Climate change: Can we afford to play with loaded dice?
January 16, 2015
Inaugural Indiana Governor’s Agriculture Conference - Indianapolis, Indiana
Greg Page, Cargill Executive Chairman
Good morning. It is great to be with everyone. I really enjoyed the opportunity last night to visit the governor’s residence. It was great to meet a number of you that are in this room and to really get a sense for the amount of energy and optimism there is around making Indiana a great place for agriculture to succeed and prosper – and instill a huge amount of optimism about what can be accomplished.
Today I would like to talk about an issue that I believe can have a big impact on our future success: climate change. It is an issue that will require all of us to be prepared, to be determined and to be confident. The changing climate will present new risks and new opportunities as we face the very complex task of producing enough food, feed and fuel for a world on its way to nine billion increasingly prosperous people.
Let me share a little bit about Cargill. Our original business was taking products from places of surplus to places of deficit. That basic grain and oil seed processing business still makes up about 25 percent of what Cargill does. We also provide farmers of all sizes, including those in Ghana and the Ivory Coast, a host of services, financing and access to markets. We provide a lot of food ingredients and a number of them produced here in Indiana: corn grits, sweeteners, vegetable oil, beef, pork and poultry. Finally, we have an important business in trading ocean freight for electricity, energy, natural gas, and petroleum. We also trade currencies. We do those things because every one of those commodities and the price of discovery that surrounds them is important to agriculture.
This is our 150th year. In 1865 William Wallace Cargill founded Cargill by buying a small grain business in Conover, Iowa. Just three months ago the first of our sixth generation of family members joined the Board of Directors. So it’s a bit of a “Happy Birthday” for us at Cargill. We have 20 locations in the state of Indiana with about 700 employees.
Climate change and food security
I believe the discussion about climate change is particularly important to the heartland of the United States, and the reasons for that will become more apparent. The Lieutenant Governor made the point that 500,000 jobs in Indiana are dependent on the agriculture industry. So why am I here to talk about climate change? Because all of the things that are challenging about farming under any circumstance become more difficult with the growing population and the presence of more quickly changing climate.
The effects of climate change on agricultural production projected in the recent reports from the IPCC, the National Climate Assessment and even more regionally, the Chicago Council on Global Affairs, all point to significant risks regarding climate change and its potential impact on food production. Regardless of one’s view on climate change and its causes, it’s irresponsible for us not to have this discussion and this debate, or to take these projections lightly. We are not talking about some condo in Florida getting a wet basement because the sea level rose. We are talking about feeding and nourishing an entire world.
Among the host of new climate change studies is the one commissioned by a group of business leaders called “Risky Business.” It released its report last June about the economic risks of climate change. It didn’t focus on a prescription. It simply sought to quantify and give ranges to the possible scenarios we could confront. Cargill was invited to serve in an advisory role to this initiative.
The initiative was paid for by Secretary Hank Paulson, former Secretary of the Treasury; Mayor Bloomberg of New York City; and the very active environmentalist Tom Steyer from California. They put up the money and they hired the scientists that did the work. Cargill elected to participate in this effort at Hank’s request – even though it’s an unpopular subject in much of middle America – because we think it is important to have a serious conversation about what we can do now to accommodate a range of climate change scenarios.
We believe there is risk. It’s not a certainty, but a risk and a probability of climate change that warrant a much more intense discussion and debate.
The implications for agriculture
Agriculture is a commercial activity, and one of the great outdoor “sports” in world business. We are all inextricably linked to our environment and it is the perfect place to talk about the range of possible economic risks that we confront. We all stand here today as farmers and ranchers and as the agribusinesses that work with them, to be able to feed a growing global population. And we’re able to do that thanks to the innovations and investments that came before us. We collectively have to ensure we build on that foundation and preserve our ability to produce more food and to do it with fewer natural resources.
The Risky Business report released this past summer said that the American economy could face significant and widespread harm through climate change – unless U.S. businesses and policy makers take prompt action. The findings also show that the most severe risks can be avoided through early investments in resilience and through immediate action to reduce our greenhouse gas emissions. I can assure you all of the companies that Cargill works with are asking us to account for our global greenhouse gas emissions. Whether we agree that it is man-caused climate change that we’re confronting, the fact is that the consumers that sign all of our checks want to know that we’re taking action against this potential risk.
Specific to agriculture, the Risky Business report outlined the shifting agricultural patterns in crop yields that we should expect – with likely gains for northern farmers offset by losses in the South. The report also showed that without agricultural adaptation, the national commodity production here in the United States of corn, soybeans, wheat and cotton could decline by 14 percent by midcentury and by as much as 42 percent by late century; again, without adaptation and investments in resilience.
At the same time, warmer temperatures and carbon fertilization may improve agricultural productivity and afford the opportunity for double cropping in more parts of the Midwest and the upper plains. This graphic shows the possible relative change in yields and the absolute change in production out to the end of the century; again, assuming no adaptation. As we all know in this room, farmers everywhere are intimately familiar with the need to adapt. I think the agricultural community here in Indiana would share an enormous optimism that these adaptations and this resilience can be created.
Asking “What If?”
Our adaptive capacity and our resilience is real. We have all seen it in the past 30 years, but we know that the complexity of modeling adaptation increases the further out you go from the baseline, and hence greater is the need for energetic discussions now about “What If?” That needs to be the great preface to a lot of what we spend our time on. What if this is the climate that we face at a given moment in the future?
We also know that farmers will adapt and respond to the technologies and the agronomic practices that are well-researched and made available to them, so that in the face of a climate that becomes warmer and wetter – particularly here in the Midwest – and more prone to extremes of both temperature and precipitation, that we can prevail. We can make changes in the number of crops per year, changes in the phenotype, changes in our rotations and our agronomic practices and certainly potential scientific breakthroughs in genetics.
In addition to the original report that Risky Business published last June, one week from today a report will be issued specific to the impact on climate change here in the Midwest. In the Midwest we need to be particularly mindful of the possible impacts of our changing climate, given this region’s disproportionately large contribution to the world’s food supply. We have achieved incredible success in the Midwest in production agriculture, but the research shows that the Midwest faces some of the most significant climate risks to our ag sector if we stay on our current path. These risks are going to vary dramatically by state, by county and certainly even by crop.
Here you see the projected change in just corn, soybean and wheat yields for three time periods. The map on the right takes us out to the end of the century. Clearly it shows the most extreme potential impact, again in the absence of investments and adaptation. For some parts of the Midwest there are positive impacts, and I’ll speak a little bit about Indiana.
There are indeed scenarios that actually showed Indiana raising more crops, but there are equal or more scenarios that predict a much harsher outcome. For example, Indiana’s statewide yields of all crops that were modeled have a likely range of positive 8.6 percent at midcentury to -21.4 percent. Clearly, these are wide ranges and they go as wide at the end of the century from 31 percent to 81 percent. With these wide ranges the question that naturally comes to mind is this: how much should we invest now, how much should we invest tomorrow against something that is uncertain, and press forward to the future?
Even with the uncertainty of the ranges, the what if conversation has to be had. We need to talk to and debate with even those who disagree with us. We need to have honest discussions and contemplate what if any climate scenario is true, what questions would I have for Dow? What questions would I have for Elanco? What questions would I have for Purdue? What questions would I have for John Deere? You can go through the list. What questions would I have for the Army Corp of Engineers? We need collectively to take up these scenarios, add the question what if and address it to the hundreds of links in the chain upon which we’re all so dependent.
Playing with loaded dice
So here’s the question for all of us in agriculture: are we in a situation where increasing levels of global CO2 are loading the dice? Farming has always been a game of probabilities. You toss the dice; you get a certain set of temperatures and rainfall, a certain number of frost-free days.
As Howard Buffet said in his book, in a lifetime of farming, you get about 40 chances to do that. The Risky Business project reports that if we continue on our current course, we are at an increasing risk in any given year for getting a much more negative weather outcome than what we have experienced to date. In other words, a roll of the dice that we won’t like – where the odds of a four-or-five standard deviation rain event, thunderstorm event, or temperature event – are increasingly likely. We could face a future where our probability of success is reduced if we don’t prepare and adapt. The dice can become loaded against us.
The discussion is starting
The dialogue is starting in many places. Since this report was published, I’ve had the opportunity to meet with a number of the national crop groups, the Farm Bureau and others, and farm associations and farmers in Minnesota. I have learned a lot. A couple of the key takeaways are that the words climate change are seen as synonymous with more regulation. It is seen as synonymous with the EPA telling farmers how to farm. That explains a lot of the reluctance to enter into the dialogue. I think we need to have the confidence that we can enter into these discussions without acknowledging what the cause is or without fearing regulation, because to not enter into the dialogue is to not prepare for that great what if.
I think there is a great difference between what farmers’ trade associations say and what may be said in a large group, and what the conversations held across a farmer’s kitchen table would lead us to understand. Farmers certainly have experienced change in the 20, 30, 40 and 50 years that they’ve been farming. I don’t think our argument and our energies should be put against arguing about what caused the weather to evolve and how far it will evolve, but rather to take a range of plausible scenarios and enter into an honorable debate about how to prepare.
In North Dakota they call the current environment “global climate improvement.” It just shows you why it is so hard to have 100 percent truth. Many of my high school friends are still there. I grew up in a town six miles from the Canadian border. When I graduated from high school – most of the days I was in school my father was a John Deere dealer in North Dakota, and the big decision he saw farmers making was whether to plant wheat on the 20th of May or the 28th. That was the choice. Today I go back and my friends have an array of at least 10 crops available to them, and probably eight-to-10 more frost-free days than when I graduated from high school. They, too, have had to adapt and in this case, in a positive way.
Today at Cargill, the single largest single-site capital investment that we’re making is in Camrose, Alberta. It’s at the 53rd-degree North latitude. Virtually all of the grain that will come into this canola processing plant will come from north of that plant. Regrettably my father is not alive. Also positively, my father is not alive: He would say what kind of a darn fool are you? Trying to build a $300 million facility at the 53rd-degree North latitude to support farmers who are farming at 54, 55, 56-degree North latitude? But the change has happened and we are investing against that change, preparing to adapt and be resilient. We need to be asking these tough questions and we need to be asking them soon about a range of scenarios.
If there is an important takeaway I would have is that each of us take our energy, and not put it against debating what the causes are, but to acknowledge that we don’t know the future. I believe it would be irresponsible, and since we are food people – arguably immoral – not to enter into a discussion about a host of possible climate scenarios that we could face in a decade or three decades.
I would like to leave with just one thought. As society continues to grapple with this whole area of sustainability, we in production agriculture need to be asking: what are the things that our land-grant universities and all of our partners in the supply chain can do to prepare for an uncertain future? The most important thing we can do is to converse and collaborate and to debate. I appreciate your time very much.