Drought resilience overview
- European droughts increasingly threaten crop yields, quality and supply
- Companies should map risks and strengthen sourcing resilience plans
- Long-term adaptation requires redesigning supply chains for water scarcity
- Diversification helps only when sourcing regions face different climate risks
- Climate forecasting supports risk management, though uncertainty remains significant
Most of Europe’s food crops have been affected by the drought conditions that recently swept through the continent. While some were hit particularly hard, no crop emerged entirely unscathed.
Yet this is part of a larger story. While global agricultural productivity has grown substantially since 1961, according to Rabobank, it is 21% lower than it could have been without climate change, which has effectively wiped out the equivalent of more than seven years of productivity improvements.
Things are not getting better. The drought seen in Europe this year was one of the worst in living memory, made worse by El Niño. How can food manufacturers prepare for the next one?
In the short term, mitigation
“The overriding principle here is that we are past the stage of thinking in terms of the next drought as an unpredictable event”, says Simon Geale, executive vice president of procurement at supply chain consultancy Proxima.
“We should be thinking about how we design food supply chains more permanently against extreme heat and water scarcity in Europe.”
Many of the most effective solutions are long-term in nature. In the short term, companies can mitigate losses.
Manufacturers should be profiling demand as far as possible, and mapping supply against this, says Geale, all the while considering challenges that could arise from severe weather.
If specific challenges are profiled, companies can come up with specific answers, such as investing in storage where needed, changing buying patterns, and working with customers on substitutions.
One thing companies should keep in mind is that having another supplier is not the same as having another source of supply. It is critical for companies to understand the source of their ingredients as well as who they are buying them from.
In the long term, redesign
Food companies should not treat drought as an emergency volume problem when yields are already falling, says Camilla Bonilla Cedrez, senior analyst for climate resilience and food systems at Rabobank.
Instead, they should develop a procurement and supplier management process to mitigate its impacts.
They should identify the most exposed ingredients by combining crop type, irrigation dependence, harvest window, soil and water constraints, the crop stage most sensitive to water stress, and the region where the supplier is located. This will reveal the effect of drought not only on tonnage, but also processing quality and storability.
This will allow companies to develop plans for how to respond in the case of high-risk ingredients. They will be able to pre-qualify alternative suppliers, decide when to activate backup volumes, and contract earlier so farmers and processors have confidence to invest.
Companies must also prepare for when raw material intake is lower or more variable and pressure on storage is greater. They should be prepared to change recipe formulation if necessary, and to let their customers know as early as possible if there is a risk to supply.
Can European crops be protected?
To a certain extent, crops can be protected. The first step in protecting yields is reaction, says Rabobank’s Cedrez.
Reacting to drought includes measures such as adjusting planting or sowing dates, using seasonal forecasts, changing harvest timing, monitoring soil moisture, improving irrigation scheduling, and tightening pest and disease management during high-risk periods.
Yet structural changes must also be made to protect crops in the long-term. Food companies should invest in better soil water retention, improved drainage, more efficient irrigation when water is available and more drought-and-heat-tolerant crops. They should also invest in frost and heat protection in fruit, more diversified crop rotations in grains, and more suitable rootstocks and cultivars.
Finally, companies can adopt transformative practices. These may include more dramatic shifts such as relocating production, changing crop type, or diversifying farming systems.
Yet measures to protect yields and improve agricultural production come at a cost, points out Geale. “The elephant in the room is who should bear the cost of systematic modernisation.”
To diversify or not to diversify?
Another option is to diversify sourcing, but this is not entirely simple. In cases where drought poses a risk to crops, the logical option is to source from less at-risk locations. But when all areas in which a certain crop is produced contain risk, what can food companies do?
Buyers need crops with genuinely different climate exposures in order to hedge risk, says Geale – if crops in all locations are exposed to the same or correlated risk, there is little point in diversifying.
“The overriding principle here is that we are past the stage of thinking in terms of the next drought as an unpredictable event.”
Simon Geale, executive vice president of procurement at Proxima
“Sourcing from elsewhere should ... be a complement, not a substitute” to other measures, adds Cedrez. “Manufacturers should distinguish between tactical diversification, such as adding suppliers in less correlated weather regions, and strategic relocation, which only works where climate suitability, water access, infrastructure, scale, technical capacity, and market requirements align.
“Otherwise, moving sourcing can simply shift the risk to another region or create new quality, logistics, or sustainability constraints.”
Predicting the next drought
Of course, one way of protecting supply chains is to know when, and from where, the next drought will come.
Companies can, to a certain extent, predict future droughts, but they must view this as risk-screening rather than certainty, says Cedrez.
Companies should use climate indicators such as rainfall deficits, heatwave days, drought frequency and soil moisture to identify hotspots, combining these with crop maps, supplier locations, production calendars and sensitive growth stages to identify locations and times where risk is highest.
This can be done through the use of tools including national weather services, drought monitors, and seasonal forecasts. Datasets collected by national climate services, crop-specific studies and satellite systems like Copernicus can also lend a helping hand.
“The most useful output for a manufacturer” says Cedrez “is not a generic climate map, but a crop-by-region risk matrix that links hazards to likely business impacts: yield loss, quality downgrade, delayed harvest, storage pressure, or higher procurement costs.”
Yet uncertainty still remains, particularly on a local level, Cedrez explains. The same heatwave or dry spell can have very different effects, depending on factors such as soil water-holding capacity, irrigation access, crop stage, variety and farm management.
“That is why manufacturers should combine regional climate screening with supplier-level information and update contingency plans each season, especially for crops with narrow harvest windows or strict processing and retail specifications.”
The future of drought
While some mitigation measures are sustainable in the long-term, says Cedrez, this is only when they reduce exposure without creating new resource constraints.
Rotating crops, addressing soil health, improving forecasting and using precision irrigation can strengthen resilience, as long as they’re viable.
In some cases, mitigation strategies are not sustainable. For example, irrigation is not sustainable where there is a lack of water, and diversifying locations may just introduce new climate risks.
“The long-term question is therefore not whether agriculture can adapt, but which adaptations remain viable as events become more frequent, compound, and capital-intensive.”
More droughts will no doubt come. Businesses must not think only about how to react after droughts, but how to plan in advance for their coming, stresses Geale.
“Businesses need to be more strategic when looking to the long term with the longer-term answer likely to be more of a redesign than a react model.”
In short, food companies cannot simply prepare to react better when the next drought comes. They must make the system itself more resilient.
