Climate Risk: The Effects of Extreme Weather on Agriculture

What is climate risk? 

Climate risk refers to the potential negative effects of climate change on aspects of the environment, businesses, and society. Rising global temperatures can change the climate system and the components within it.  This change affects the Earth’s weather and climate patterns. As a result, the globe is experiencing more frequent and severe extreme weather events. 

An increase in extreme weather events 

An increase in extreme weather events correlates to agricultural production impacts. Drought, flood, convective storms (hail and wind damage), and tropical cyclones have been increasing for decades. Recently, these increases have been accelerating. 

The economic cost of climate-related weather event 

In 2024, the US had 27 weather and climate disasters defined as losses at, or over, 1 billion dollars (SOURCE: NOAA National Centers for Environmental Information). This was the second-largest number of billion-dollar events only being surpasses by 28 events in 2023.  

In 2024, 58 billion-dollar weather disasters globally caused US $402 billion in economic loss (SOURCE: Gallagher Re). Much of this loss was in the agricultural sector. This was the second-highest number of disasters, with the record set in 2023. The three biggest weather disasters in 2024 were Hurricane Helene, Hurricane Milton, and flooding in central China. These events had a significant impact on the economics of the areas impacted, and the world.  

Climate risk: The enemy of crops 

The ranking of the top hazards tells us much about the agricultural impacts. Tropical cyclones, floods, severe convective storms (hail and wind), and drought contributed the most economic loss. Of course, these are the enemies of crops. 

Climate risk causes 

The trend is clear. The root of the issue is the elevated ocean temperatures. Warm oceans impact the atmosphere, allowing more precipitable water to accumulate via evaporation.  The high levels of water vapor cause extreme weather events. These include tropical cyclones, mid-latitude storms, and summer thunderstorms. Summer storms can bring hail and strong winds.  

Average global sea surface temperatures (SSTs) are at exceptionally high levels. The current value is the second highest over the past 43 years, slightly lower than in 2024, which was the warmest. Since spring 2003, SSTs have been much higher than any other time in the historical record. The image above shows SST anomalies since the early 1980s. Ocean temperatures are expected to remain near or at record levels throughout 2025 and likely longer. We expect to see more frequent and stronger extreme weather events. These events will impact and harm agricultural areas around the world.  

Figure 1: Global sea surface temperature (SSTs) trends that contribute to increased climate risk 

Supply chain effects of climate risk 

Supply chain stakeholders must first recognize the issues, why they occur, and the affected crop belts. When possible, a resiliency plan should include alternative agricultural product sourcing areas. Consumers will inevitably feel the brunt of climate-related weather events. At different times, certain crops are going to be in short supply. Inevitable price spikes will also affect the consumer, as seen with current coffee and cocoa prices.   

Supply chain disruptions caused by climate risks can also lead to significant operational inefficiencies for businesses. Extreme weather events such as floods, droughts, and hurricanes can damage transportation infrastructure, delay shipments, and disrupt production timelines. 

Figure 2: Global SST anomaly with temperature scale  

Additionally, regions heavily dependent on single-crop exports may experience economic instability, further impacting global trade. Companies looking to limit these risks must invest in supply chain visibility and sustainability initiatives. Technologies like predictive analytics and weather modeling can help anticipate disruptions, allowing businesses to prepare and adapt more effectively. 

Ultimately, long-term strategies that focus on reducing vulnerabilities and promoting environmental stewardship can create more stable and resilient supply chains. 

Know Your Climate Risk 

Everstream Analytics offers a supply chain risk tool called Climate Risk Scores. This tool measures the effects of key climate indicators and predicts how identified risks will affect customer supply chains. Everstream’s Climate Risk Scores are part of the Explore tool. This solution assesses supplier risk. It uses data to predict scores for different locations. The scores depend on several factors. These include tropical cyclones, river floods, and sea level rise. They also consider heat, fire weather, cold, drought, and precipitation. 

Jon Davis 

Jon Davis leads the Everstream Analytics weather and climate team as Chief Meteorologist. With over 35 years of experience, he is widely considered one of the foremost experts on the impact of weather and climate on global commodities and business.