Lloyd's extreme event scenarios (feb 2015)

Climate Shocks and Adjustment for Selected Crops

The IMPACT 3 Model Team: Sherman Robinson, Daniel Mason D’Croz,

Shahnila Islam, Mark Rosegrant, Keith Wiebe

London, February, 2015

2

• Rapid income growth and urbanization – effects on diets and patterns of agricultural production• Increased consumption of fruits and vegetables• Rapid growth in meat consumption and demand

for grains for feed • Change in diets to convenience foods, fast foods• Higher food energy, more sugar, fats and oils• Half of growth in grain demand will be for

Livestock feed• Increased pressure on land and water

Drivers of Agricultural Growthand Food Security

3

• Supply drivers– Climate change– Water and land scarcity– Investment in infrastructure– Investment in agricultural

research– Policy

Drivers of Agricultural Growth and Food Security

4

The IMPACT Global Simulation Model

• International Model for Policy Analysis of Agricultural Commodities and Trade

• Global partial equilibrium model – Multimarket model– Water models– Crop models– Livestock model– Malnutrition model

5

What is new in IMPACT 3?

• Geographic and crop disaggregation (2005 base year)– 58 agricultural commodities

• Prices and markets– Three markets: farm gate, national, international– Tradability: traded and non-traded commodities

• Land Allocation to crops• Activity-commodity value chain framework• New Water Models: hydrology, water basin management,

water stress on crops• Modularity of the IMPACT model “system”

6

IMPACT 3 Geography

159• Countries

154• Water Basins

320

• Food Production Units

7

IMPACT 3 Model System

8

IMPACT – A Suite of Linked Models

• Modularity: “a la carte”– Use only the modules you need– Modules can be run in “standalone” mode as separate

models (e.g., water models)• Linking Modules

– Model system is driven by core multimarket economic model (IMPACT 3)

– Standardize data transfer between modules• Information flows: dynamic interaction with core model

9

Marketing Margin

Markets and Prices

Farm: Producer Price • Price at Farm/Factory Gate and market

Market: Consumer

Price

• Commodity prices consumers face

Port: World Price

Marketing Margin

Trade Regime

10

• Commodities can be globally traded or non-traded

• This option can be set exogenously– E.g. sugar beets

• Or endogenously through the followinginequality

Tradability in IMPACT 3

PC

Export Price

Import Price

𝑃𝐸=𝑃𝑊 × (1− 𝑡𝑒 )×(1−𝑀𝑀 𝑒) 𝑃𝑀=𝑃𝑊 × (1+𝑡𝑚 )×(1+𝑀𝑀𝑚)< <PE PM

Water Models in IMPACT

• Global hydrological model (GHM) assesses water availability

• IMPACT Water Simulation Model (IWSM) optimizes water supply according to demands– Monthly time step– Domestic, industrial (linked to GDP/population)– Livestock– Environment– Irrigation

• Water stress model– Delivers crop yields to the IMPACT food module

11

12

Land Allocation to Crops

• Land types: irrigated and rainfed land• Demand for land by crop is a function of

commodity price and shadow price of land• Total supplies of irrigated and rainfed land are

fixed in each region (FPU)• Shadow price of land varies to equate supply and

demand for land by type and region– Solution determines allocation of land to crops and

equilibrium shadow price

13

Value Chains: Activity-Commodity

• Commodities are:– Produced (activities)– Traded (commodities)– Consumed– Can be endogenous

or exogenous• Maize has endogenous production and demand• Oilseeds have endogenous production and both

endogenous and exogenous demand (biofuels)• Fertilizers is an exogenous commodity with fixed price

14

Example: Oilseed Activity-Commodity Value Chain

Activity• Soybean

Farm(jsoyb)

• Demands land, fertilizer, labor

Activity Output• Soybean

Commodity(csoyb)

Activity• Soybean

Processing (jsbol)

• Demands soybeans (csoyb) at market price

Processed Commodities• Soybean

Oil (csbol)• Soybean

Meal (csbml)

15

Baseline Model Results

• Core drivers: population, GDP, land• Changes in technology• Climate change:

– Suite of Global Circulation Models (GCMs) of climate change

– Different assumptions about climate drivers: socioeconomic and greenhouse gas pathways

16

Drivers – Population, GDP, and Land

17

Sources of Technology Change

• Underlying Intrinsic Productivity Rates (IPRs)– Exogenous trends in yields

• Climate Change:– Water: Hydrology, water basin management, water

stress on crop yields– Temperature: Crop Models (DSSAT)

• Market Effects– Changes in prices affect farmer behavior and yields

(e.g. fertilizer use)

18

Inflation-adjusted prices for corn, wheat and soybean (1912-2011)

19

Climate Change - Base Suite

• NoCC – Historical climate• Four Global Circulation Models (GCMs), IPCC -

AR5, with one Shared Socio-economic Pathway (SSP2) and Representative Concentration Pathway (RCP) 8.5– IPSL: – HADLEY:– MIROC:– GFDL:

20

What about climate change?

Source: IPCC AR5 WG2 SPM, Figure 4(B), 31Mar2014

Global annual average surface temperature

21

World Prices over time (NoCC, indexed to 2010)

Source: IMPACT 3 (2014)

22

2050 World Prices under Climate Change (% difference from NoCC)

Source: IMPACT 3 (2014)

23

Global Yields over time (NoCC, indexed to 2010)

Source: IMPACT 3 (2014)

24

Historical climate change impacts on yields 1960-2013

Source: IPCC AR5 WG2 SPM, Figure 2(C), 31Mar2014

25

2050 Global yield under Climate Change (% diff from NoCC)

Source: IMPACT 3 (2014)

26

2050 Wheat Yields: Climate Change Effects for Top 10 Wheat Producers

Source: IMPACT 3 (2014)

27

Thank you

S.Robinson@cgiar.org

28

Production Shock Scenario Specification

Scenario Crop Region Shock

Multi-Crop Shock Wheat North America (NAM)Europe, Russia, Western Asia

20%20%

Maize North AmericaEurope, Russia, Western AsiaBrazil, Argentina

25%20%20%

Soybeans North AmericaBrazil, Argentina

12%10%

Maize Shock Maize USAChina

30%40%

Rice Shock Rice ChinaSouth Asia

25%10%

Wheat Shock Wheat Eastern AfricaWestern AsiaCentral AsiaNorth America

40%50%60%50%

World Prices (2005=1)

63% increase from ref

20% decrease from ref

34% increase from ref

8% decrease from ref

42% increase from ref

12% decrease from ref

33% increase from ref

6% decrease from ref6% increase from ref

2% decrease from ref

3% increase from ref

1% decrease from ref

30

Changes in Production by Scenario

Regions Shocked

31

Changes in Production by Scenario

32

Changes in Production by Scenario

33

Changes in Production by Scenario

34

Changes in Trade by Scenario20

1520

1620

1520

1620

1520

1620

1520

1620

1520

1620

1520

1620

1520

1620

1520

1620

1520

1620

1520

1620

1520

1620

1520

1620

1520

1620

1520

1620

1520

1620

1520

1620

1520

1620

1520

16

EAP EUR LAC MEN NAM SAS EAP EUR LAC MEN NAM SAS EAP EUR LAC MEN NAM SASMaize Wheat Soybean

-60000

-40000

-20000

0

20000

40000

60000

80000

100000

Multi-Crop Scenario Net Trade by Region (million mt)

Reference MultiCrop1 MultiCrop2

35

Changes in Trade by Scenario

36

Changes in Trade by Scenario

37

Changes in Trade by Scenario