Does climate change have a hand in this?



To begin with, it must be said that the outlined weather conditions are exceptional. However, at the same time, research findings have shown that the instances of record summer temperatures in Europe have increased significantly over the last few decades and were above the level one would expect in a climate without any long-term warming trend. In Germany, hot summer weather from high-pressure systems is invariably accompanied by drought. Furthermore, the majority of climate scientists expect that farmers in Europe will have to cope with more frequent periods of high summer temperatures and drought in the future.



The number of hot days in Germany with a maximum temperature of at least 30 degrees has almost tripled since 1950. Models project a further increase in the number of such days, with almost twice as many in May by the middle of this century. In general, summer rainfall will decrease over the long term while the number of very dry summer days will rise, according to climate projections of the German Weather Service. At the same time, increases are expected in other weather extremes, such as hail, strong winds and torrential rainfall in individual regions. A recent study* established an increase in hail events with hailstones bigger than 2 cm in diameter in central and southern parts of Europe over the last four decades.



The expected overall impact from climate change on the agricultural sector over the coming two to three decades is a complex one. There will be negative impacts due to short-term weather extremes that increase fluctuations in yields. Yet in normal years there will also be positive aspects from non-extreme climate characteristics in central European countries with a humid and moderate climate. In the course of the CO2 fertilising effect, plants use groundwater more efficiently, which is why some models for the period until the 2030s expect no losses in yields vis-à-vis a longer-term average. Also, with a longer vegetation period, higher yields can be achieved for crops like cereals and maize, even in higher latitudes. What is more, agriculture can partially compensate for the losses from greater heat and less rainfall through continuous and systematic cultivation of adapted varieties.



The situation is different in southern European regions such as Spain, the south of France, Italy and southeastern Europe, where it has already become substantially drier. This trend is likely to continue, in conjunction with an increased number of periods with high temperatures, which will mean a reduction in yields for some crops.



Adaptation can help reduce yield losses



To compensate for yield losses in the future, agriculture needs to make full use of the available potential for adaptation. This includes selecting more robust varieties and crops, and adapting the current production technology. Sensible prevention measures include irrigation and the use of hail nets to protect fruit crops such as apples. However, adaptation measures are of limited use against the effects of extreme events. In such cases, insurance models are needed that protect farmers against crop losses.



Digital technology in agriculture is enabling new insurance models



Traditional insurance against crop losses bundles several different risks in a single policy. But in Germany and many other countries, people generally opt for less expensive single-risk covers, which usually insure farmers against hail.



The index-based cover segment is still quite small but is experiencing strong growth. This type of insurance is based on a yield index or on weather parameters and offers a simple and somewhat more affordable method of protection that ensures a prompt payout. Covers featuring what are known as parametric triggers are especially useful in emerging and developing countries, where farms are small and loss adjustment therefore entails too high costs. But the so called basis risk also plays a major role in this context. A trigger may not reach the payment threshold even though the insured has suffered a loss. Experiences like these represent an obstacle to introducing this innovative cover.



Which cover concept is most suitable for individual farmers will depend on the type of business they run. What is certain is that the increasing digitalisation of risk management in agriculture, using satellite data for example, will pave the way for improved levels of protection and innovative products.



There is also no doubt that agriculture will feel the impact of climate change more strongly in the future. Co-financing of risks by the public sector should therefore be considered for multiple hazards in order to limit the financial impact on farmers. Numerous countries have already introduced successful systems of this kind.



* Rädler, Groenemeijer, Faust, Sausen 2018: Detecting severe weather trends using an Additive Regressive Convective Hazard Model (ARCHaMo). J. Appl. Meteor. Climatol., DOI:10.1175/JAMC-D-17-0132.1