Developing potential adaptations to climate change for farming systems in Western Australia’s Northern Agricultural Region using the economic analysis tool STEP

Climate change is expected to have a significant effect on agricultural production but less is known about its projected impact on the farm business. This paper provides a first attempt at an economic analysis of the impacts of climate change for broadacre farming systems and provides an insight into agricultural production areas in Western Australia at risk over the next 50 years. These risks have been assessed using the Simulated Transitional Economic Planning (STEP) model to investigate the impact on the farm business. Modelled future climate scenarios were incorporated into crop and pasture production models to examine the economic impact on the whole farming system. Uncertainties associated with climate and production projections were captured through the development of scenarios and sensitivity analyses were performed to encompass a range of potential outcomes for the impact of climate change on the farming systems of the northern wheat-belt. Testing of this process showed that the current farming systems of the region may decline in profitability under climate change to a point where some become financially unviable in the long term. This decline in profitability is driven not only by the decline in crop yields from climate change but also from a continuation in the trend of declining terms of trade. With innovation and adaptation it may be possible to overcome these impacts on the region‘s farming systems even under severe (CSIRO Mk2) climate change projections. Potential profitable adaptations under climate change included a combination farming system of trade cattle, opportunistic cropping and carbon sequestration from oil mallee trees in the low rainfall area; investment in technology and genetically modified crops in the medium rainfall area; and in the high rainfall area a combination of increased crop area on the better soil types and the use of perennial pastures on the poor soil types. The findings are dependent on the accuracy and validity of future climate projections, crop yield estimates and the economic conditions used in the STEP model. Use of this process has improved understanding of the potential impacts of climate change and facilitated regional planning, decision making and the setting of research and investment priorities. However, additional fine-tuning of the analysis and further exploration of alternatives is necessary before policy decisions are made on the future of agriculture in Western Australia‘s northern wheatbelt.