Grains Research and Development

Date: 01.03.2016

Climate and profits tracked into the future

Author: Allyson Williams

Graphic showing the change in the voltaility of simulated yield

Figure 1B Historical April–September rainfall correlation with June to August SOI.

Comprehensive climate modelling to gauge the evolving influences on wheat profit and risk over the next 15 years suggests a 10 per cent decline in average wheat yields by 2030 – in line with a decrease in rainfall.

The modelling was part of a GRDC-supported project by the International Centre for Applied Climate Sciences (ICACS) at the University of Southern Queensland to identify the relative importance of profit drivers in wheat-growing regions across Australia, and specifically the volatility of wheat yield and how it is likely to change under a warming and drying climate.

Graphic showing historical April-September rainfall correlation with yield

Figure 1A Historical April–September rainfall correlation with yield.

ICACS used historical climate data, modelled wheat yield using the Agricultural Production Systems sIMulator (APSIM), and future climate output from five general circulation models to assess the main drivers of farm risk at 104 locations across 14 of the GRDC’s agro-ecological zones in the three wheat-growing regions – northern, southern and western.

The strongest driver of wheat yield was shown to be in-crop rainfall, except in Central Queensland where pre-season rainfall and soil moisture levels are more significant for production compared with southern and western regions (Figure 1a). The Southern Oscillation Index (SOI – the indicator for El Niño or La Niña weather periods) was associated with in-crop rainfall in all regions, particularly eastern Australia (Figure 1b).

Also, the number of frosts was a stronger driver of yield effects rather than the timing – the date of the first and last frost.

The research also examined yield volatility: the season-to-season variability in wheat yield. Over the past 30 years, the highest volatility in yield has been in south-west Queensland, north-west and central New South Wales, the Mallee areas of Victoria, South Australia and Western Australia, and WA’s eastern wheatbelt.

The modelling analysis showed this yield volatility is likely to increase in WA generally, as well as in south-east Queensland, north-east NSW, the NSW and Victorian slopes, the Victorian high-rainfall zone and in the SA–Victoria border region (the green areas in Figure 2). Against this, yield volatility is expected to lessen in Central Queensland, south-west Queensland, north-west NSW, central NSW, the SA and Victorian Mallee, and SA’s Yorke Peninsula and Eyre Peninsula (Figure 2).

These results show that the key climate drivers of wheat yield are unlikely to change in the future, that average yields are likely to decrease and that farm risk associated with wheat yield is likely to increase in the western region (WA) and extreme eastern and southern areas, but decrease in the SA, northern Victorian, western NSW and western Queensland zones.

Graphic showing change in the volatility of simulated yield

Figure 2 Change in the volatility of simulated yield.

Future profit

These production risks translate to profit risk; however, accurately assessing this requires information on future commodity prices and input costs.

Nonetheless the complexities of such economic scenarios and the economic modelling required can be overcome by ‘sensitivity analyses’ based on historical price and Australian Bureau of Statistics cost data from each agro-economic zone.

Using this historic cost and price data in conjunction with the historical and future yield data, assessments can be made of the sensitivity of profit to climate change.

Using yield as a benchmark for the highest and lowest 25 per cent of growers, it is seen that the profitability of the two groups responds differently to climate change and market environments. In wheat-growing regions in eastern Australia, profits would increase for the bottom 25 per cent of growers (by yield). However, the volatility also increases (Figure 3).

In contrast, the top 25 per cent of growers are more likely to experience less volatility in their future profit. In general, in the northern region, the sensitivity of profit to climate change over the next few decades is less in the modelling than the sensitivity to price and cost fluctuations. On a longer timescale towards the end of the century, climate change becomes the dominant driver of profit in the Australian grainbelt generally.

Graphic

Figure 3 The sensitivity of profit risk to climate change and market environments in 2030.

More information:

David Cobon, ICACS,
07 4731 1543,

david.cobon@usq.edu.au;

Allyson Williams, ICACS,
07 4637 5874,
allyson.williams@usq.edu.au

Next:

The ups and downs of more CO2

Previous:

Changing climate may reimpose the Goyder Line

GRDC Project Code USQ00016

Region North, South