Climate change ’causes only 2-3% of farm income fluctations’

Climate change is having only a small impact on farmers' incomes, so economic losses can be offset by output-boosting technology, says leading Chinese agricultural scientist Wang Jinxia

Studying the role climate change plays in farmers’ income fluctuations has found no big impact, so technological farming, land consolidation and improved market information can all help farmers to mitigate financial risks from global warming, argues Wang Jinxia, deputy chair of the Centre for Chinese Agricultural Policy at the Chinese Academy of Science.

Chinadialogue (CD): How big will the overall effect of cllmate change on the agricultural economy be?

Wang Jinxia (Wang): In recent years, we’ve taken income data from 8,000 agricultural households and compared it with climate data to research how climate change affects income.

Climate data in our model consisted primarily of temperature and precipitation. We used this model to identify links between climate factors and income, and then look at what would happen to incomes given certain changes.

Using 30 years of historical data, our research found climatic change accounted for only about 2%-3% of fluctuations in agricultural incomes.

CD: Will climate warming have a positive or negative impact on agricultural output? How ready are farmers to respond?
Wang: What remains contentious is the effect of increased carbon dioxide. Plants need carbon dioxide to grow, so higher levels will promote photosynthesis. Leaving this out of account, then rising temperatures will reduce output, whereas, if you factor it in, climate change will actually help crops grow.
In the short term, suitable temperature increases will help farmers. But they will cause harm in the long term, due to a big impact on water supplies.
But changes in output are largely down to technological advances. China’s agricultural output has increased in recent years, and if climate change has had any impact it has just been to slow that increase a bit. The main impact of climate change won’t be increased temperatures, but greater fluctuations – for example, extreme climate events have a big effect. But technological advances bolster output, cancelling out much of the effects of climate change.

As for the impact of climate change on the agricultural economy, there are two things to look at: agricultural output, and the market.

Agricultural output is linked to climate change, but as described above the effect is quite small. Of course, you get different results in different scenarios and  different models. For example the United Nations Intergovernmental Panel on Climate Change (IPCC) report estimates a 20%-30% reduction in output. Their  calculation comes from climate and crop models, but we used an economic model.

Generally, simulations using economic models find smaller impacts than those with climate models.

First, crop and climate models use hypothetical conditions, while economic models use actual data and are more realistic. Second, an obvious failing of the climate models is that the scientists haven’t considered how farmers will respond, and their responses cancel out some of the impacts.

Since agriculture began, farming has always been molded by changes in climate. Farmers have always adjusted to local variations by changing the amount of planting or fetiliser used.

Agricultural incomes are also affected by market reactions. In a dry year, harvests may be smaller, but the market quickly responds by offering higher prices, so farmers earn more for the same quantity of harvest, and those higher prices also mean more is invested in production. So overall, losses may not be as big as predicted. Short term losses can, as farmers respond to the market, be made up by longer term gains.

Also, globalized markets will also acts as a buffer zone, evening out price fluctuations in specific locations.

CD: What will climate change mean for farmers, especially in already water-scarce north China where rising temperatures will shift grain-growing north. What should be done about water resources there?

Wang: Overall, we found agricultural incomes in south China are more sensitive to changes in precipitation, while in the north they are sensitive to both temperature and precipitation.

More irrigation will help the north of China deal with the drier conditions caused by climate warming.

To improve water use, first, improve infrastructure construction. The north’s infrastructure is already old. Even when water is available it may not be used well. Second, popularize genuinely valuable technologies. Sprinkler and drip irrigation are not really suitable for much farmland – they work well on high-profit, large-scale crops, but are too expensive for ordinary crops such as wheat, or on small fields. Farmers often have to figure out their own low-cost solutions for small fields, which is a cost in itself.

Also, market factors need to be considered. The northward movement of crops initially suggests an expansion of the extent of some crops planted in the south. But climate is only one factor: market prices are key to what gets planted. If a certain crop isn’t suitable for planting at high latitudes, but later becomes suitable through improved strains, then the technology is in place to make the shift if prices increase. So a big issue currently is how to guide technology to reduce the impact of climate change on agriculture.

CD: Planting is adjusted according to market conditions. Is it possible that copycat planting will run out of control, aggravating water scarcity and waste? What should the government do?

Wang: Individual farmers don’t worry much about environmental issues. For example when rice from Hunan falls in price, while rice from the north-east goes up, there’s more profit in rice-growing in the north-east. Even if the north-east is short of water, farmers will create more paddy fields.

But they need the government to allow this, so policy-making can provide restrictions and guidance.

Guidance isn’t about telling farmers what to plant, so much as improving how the market operates. There’s plenty of hard and soft market infrastructure that needs improving, such as information exchanges and market management systems. What the government needs to do is to enable the swift flow of market information and resources, so farmers can make judgments about prices, and goods can move easily.

China has many small-scale farmers, and if they can get a good price for a certain crop they’ll plant it, regardless of whether they’re allowed to or not. If market information infrastructure lags behind, then farmers don’t know what anyone else planting, creates a risk of unexpected losses. Those losses may be small for each farmer, but added up across huge numbers of small farmers they become economically significant.

Large-scale operations are more professional and are more able to invest and build infrastructure, and they pay more attention to market information, so combining land lessens risk.

Overall, farmers need to guard against market risk first. Climate change comes second.