*4.3.1. Climate risk management in rice industry: Challenges and opportunities*

The Australian rice industry has a relatively small number of producers, mostly within the Riverina (southern New South Wales), generating considerable export income. The rice industry and rice growers have adopted a risk-averse approach. CRM in the rice industry is based on a systematic process of managing climate and water availability risks to take advantage of opportunities to improve financial, economic, social and environmental systems. The rice processor has a global supply-chain that ensures continuous rice supplies. During years of low water availability, growers trade water and shift to low water intensive or dry land farming. This has resulted in highly variable domestic rice production. Water will probably become more expensive, less available and allocations will be less secure. The production capacity of the domestic rice industry will be significantly influenced by droughts and environmental water buy-backs. One strategy for Australian growers is to increase production in areas like the Burdekin (north Queensland) that have a sustainable water supply.

### *4.3.2. Evaluating structural adjustment as a CRM in Rice Farming System*

Rice farmers are continually faced with pressures to adjust to changing environmental, climatic and economic conditions. Structural adjustments reflect the decisions by rice growers to adjust the size and farming operations to manage climate, environmental and economic risks59. The following sections provide empirical evidence of structural change in rice farming.

**Farm sizes, irrigated area and rice area***:* Rice farmers have greater flexibility in farm adjustment and structural change than dryland farmers. This allows them to reduce rice area and maintain farm income from dryland crops. It is hypothesised that increased water scarcity in the Riverina has resulted in an increase in farm size while total rice and irrigated area have reduced. Fig. 10 shows that water availability has a significant impact on rice production and irrigated area and that the total operated farm area is increasing significantly. The increase in farm area can be attributed to the decreasing number of farms and temporary and permanent water trading.

**Crop shifting:** An assessment of the Riverina (Fig. 11) indicates that farmers are continuously adapting to climate variability and climate change by changing crop mixes and farm restructuring. Rice area per farm is generally declining and being replaced by winter dryland wheat. Some farmers have adjusted their farming operation by shifting from rice to wheat along with a larger area of dryland wheat. The reduction in rice and the increase in wheat area will have an industry-wide impact, e.g. rice mills and storage depots were closed as a result of the lower level of rice supply during 2007-08.

512 Risk Management – Current Issues and Challenges

water supply.

rice farming.

and temporary and permanent water trading.

events in parts of the north58. The possibility of climate change leading to less rainfall in southern mainland Australia, and as a result on-going water policy reforms, has triggered robust CRM strategies by agriculture sector, particularly in the rice industry. The success of any CRM strategy depends on risk management systems that reflect a more detailed understanding of the complexity inherent within human-environment interactions with more reliable future climate information and associated risks. This case study evaluates

The Australian rice industry has a relatively small number of producers, mostly within the Riverina (southern New South Wales), generating considerable export income. The rice industry and rice growers have adopted a risk-averse approach. CRM in the rice industry is based on a systematic process of managing climate and water availability risks to take advantage of opportunities to improve financial, economic, social and environmental systems. The rice processor has a global supply-chain that ensures continuous rice supplies. During years of low water availability, growers trade water and shift to low water intensive or dry land farming. This has resulted in highly variable domestic rice production. Water will probably become more expensive, less available and allocations will be less secure. The production capacity of the domestic rice industry will be significantly influenced by droughts and environmental water buy-backs. One strategy for Australian growers is to increase production in areas like the Burdekin (north Queensland) that have a sustainable

climate risks strategies employed by the rice industry in Australia.

*4.3.1. Climate risk management in rice industry: Challenges and opportunities* 

*4.3.2. Evaluating structural adjustment as a CRM in Rice Farming System* 

Rice farmers are continually faced with pressures to adjust to changing environmental, climatic and economic conditions. Structural adjustments reflect the decisions by rice growers to adjust the size and farming operations to manage climate, environmental and economic risks59. The following sections provide empirical evidence of structural change in

**Farm sizes, irrigated area and rice area***:* Rice farmers have greater flexibility in farm adjustment and structural change than dryland farmers. This allows them to reduce rice area and maintain farm income from dryland crops. It is hypothesised that increased water scarcity in the Riverina has resulted in an increase in farm size while total rice and irrigated area have reduced. Fig. 10 shows that water availability has a significant impact on rice production and irrigated area and that the total operated farm area is increasing significantly. The increase in farm area can be attributed to the decreasing number of farms

**Crop shifting:** An assessment of the Riverina (Fig. 11) indicates that farmers are continuously adapting to climate variability and climate change by changing crop mixes and farm restructuring. Rice area per farm is generally declining and being replaced by winter

**Figure 10.** Area operated per farm, p=0.001, (left); rice area, p=0.003, and total irrigated area, p=0.01, (right) as a function of water availability and in Riverina, NSW, Australia; Source: ABARE Farm Survey.

**Figure 11.** Wheat, p<0.001, and rice, p=0.01, production by area per farm as a function of water allocation in Riverina from 1992-2009, NSW, Australia; Source: ABARE Farm Survey.

**Water trading**: Water movement to more efficient and higher value commodities results in a consolidation of farms without showing evidence of a corporate takeover of the industry60 showed that water markets facilitate the process of farm adjustment and structural change within the irrigation industry. To maintain a liveable income during drought periods some farmers adjust their operations by temporarily trading water to other growers to take advantage of higher water prices. Fig. 12 shows the relationship of water trading to rice area in the Coleambally Irrigation Area (CIA), Riverina (NSW). However, over the last 5 years the CIA is trading-out water to satisfy the demand of high value crops such as rice. In some instances rice farmers have had to purchase temporary groundwater in order to satisfy forward contracts61.

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economic impact of such strategy. The model compared the net impact of shifting rice production from Riverina to Burdekin on fallow sugarcane land, assuming with no competition and displacement of sugarcane land, under 2030 and 2070 future time periods.

The macroeconomic impact of relocating rice production from the Riverina to the Burdekin is presented in terms of changes in real output and real income. Relocation also affects a

Table 7 summarises the projected changes in real output and real income for each region. The loss of water and consequent switching from rice to wheat is projected to reduce the real economic output and income of the Riverina. Using a 4 per cent real discount rate a cumulative decrease of –\$915 million over the 59 years to 2069-70 has been estimated. The decrease in 2069-70 represents an average decrease in real economic output of around \$550

As a result of rice relocation on fallow sugarcane land, real economic output increases in Burdekin. A cumulative increase of total of \$759 million is projected over the 59 years to 2069-70. The increase in 2069-70 represents an increase in real economic output of around \$7,000 per person projected to be living in the Burdekin at this time (18,500 people). The net movement of labour is primarily between the Riverina and Burdekin with minimal net movement of labour to/from the Rest of Australia. Consequently it is projected that there

will be minimal impacts (a cumulative total of –\$211 million) on the Rest of Australia.

Southern Rice –45 –139 –915 –72 –161 –1,298 Burdekin LGA 35 131 759 58 178 1,149

Australia –1 –21 –54 6 –26 9 Total Australia –11 –29 –211 –8 –9 –140 **Table 7.** Cumulative change in real economic output and real income under scenario 1, relative to

With the expected reduction in water allocation, losses in rice production cannot be wholly offset by productivity gains given current production techniques and increasing temperatures and rainfall variability. The reduction in output will reduce net exports and have some impact on Gross Domestic Product (GDP), especially because of the extensive value-adding that occurs in Australia. Relocation to Burdekin is one potential risk

**2029-30 2069-70 NPV (2010-11** 

Rest of

reference case for 2010-11.

*4.3.5. Lessons learned and implications for CRM* 

**Real economic output (\$m) Real income (\$m)** 

**2010-11 2010-11 2010-11 2010-11 2010-11 2010-11** 

**to 2069-70) 2029-30 2069-70 NPV (2010-**

**11 to 2069-70)** 

range of other variables (notably employment) but these are not presented here.

per person projected to be living in the Riverina at this time (295,000 people).

*4.3.4. Economic impact regional relocation CRM strategy* 

**Figure 12.** Relationship of net water trading and rice area in the Coleambally Irrigation Area, Riverina, NSW, Australia, p<0.001; Source: Source: ABARE Farm Survey; Coleambally Irrigation, 2009 62 .

**Financial impact***:* The reductions in available water have significantly influenced farm business profit and overall family income (Fig. 13) and income is sustained through off-farm activities. During 2007-2008 (<10 per cent water allocation) overall average family income per farm and farm business profit was –\$27,893 and –\$109,536, respectively. Clearly, this is not sustainable in the long-run. Under the anticipated climate change considerable adjustment in terms of cropping pattern or off-farm activities will be required to sustain a reasonable family income. Alternatively, relocation of farms or some of the production could be an option.

**Figure 13.** Relationship of water availability and farm business profit, p=0.003,and total family income, p=0.03, Riverina, NSW, Australia; Source: ABARE Farm Survey; Where: Farm business profit (\$): Farm business profit equals farm cash income plus build-up in trading stocks, less depreciation expense, less the imputed value of the owner manager, partner(s) and family labour. Total family income (\$): Family share of farm cash income less family share of depreciation plus all off- farm income of owner manager and spouse.

#### *4.3.3. CRM Potential from regional relocation*

A potential CRM strategy under climate change is to relocate rice production to regions with plenty of water such as the Burdekin. The CGE model was used to estimate the regional economic impact of such strategy. The model compared the net impact of shifting rice production from Riverina to Burdekin on fallow sugarcane land, assuming with no competition and displacement of sugarcane land, under 2030 and 2070 future time periods.

#### *4.3.4. Economic impact regional relocation CRM strategy*

514 Risk Management – Current Issues and Challenges

could be an option.

and spouse.

*4.3.3. CRM Potential from regional relocation* 

**Figure 12.** Relationship of net water trading and rice area in the Coleambally Irrigation Area, Riverina, NSW, Australia, p<0.001; Source: Source: ABARE Farm Survey; Coleambally Irrigation, 2009 62 .

**Financial impact***:* The reductions in available water have significantly influenced farm business profit and overall family income (Fig. 13) and income is sustained through off-farm activities. During 2007-2008 (<10 per cent water allocation) overall average family income per farm and farm business profit was –\$27,893 and –\$109,536, respectively. Clearly, this is not sustainable in the long-run. Under the anticipated climate change considerable adjustment in terms of cropping pattern or off-farm activities will be required to sustain a reasonable family income. Alternatively, relocation of farms or some of the production

**Figure 13.** Relationship of water availability and farm business profit, p=0.003,and total family income, p=0.03, Riverina, NSW, Australia; Source: ABARE Farm Survey; Where: Farm business profit (\$): Farm business profit equals farm cash income plus build-up in trading stocks, less depreciation expense, less the imputed value of the owner manager, partner(s) and family labour. Total family income (\$): Family share of farm cash income less family share of depreciation plus all off- farm income of owner manager

A potential CRM strategy under climate change is to relocate rice production to regions with plenty of water such as the Burdekin. The CGE model was used to estimate the regional The macroeconomic impact of relocating rice production from the Riverina to the Burdekin is presented in terms of changes in real output and real income. Relocation also affects a range of other variables (notably employment) but these are not presented here.

Table 7 summarises the projected changes in real output and real income for each region. The loss of water and consequent switching from rice to wheat is projected to reduce the real economic output and income of the Riverina. Using a 4 per cent real discount rate a cumulative decrease of –\$915 million over the 59 years to 2069-70 has been estimated. The decrease in 2069-70 represents an average decrease in real economic output of around \$550 per person projected to be living in the Riverina at this time (295,000 people).

As a result of rice relocation on fallow sugarcane land, real economic output increases in Burdekin. A cumulative increase of total of \$759 million is projected over the 59 years to 2069-70. The increase in 2069-70 represents an increase in real economic output of around \$7,000 per person projected to be living in the Burdekin at this time (18,500 people). The net movement of labour is primarily between the Riverina and Burdekin with minimal net movement of labour to/from the Rest of Australia. Consequently it is projected that there will be minimal impacts (a cumulative total of –\$211 million) on the Rest of Australia.


**Table 7.** Cumulative change in real economic output and real income under scenario 1, relative to reference case for 2010-11.

#### *4.3.5. Lessons learned and implications for CRM*

With the expected reduction in water allocation, losses in rice production cannot be wholly offset by productivity gains given current production techniques and increasing temperatures and rainfall variability. The reduction in output will reduce net exports and have some impact on Gross Domestic Product (GDP), especially because of the extensive value-adding that occurs in Australia. Relocation to Burdekin is one potential risk

management option, but limited agronomic knowledge and uncertainty associated with the future climate and associated financial risk pose barriers to relocation. The displacement of an existing intensively-produced crop, such as sugar would result in a much larger net national loss, also meaning that there would be a net reduction in regional income and outputs. It is concluded that there is unlikely to be a rapid increase in rice production in the north without more reliable future climate assessment to build confidence for making informed relocation decisions, infrastructure support, and R&D and extension support to enhance rice productivity and better communication.

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well to predicted changes of the climate system, "*climate and meteorological information must be taken into greater consideration in health science, practice, and policymaking*"66. To this end, the World Health Organisation (WHO) works with partners and collaborating Centres to develop tools, information resources, and dialogs which facilitate climate informed

*"Each year, about 3.5 million people die from malnutrition, 2.2 million from diarrhoea, 800 000 from causes attributable to urban air pollution, and 60 000 in climate-related disasters, mostly in low resource settings and also frequently in humanitarian emergency situations. Climate change brings new challenges and costs to the control of infectious diseases as some are highly sensitive to temperature and rainfall, including cholera and the diarrhoeal diseases, as well as vector borne diseases including malaria, dengue and schistosomiasis. Climate change threatens to reverse the progress that the global public health community has been making against many diseases, and increase the challenges for the humanitarian community to respond to natural, biological and social* 

It is clear that climate factors play an important role in the definition of some human diseases. For other diseases where climate is only considered as one of many determinants, WHO have stated that it is also important to understand the various causal pathways from climate change through to health outcomes, in order to identify opportunities to address the

WHO promotes *"measures to reduce the health impacts from climate risks and associated climate change, such as strengthening public health systems based on partnerships with multi-sectoral actors, enhancing capacity of health systems to reduce risks and respond to public health emergencies, protecting hospitals and other health infrastructure from climate risks and effects of climate change, strengthening surveillance and control of infectious disease against climate risk, improving the use of early warning systems by the health secto and building public health interventions at local level to increase community resilience."*65. Climate information is needed and should be available in ways that users in each country can understand, especially at the local level. This would facilitate the development of, for example, *"health action plans to enhance early warning and effective response over a range of time scales: from hours or days (for flood or heat wave warnings), to weeks (for seasonal epidemics of vector-borne disease), to months (seasonal forecasts of precipitation anomalies allowing* 

*planning for flooding or drought), to years (for drought and associated food insecurity)."*63.

The Vulnerability and Adaptation Assessment Tool was developed by WHO to help manage climate risks to health (Fig. 14). It departs from gathering information on the extent and magnitude of current and future importance of climate dependent health outcomes, in order to identify policies and programmes that can prevent or reduce the severity of future

*4.4.3. The WHO's Vulnerability and Adaptation Assessment Tool* 

management of health risks.

*emergencies."64*.

health impacts.

*4.4.2. CRM in the World Health Organization* 

environmental determinants of poor health outcomes.
