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Climate change and extreme weather events hang heavy over global breadbasket countries

Global breadbasket countries have had much to contend with in recent years, but it is climate change that presents their biggest challenge.

By Marina Leiva

The compounded effects of the Russian invasion of Ukraine and the Covid-19 pandemic have brought to light the vulnerabilities of global food supply chains, particularly in countries known as global ‘breadbaskets’.

Joana Colussi, an academic researcher at the University of Illinois and collaborator on Farmdoc, a crop data programme designed by the university, adds that major agricultural producers are also having to contend with the effects of climate change, with extreme weather events such as La Niña in Brazil becoming more and more frequent. La Niña is a weather phenomenon that cools off the surface ocean water along the tropical west coast of South America and contributes to extreme weather events.

“Meteorologists are forecasting a third consecutive year of La Niña,” she says. “The occurrence of two successive La Niña winters in the Northern Hemisphere is common; however, having three in a row is relatively rare. A triple La Niña has happened only twice since 1950. The last time La Nina was in place for three years in a row was from 1999 to 2001.

“La Niña events [tend to bring] increased rainfall across northern Brazil and decreased rainfall in southern Brazil. This has been the case this year, with southern Brazil going deep into drought.”

In the Brazilian 2021/22 crop season, which finished in June, soybean production reached 124 million tonnes, a decrease of 10% compared with the previous season, according to the National Supply Company, an agency within the Brazilian Ministry of Agriculture. 

“In the southern states of Rio Grande do Sul, Paraná and Mato Grosso do Sul, the yields were 42% lower than last season," says Colussi. "These three southern states represent 38% of national soybean production. On the plus side, Mato Grosso – the largest Brazilian soybean producer – and other states from the Brazilian mid-west, north and north-east had a record-breaking 2021–22 harvest.”

Climate change having big impact on global breadbaskets

Extreme weather events such as La Niña, and shifting climate patterns across the world, will likely translate into changes to global production yields and breadbaskets as growing conditions are affected.

These changes will be advantageous to some countries while others will see their food production levels suffer, according to Alan Matthews, professor emeritus of European agricultural policy at Trinity College Dublin.

“Because of global warming, a comparative advantage will shift from countries in the mid-latitudes where higher temperatures will have a larger adverse impact on yields, to higher latitudes where higher temperatures may favour food production; for example, Canada and Russia,” he says.

However, Matthews stresses that “there is still great uncertainty about the magnitude of these impacts for different countries and crops across the different models [known as global gridded crop models] used to estimate these impacts”.

In the case of the most grown cereal crop in the world, maize, Dr Florian Schierhorn, research associate at the Leibniz Institute of Agricultural Development in Transition Economies, explains that its latest research shows that it is very likely maize yields will be under increasing pressure worldwide as a result of climate change. 

Maize yields are very likely to decrease “without adaption or big steps in technology”, he says. The three largest exporters of maize are located on the US continent – the US, Argentina and Brazil – followed by Ukraine

Schierhorn explains that in the case of wheat there are only a few breadbaskets that could – or are very likely – to benefit from higher temperatures. These would be in higher-altitude regions such as northern Canada, northern parts of the US or Russia, as well as some parts of the southern hemisphere such as Argentina.

However, Schierhorn adds that vast tracts of these regions are not really croplands, “they are forests or unproductive agricultural lands and pastures”. 

This translates into a trade-off, as these areas might have suitable climate conditions, but if the forests are converted into cropland, this could in turn increase greenhouse gas emissions, as forests are better at capturing carbon

The consensus seems to be that as climate change advances, the world will have larger and more often extreme weather events, according to Nicholas Paulson, associate head of agricultural and consumer economics at the University of Illinois. 

From an agricultural perspective, what that brings into play is “just more risk, more uncertainty, which again, will manifest itself into more commodity price volatility”, he adds, explaining that this will lead to “periods of very high prices when we have natural disasters and poor growing conditions, and then periods of lower prices when we have good growing conditions and markets respond by producing large crops”.

“We have seen that play out in markets, with the increased level of volatility for commodities such as corn, soybeans and wheat in the past few years," says Paulson. "Obviously, part of that [volatility stems from the situation in Ukraine], but I think we are going to see more volatility moving forward due to climate change.”

Regulation is the key to ascertaining agricultural sovereignty

Climate and growing conditions are key from any country wanting to become (or remain) a breadbasket, but policies also play an instrumental role. This is an area where Russia, now a major wheat exporter, has struggled in the past, according to Matthews. 

“When you think back to the 1972–73 food price crisis, this was caused by huge and sudden increases in Russian import demand for grains," he says. "Who would have projected that 50 years later Russia is now a major wheat exporter, largely because of more favourable policy conditions.”

Similarly, the recent agricultural rise of countries such as China and Vietnam is also widely attributed to policy reforms, says Matthews, who adds that “there are many countries in Latin America, Africa and Asia that are characterised by poor or chaotic agricultural policy and which could surprise with more supportive agricultural policies”.

In fact, speaking about the agricultural potential of countries in South America and the barriers they face, Colussi points to political stability as one of the main issues. This is particularly pertinent as two of the world's largest food producers – Brazil and Argentina – are due to hold presidential elections in the near future; later in 2022 for in Brazil and in 2023 for Argentina. 

In the case of the latter, “agribusiness has had a tense relationship with President Alberto Fernandez and previous administrations governed by his Peronist Party because of their tendency to intervene in the market”, says Colussi.

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In March, for example, Argentina raised the export tax rate on soy oil and meal by two percentage points to 33% until the end of the year in a bid to combat domestic inflation. 

European countries can also see their production affected by regulation, according to Daniel Sumner, an agricultural economics professor at the University of California, Davis. He points out that regulatory pressure can translate into higher costs for farmers and decreased productivity that will “likely mean more commodity imports, putting a strain on world markets”.

Sumner adds that “many Europeans have plenty of money for food, so the strain will not be on them. Instead, it will be on the poor, for whom paying more for food really matters.”

As such, whatever next steps – particularly in terms of trade policies and environmental protection – are taken by countries around the globe will be crucial to determine which emerge as breadbaskets or which retain that status.

Editor's note: The original version of this article appeared on our sister site Investment Monitor.

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