Production of crops and livestock is a huge industry in the United States. There are approximately 2.2 million farms covering 922 million acres, which produce enough food for the U.S. to be a net exporter (Service 2009).
Physical Exposure Risk. According to FAO, 11% of arable land in developing countries could be adversely affected by climate change leading to reduced cereal production in up to 65 nations (Food and Agriculture Organization 2007). Changes in average temperatures and precipitation patterns will have serious implications for crop and livestock production. Weeds are expected to benefit from increased atmospheric concentrations of carbon dioxide and pests are anticipated to increase with the hotter temperatures. More hot days will put stress on livestock and could lead to a higher incidence of disease (Watson, Zinyowera et al. 1998). Not all crops will do better with higher levels of CO2 once other nutrients become limiting. Or, as in the case of wheat, high levels of CO2 inhibit uptake of nitrate in the soil, which limits growth and the nutritional quality of the grain (Bloom, Burger et al. 2010).
Policy and Regulatory Risk. Many climate change policies discussed by regulators include benefits to agriculture, such as a large offset market and increased support for biofuel. A thriving offset market would be a boon to corn and soy farmers in the Midwest who expanded no-till practices. On the other hand, it would be very difficult for cattle ranchers to earn credits, since they would have to preserve much more grassland and therefore reduce their herd size (Morgan 2010). Also, climate regulation may increase the price of fossils fuels, which would increase costs for fertilizers and energy inputs (Shipley, Hessenflow-Harper et al. 2010).
Reputational Risk. Today, many Americans are separated from the production of their food; only 1% is involved in farming (Environmental Protection Agency 2009). Still, many Americans remain interested in how their food was produced. A willingness-to-pay survey found that consumers of breakfast cereals would pay on average 49.5 cents per box more if it the grains were grown pesticide free and 52 cents per box more if it was made of 100% organic materials. Another study found that organic produce also commands a price premium: 20% price increase for grapes, 42% increase for strawberries and a 60% increase for potatoes. While the reputation of organic farmers may not directly profit, their pockets will profit from supplying brands and stores that rely on customer faith in their green reputation (Batte, Hooker et al. 2007).
Competitive Risk. There are a considerable number of strategies available to farmers who wish to better prepare their business for the effects of climate change. These include, but are not limited to, growing different varieties, implementing more efficient water delivery systems, initiating soil conservation efforts and aligning sowing and harvesting dates with the new seasonal patterns (Food and Agriculture Organization 2007). Farmers who are proactive will out-compete those who have not yet accounted for the significant challenge climate change presents for agriculture.