The growing value and efficiency of US agriculture means weather-related disasters are becoming ever more damaging, according to Farmer Mac.
The secondary market provider says 2017 may turn out to be the costliest year on record, with Hurricanes Harvey, Irma and Maria potentially displacing the three most expensive weather-related disasters in US history.
Tornadoes and hail storms have been the most frequent category of disaster to cause at least $1 billion in total economic damage, according to data from National Oceanic and Atmospheric Association collected since 1980. Tropical storms like hurricanes tend to cost more in overall monetary terms, but mostly impact the US Gulf and Atlantic Coasts, while severe storms are concentrated in the agricultural production zones of the Midwest.
“Sixty-four of the 90 high-cost severe storms since 1980 have occurred since 2005. Grouped by decade, the severe storm category is the only type showing an upward trend in frequency,” Farmer Mac said.
An important factor driving the total cost of storm events, according to the research, is the increasing value and efficiency of US farm production.
“In 2004, to generate a $1 billion loss, a storm would have to damage over two million acres of production at average yields and market prices. By the end of 2005, that number fell to 1.5 million acres and by 2012 dropped below a million acres,” the report noted. Farmer Mac director of economic and financial research Jackson Takach told Agri Investor that some larger row crop producers in the Midwest have striven to diversify their operations across multiple properties along a north-to-south axis in an attempt to minimize damage from more frequent storms, which tend to move from west to east.
For permanent crop producers located in areas where tropical cyclones tend to be the greatest threat, Takach said, damage is more likely to come in the aftermath of a storm, when a surge of ocean water can lead to greater soil salinity and lasting damage to trees and infrastructure.
Overall, the agricultural impact of weather-related disasters has been mitigated by the growing use of consulting services, software and analytic tools that help producers anticipate challenging weather conditions, he added.
“The availability of the information and the resources to have great minds thinking about these events’ impact, how to prepare for them and how to deal with them is invaluable, and it didn’t exist 20 years ago,” Takach said. “The data existed, but you didn’t have the internet, you didn’t have access to mobile devices and all the communications tools that you have today. These types of services are great to prepare for […] these types of disruptive events.”