Climate costs could 'wipe out' livestock farmers' profits

In collaboration with scientists from the Intergovernmental Panel on Climate Change, FAIRR modeled the various impacts of climate change on agricultural productivity according to a 2°C increase in global temperature by 2100.

Climate change will affect crop production, which will drive up feed prices, FAIRR says. This price increase will be 5% of the cost increase for livestock companies; expected taxes on carbon emissions from livestock production will be 4% of the cost increase.

The FAIRR Climate Risk Tool predicts a $23.7 billion decline in pre-tax profits in 2030 from 2020 levels for the world's top 40 livestock producers. This decline will result in 20 of these manufacturers, including JBS, Tyson, Cal-Maine and WH Group, posting net operating losses.

For example, Tyson Foods, a North American company, could see profits fall by more than $4.3 billion in 2030 compared to 2020. In this scenario, the company will operate at a net loss compared to 2020 levels, with a negative 0.9% profit margin. U.S. egg maker Cal-Maine is down $354 million in profits, with a negative 13.1% profit margin. In Brazil, beef supplier JBS will see a $5 billion decline in profits and a negative 0.3% margin. Chinese pork producer WH Group is set to lose $2.5 billion in profits, with a negative 2.7% margin.

FAIRR says this scenario is "realistic" given the IPCC's recent report that global temperatures are "likely to reach 1.5°C above pre-industrial levels in the near future, with carbon emissions continuing to rise."

All of this means potential price increases for millions of customers and consumers as these companies supply the bulk of the world's animal protein. For example, JBS claims to be able to process over 200,000 cattle, 500,000 pigs, 45 million chickens and 80,000 small livestock (eg lambs, kids, etc.) per week.

The FAIRR model highlights the potential of companies to offset these cost increases through climate change mitigation strategies. So far, only 11 of the 40 companies featured in the FAIRR analysis have publicly disclosed how they plan to mitigate risk. Only six of these 40 companies have published climate scenario analysis, which is "widely regarded as a useful tool for planning effective climate risk reduction strategies."