Corn, catastrophes and climate

Now you do believe in global warming?

That was the headline over a story last week by Time’s Bryan Walsh, citing this summer’s heat waves and wildfires. The money quote:

“What we see now is what global warming really looks like,” says Michael Oppenheimer, a climate expert and a professor at Princeton University’s Woodrow Wilson School. “The heat, the fires, these kinds of environmental disasters.”

This past week, I had reason to think about climate change–not so much the science but the costs, and how we are planning to pay them. As most of you know, efforts to regulate global warming pollutants have failed, so far, in the US because opponents argue that they will be too costly. “Job-killing climate regulations” was the sound bite. The trouble with this argument is that doing nothing will cost us money, too. Indeed, it already is, although most of those costs are hidden–in places like our premiums for homeowners insurance, our tax bills, or the price we will pay for burgers or chicken.

Put simply, when it comes to climate change, we can pay now or pay later. But we’re going to pay.

Consider, for example, drought. The US is abnormally dry this summer. Hot, too. The hot, dry weather was a theme that ran through the conversation at a Washington event last week when DuPont unveiled the 2012 Food Security Index, an assessment of food affordability, availability and quality in 105 countries compiled by the Economist Intelligence Unit and commissioned by DuPont. [Disclosure: DuPont paid me to moderate a panel at the event.]

While the US was ranked No. 1, as the most food-secure country in the world, followed by Denmark and France, speakers noted that even the plentiful US food supply is threatened by extreme weather this year. Howard Buffett, an Illinois corn and soy farmer, author and philanthropist (and yes, son of Berkshire Hathaway CEO Warren Buffett), said he was stunned to see corn futures approaching $8 a bushel and yields-per-acre declining sharply as a result of the heat and drought.

Under the headline “In Iowa, hope fades as relentless drought decimates crops,”  Reuters reported:

Taking a cue from a deteriorating crop, the U.S. Department of Agriculture cut its estimate of this year’s corn production in the United States, the world’s top grower and exporter, by 12 percent, slashing the average yield by a whopping 20 bushels to 146 per acre.

The toll that the drought is taking on the U.S. corn crop is so severe in some areas of the Midwest that farmers are writing off whole fields, or fear they will soon have to.

Business Week put the problem in a global context:

When rain doesn’t fall in Iowa, it’s not just Des Moines that starts fretting. Food buyers from Addis Ababa to Beijing all are touched by the fate of the corn crop in the U.S., the world’s breadbasket in an era when crop shortages mean riots.

The Food Security Index reminded me that while we in the US enjoy cheap and plentiful supplies of food–on average, we spend less than 10% of our household income on food–people in the developing world spend as much as 45% of their income on food.  No wonder they riot when prices climb.

Meanwhile, although 2012 is shaping as a tough year for Midwestern farmers and those who rely on them, it has been a good year, so far, for insurance companies because we’ve had relatively few natural catastrophes. Munich Re, the big global reinsurance company, which tallies the losses from storms, tornadoes and wildfires, said that — despite the tornadoes that did serious damage to Ohio and the Tennessee River Valley, a terrible hailstorm in St. Louis, wildfires in Colorado and New Mexico, and the “derecho” that battered the mid-Atlantic states — “natural catastrophe losses were relatively moderate in the first six months of 2012.”

The company said:

Losses up to the end of June were well below the six-month average of recent years. Overall losses for the first six months were US$ 26bn, compared with a ten-year average of US$ 75.6bn for the corresponding period.

Nothing this year came close to matching the devastation caused by the Japanese earthquake and tsunami in 2011 or Hurricane Katrina in 2005, the worst year ever in terms of financial losses.

And yet we’re still paying for past disasters. Robert Hartwig, an economist with the Insurance Information Institute, who joined a teleconference about the catastrophes, said that higher losses in 2008, 2009 and 2011 have driven up premiums for property, casualty and commercial insurance. Underwriting losses in 2011 totaled $36.5 billion, the largest in a decade.

Ernst Rauch, who leads the corporate climate center at Munich Re, noted that Northern Hemisphere land and ocean surface temperature for May were the highest since record keeping began in 2012.”It is likely,” he said, “that climate change plays a role” in the frequency and severity of weather events noted in recent years. Increasingly, scientists attribute extreme weather to climate change.

What does all this mean?

First, mitigating climate change is failing, and we’re starting to pay a price.

Second, we’re beginning to adapt to global warming. DuPont’s CEO, Ellen Kullman, said last week that the company is developing crops that can survive drought conditions. Around my neighborhood, there’s lots of talk about buying generators to deal with power outages–another form of adaptation. My marathon training group meets at 6:30 a.m. on Sunday for our longer runs, to get them done before the real heat sets in at 10. On an even smaller scale, I just spent $15 for a car charger for my iPad and iPhone to keep them juiced during the next power outage

Welcome to a warmer future, friends. It’s here.


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