of the equation.
Click here to see more...