Risky agri-business


Agriculture is a risky business. The report by the Risky Business Project focuses on the potential effects of global climate change (GCC) on U.S. agriculture, one of five principal impact foci. The authors challenge us to think about a wide variety of causes, effects and solutions. It's a lot to digest. Here is one angle that isn't specifically mentioned and relates to the recent farm bill debate.

Crop insurance and food assistance are effected as income subsidies under the assumption that needs are episodic and money solves the problem. Handing out money is a solution when all we need is a bridge from a bad year to a good year or from unemployment to the next job; but what if the bridge goes nowhere? What if one bad year just keeps leading to more and increasingly bad years

The Risky Business report provides a granularity that forces us to realize that there is more involved than just wearing shorts for a few more days of the year. Current risk-management strategies fail in at least two ways under the more severe GCC scenarios.

First, production or revenue losses are defined by historical patterns that have ups and downs. Indemnity payments are driven by deviations from averages. There will always be year-to-year variation, but if the dominating effect becomes persistent declines in yields, current crop insurance won't address the bigger problem.

Second, GCC will have different effects in different parts of the planet. It is a huge mistake to think that corn production will just move to Canada and Siberia and globally it will all work out. When the climate in the Corn Belt starts to feel like the Cotton Belt, corn, soybeans and hogs are not going to gracefully migrate to eastern Montana and southern Manitoba. This is true for biological, physical and socioeconomic reasons. The ability to produce food will be challenged, and of course this will happen at the same time global population is expected to nearly double. Crop insurance indemnities or Supplemental Nutrition Assistance Program (SNAP) Electronic Benefit Transfer (EBT) cards don't solve the kinds of risks society faces under the GCC scenario.

For many folks, GCC has felt like a problem that can wait another day while we work out what seem like more pressing immediate problems. The trouble with that approach is that solutions become much more difficult and costly the longer we wait. Part of the challenge is figuring out what we can do.

While others will press for changes to reduce the causes of GCC, agriculture would be wise to focus on new tools and strategies to be prepared for the effects of GCC. Private research will play an extremely important role in these developments, but the magnitude of the challenge and the inherent difficulty in prioritizing these longer-term effects requires a public investment as well.

Federal and state support for basic and applied agricultural research has been drifting downward, when adjusted for inflation, since the 1980s. Although private and corporate research continues to grow, relying on the private sector poses two problems, related to capacity and agenda.

Dwindling public support for agricultural research threatens the research capacity of colleges of agriculture. A decline in faculty and facilities also ends up reducing the number of bright, young minds who otherwise might be attracted to careers in agricultural and food systems research.

The rationale for public research funding becomes much more compelling when the agenda is broad, complex and long-term. Academic and public research is best at looking at tough questions ill-suited to most business research models.

In addition to pushing agricultural resilience to a new level, society will be wise to think of other approaches to food security. The food problem won't be limited to a bad year for wheat or by economy-wide or more individualized dips in household income, although those things will still happen as well. What we will want to be prepared for is more expensive food in general and the possibility of widespread crop failures that threaten food security even for people with ample household incomes.

What to do? Don't let today's inexpensive, abundant and high-quality food supply lull us into a sense of complacency. We need to ensure that scientific and economic research aimed at improving agricultural productivity and resilience and at ensuring food security remain robust and vibrant. Those investments will pay off regardless of which GCC scenario comes to fruition.

Agriculture and the food system it supports is indeed a risky business, and it seems destined to get a lot more risky in the coming decades. Inasmuch as we are talking about nutrition and health, do we really think we can afford to wait to see just how big a problem we will have? Personally, this isn't a legacy I want to leave for my infant grandson.

Novakovic is the E.V. Baker Professor of Agricultural Economics at Cornell University.