Global climate change impacts and the supply of agricultural commodities to Europe

Assessing transboundary risks of climate change 

The impacts of climate change in one region can spill over to another through a range of mechanisms, including trade, infrastructure and finance (see Figure 1). The associated systemic risks are being increasingly recognised and are subject to ongoing research ^[1]. National assessments of transboundary climate risks, however, are still scarce (AWB, 2020).

Figure 1. Transboundary risks resulting from global climate change impacts

Note: The impact pathways have been placed arbitrarily on the map; therefore, the arrows do not indicate any predominant geographic direction from which these impacts might affect Europe.
Source: EEA (2017).

This briefing is based on a study commissioned by the EEA (Arvis et al., 2020), combining information on global climate change impacts on agricultural production with information on the EU’s import profile and evidence on the vulnerability of the products’ countries of origin to climate change. The most important commodities imported to the EU in terms of volume and value were identified using Eurostat data. The risk to their supply was judged based on both the distribution of suppliers (supplier or trade concentration) and the vulnerability of suppliers to climate change (climate vulnerability). 

Climate change and agricultural production 

Agriculture is one of the socio-economic sectors most sensitive to climate change, dependent as it is on soil characteristics, weather patterns and biodiversity (EEA, 2019, 2020). Climate change affects precipitation, water flows, humidity and temperature. The frequency and magnitude of extreme weather and climate events will increase, and the distribution and abundance of pest species and pollinators may change (Bocci and Smanis, 2019; see also Figure 2). These changes will influence crop growth, phenology and yields, ultimately leading to shifts in zones suitable for cultivation and land use changes (Ceglar et al., 2019). 

Assessing the regional impacts of climate change on agricultural yields is not straightforward. They vary with crop type, latitude and altitude, and need to be disentangled from other productivity factors, such as technological progress, agricultural practices and regular inter-annual variation. In addition, the role of higher atmospheric CO₂ concentrations in increasing photosynthetic activity, countering negative climate change impacts, is still being debated (Sultan and Gaetani, 2016). The findings of Lobell et al. (2011) point to a relative suppression of maize and wheat production since 1980, compared with a theoretical scenario without climate change. Climate change appears to have negatively affected productivity for major food crops in Europe and sub-Saharan Africa in recent decades, while effects seem to have been positive in Latin America and variable in North America and Asia (Ray et al., 2019). This mixed picture is projected to continue until mid-century, with a loss in global aggregate production of cereal crops expected only after 2050 (Challinor et al., 2014).

Figure 2. Impacts of climate change on agriculture

Source: Arvis et al. (2020).

Findings from the Joint Research Centre’s PESETA IV project (Feyen et al., 2020) suggest that, up to 2050 ^[2], grain maize yields will decline by between 1 % and 22 % in the EU, and wheat yields in southern Europe by up to 49 %. In northern Europe, yields are projected to increase by between 5 % and 16 % (Hristov et al., 2020). Annual climate variability accounts for up to half of yield variance, depending on the crop and the region (Vogel et al., 2019). Considering that the frequency and severity of extremes will be aggravated by climate change (IPCC, 2014), increased volatility is to be expected. 

International agricultural trade and market mechanisms 

Nearly a quarter of food for human consumption is traded on international markets (D’Odorico et al., 2014). This proportion varies widely by commodity, however. For rice, butter and pork, it is below 10 %. For soybean, vegetable oils, fish and sugar, it exceeds 30 %. Maize, beef and wheat are intermediate, with 12 %, 15 % and 24 %, respectively. These proportions are expected to remain steady for the next decade (FAO and OECD, 2018) but to slightly increase by mid-century because of climate change (Cui et al., 2018). 

The demand for and supply of agricultural commodities vary little, or at least slowly, in response to changes in price. This means that shortages or oversupplies can lead to price swings. Trade can in theory dampen price volatility by buffering demand and supply across regions (Liapis, 2012). This applies particularly for grains that can be stored from one year to the next. Seasonality and buffer stocks (roughly 12 % of annual production, excluding China) play an important role in price formation (Wright, 2011). 

Since 1970, global food supply has largely kept pace with growing demand resulting from population growth and rising incomes (Liapis, 2012). In the coming decade, this is expected to remain the case because of technological progress (FAO and OECD, 2018). In the longer term, however, the impacts of climate change are likely to kick in and affect productivity, with prices expected to rise significantly (Headey, 2011). Climate change can also affect trade by disrupting transport and distribution chains (Tamiotti et al., 2009).

Climate change-related vulnerability of supply to Europe 

Europe is a major exporter of processed food and dairy products and, by and large, is self-sufficient in terms of the main staple foods such as grains (wheat, barley) and vegetables. This means that there are no immediate food security concerns in Europe related to climate change impacts elsewhere. However, Europe is heavily reliant on imports of products for animal feed (soybean and maize); products grown in tropical regions (e.g. cocoa, coffee, bananas); and commodities for secondary processing (e.g. palm oil, beet and cane sugar). 

Figure 3. Climate vulnerability of major exporting countries of six key commodities

Note: Major exporting countries refers to those accounting for the top 80 % of European imports. Vulnerability score is according to the Notre Dame Global Adaptation Initiative (ND-GAIN)^[3] , with higher values indicating higher vulnerability to climate change.
Source: Arvis et al., 2020.