Financial impact of changing climate on agriculture

Financial impact of changing climate on agriculture

Posted on 05 Oct 2016

Recent years agriculture experiences much heavier losses caused by changing climate and alterations in global middle-season temperature. Even a small rise or drop of usual temperature takes a toll on yield, productivity and profitability of agricultural sector. In such situations both manufacturers and consumers of products undergo some difficulties.    

Profit and losses of manufacturers and consumers differ significantly depending on their location; mostly this burden comes to developing countries since they have much dependence on yield productivity and it’s more difficult for them to adopt changes.      

Dense population in the regions whose economics are in direct correlation with agricultural productivity, low income, lack of social protection, and limited opportunities of risk management – all these factors make the consequences of climatic change really devastating: thousands of people can lose their livelihoods, and the threat of famine for the whole countries is no longer the illusory in the coming decades.

However it would be a big mistake to consider that this disaster can happen only to agrarian countries. Shortage of crop can affect the entire agricultural supply chain and bring substantial losses to companies and corporations throughout the world:

  • bulk companies may not be able to use its infrastructure to the full capacity, as a result, they will be likely to face a reduction in operating income, and in severe cases, they will be unable to cover their fixed costs;
  • providers of logistics services may be unable to generate enough revenue to cover their fixed costs;
  • manufacturers may get non-fulfillment of sale contracts in a supply chain since they cannot provide previously agreed amount of agricultural products, and as a result, traders will have to purchase additional amount of  products at market prices;
  • due to a drop in sale volume manufacturers of agricultural equipment may suffer as  agricultural manufacturers cannot afford to invest in more modern technologies.  

And as an overall result, the majority of costs have to be covered by ordinary consumers who will have to pay more for food basket.