If climate change means more intense and more frequent drought, what will that mean for agricultural production? A case study in Northern Australia

ABSTRACT

We examine the influence of drought and a variety of factors on agriculture in Northern Australia. Assuming constant prices, and using data collected from northern land managers, we estimate a Cobb–Douglas production function and use coefficients from the model to estimate the financial losses associated with drought. We find that drought-affected properties earn about half as much as other ‘similar’ properties. We then ask: How much does that ‘cost’ the industry, on average, and how would those costs change if droughts were to become more, or less widespread under climate change? Our estimates indicate that under the current climatic regime, the Northern Australian agricultural industry loses, on average, about 19% of output to drought each year: this could fall to 10% or rise to 40% under current climate projections. Although focused on Northern Australia, the findings have wider implications for management and adaption, given the magnitude of impacts and their likelihood to extend beyond the ‘official’ end of drought. Investments in climate-proof crops, on-farm management techniques and financial arrangements to help producers deal with a range of climatic risks, for example, should thus be priorities.

KEYWORDS:

• Climate change
• drought
• agricultural production
• Northern Australia
• Cobb–Douglas production function

Acknowledgements

We would also like to thank Shelly Honeychurch and Vanessa Adams for their invaluable contributions to the research (with literature reviews, data management and data collection), all those who participated in our workshops and all who completed our questionnaires.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1. Participants included graziers and representatives from various state and regional government departments and natural resource management organisations. Comments and input were also elicited from economic, social and biophysical scientists.

2. RCPs describe four scenarios of how the planet might change in the future. Key metrics include radiative forcings, measured in watts per square metre, by the year 2100; emission rates and emission concentrations, measured in parts per millions for each of the greenhouse gases (IPCC, 2014b).

Additional information

Funding

We would like to acknowledge the financial support provided to us by the Australian Government's National Environmental Research Program Northern Australia Hub – Project 1.3 and James Cook University.