New EDF, Cornell University and Kansas State University research demonstrates the financial risks of extreme heat and the urgent need to help farmers build resilience to the increasing threat of climate change.
Climate change is expected to bring more severe weather, like droughts and extreme heat, to Kansas in the coming decades, with significant negative impacts on farm productivity and profitability. EDF, Cornell University and Kansas State University recently released research that quantified the financial risk to Kansas farms posed by extreme heat, and how management decisions and government programs partially mitigated the negative impacts.
The study found over the last four decades, for every 1 degree C of warming gross farm income decreased by 7%, and net farm income decreased by 66%. For an average farm in this study, this meant that farmers lost about $43,000 from an average net farm income of about $66,000.
“Excessive heat was a significant factor in our crop losses in 2023. One afternoon, it reached 112 degrees F, and I went out into some soybean fields and was alarmed that it smelled similar to plant tissue ruptured by a freeze. It was the first time I had smelled plant tissue breaking down from heat,” said Justin Knopf, a farmer who raises wheat, soybeans, alfalfa, corn and other crops in central Kansas. “Learning and implementing practices to improve the resilience of our cropping systems is imperative along with financial and risk management tools to mitigate risk.”
Farmers like Justin need access to financial and risk management solutions that help them adapt to a changing climate. Robust risk management practices and programs play a crucial role in reducing the impacts of extreme heat on net farm income. Crop insurance helped farmers recover 51% of net income losses, while crop inventory adjustments helped recover 16% of the losses.
“Implementing practices that build resilience to climate change may present short-term risks for farmers, that will need to be addressed by lenders, insurers and federal programs,” said Vincent Gauthier, manager of climate-smart agriculture at EDF. “Developing financial and risk management solutions that proactively support farmers in the transition to climate-resilient production systems is critical to reducing climate risks to farmers while maintaining robust agricultural production.”
The study also found that growth in Kansas farmland values was five percentage points lower over a 30-year period than would have been the case without increasing extreme heat. This meant that landowners lost value on their assets that they could have gained without extreme heat.
“Our results clearly show that extreme heat not only affects crop yields, but also farm profitability and the land asset value farmers rely on to leverage financing to invest in their operations,” said Dr. Jennifer Ifft, associate professor and Flinchbaugh Agricultural Policy Chair at Kansas State University. “Conducting research on the farm income effects of extreme weather and climate change can help inform risk management and adaptation policy.”
“For decades, the U.S. agricultural sector has seen 1.5% productivity growth every year, year over year—few countries have seen that kind of sustained growth. Globally, we’ve found that climate change has already slowed productivity growth,” said Ariel Ortiz-Bobea, associate professor in the Charles H. Dyson School of Applied Economics and Management and a Cornell Atkinson faculty fellow.
The number of days with extreme heat in Kansas that causes crop loss has increased over the last four decades and is projected to increase by 58% by 2030. Supporting farmers’ adaptation to climate impacts like these is critical. It will require collaborative efforts from various stakeholders. To bolster farms’ resilience to climate change, the study recommends that:
• Agricultural lending institutions can support their farmer borrowers in making investments that adapt to climate change risks on the farm and manage risks to lenders’ loan portfolios.
• The U.S. Department of Agriculture, land-grant universities and the private sector can increase research, outreach and education on climate resilience solutions to support farmers’ adaptation to climate change.
• The Federal Crop Insurance Program can support farmers in implementing on-farm climate resilience measures while continuing to provide financial risk management.
Diversifying crop production to include crops with lower water requirements can be a pathway toward a resilient future for Kansas agriculture. A recent EDF study, Kansas in 2050: A pathway for climate-resilient crop production, found that replacing some acres of corn, soybeans and wheat with less water-intensive crops—oats, rye, millet and sorghum—could lower water use more than 10% and increase nutritional yield per acre. Achieving robust agricultural production in the face of climate change will require financial and technical assistance from the public and private sectors.
For more information, see our new report: https://business.edf.org/insights/extreme-heat-financial-farm-kansas/.
