Modelling the effects of climate change on the profitability of Australian farms

Recent shifts in the Australian climate including both higher temperatures and lower winter rainfall have had significant effects on the agriculture sector. Despite these recent trends, there remains uncertainty over the future climate and its potential impacts on Australian farm businesses. In this study, a statistical model of Australian cropping and livestock farms is combined with downscaled temperature and rainfall projections for 2050, to simulate the effects of climate change on farm profits. These future projections are compared against both a historical reference climate (1950 to 2000) and recent conditions (2001 to 2020). The results provide an indication of 'adaptation pressure': showing which regions, sectors and farm types may be under greater pressure to adapt or adjust to climate change. Future scenarios produce a wide range of outcomes, with simulated change in average farm profits (without any long-run adaptation or technological advance) ranging from -2 to -32% under RCP4.5 and -11 to -50% under RCP8.5, compared with a decline of 22.3% under observed post-2000 conditions (all relative to 1950 to 2000 climate). In contrast with the recent observed changes, projections show relatively moderate effects in south-eastern Australia, but relatively stronger effects for livestock farms in northern Australia.