It never rains, but it pours

Environment, Insurance and Reinsurance — By on May 4, 2012 at 10:30 PM

It never rains, but it pours

After two of the driest winters on record, farmers in the UK are learning how to cope with drought

It’s hard to believe that drought is still a problem in the UK, especially considering recent localised flooding. But in parts of England, especially in the South East, water levels are still as low as they were in 1976, when the last serious drought happened.

In the East of England, Anglian water company said some of its reservoir levels remain 20% lower than normal. A spokesman for the company told the BBC, because the “recharge period” started later, it will take more rain over a long period to get things back to normal.

Low river flows and groundwater levels have already posed significant problems for farmers and their spring planting. If the weather stays dry it is looking likely that current restrictions on agricultural abstraction will remain and additional restrictions could be enforced.

Driven to abstraction

Drought management actions, such as ‘Hands off Flow’ restrictions and irrigation bans, are looking likely throughout parts of central, east, south east and south west England particularly if there is below average rainfall over the coming months.

Most abstraction licences – a licence to divert either surface water or ground water for a designated purpose in England and Wales – now contain conditions where the licence holder has to reduce or stop taking water once the river has dropped to a certain level or flow.

The Environment Agency warned in March that because the prospects for irrigation are bleak there could be a significant impact on food production.

For example in the south east of England water shortages could affect fruit, vegetable and salad growers this summer. Continued dry weather could also increase risks to supplies of drinking water for livestock, particularly housed pigs and poultry.

It’s also likely that the quality of grass will continue to decrease, resulting in either more expense for farmers re-seeding or reductions in livestock numbers as there is less grass to feed livestock.

Planning ahead

“It does seem odd to be talking about drought when there is so much rain, but the reality is that levels in reservoirs and aquifers are still low, ” says National Farmers Union Chief Economist Phil Bicknell. “Limits on water use are of most concern to the horticultural sector, where irrigation is very important.”

Bicknell says some of these businesses will have planned ahead and secured their water supply by keeping water reservoirs topped up in the winter, for example.

“We know that water management is an increasing issue for agriculture, and some farmers are already taking action. Livestock farmers have installed rainwater harvesting systems to reduce their reliance on mains water and boreholes, with Rural Development Programme grants offering some incentives.” he adds.

Adapt and survive

Nigel Ralph

Nigel Ralph is an executive in Lloyd’s Performance Management Directorate and an expert on agriculture reinsurance. He co-authored the book World Crop Reinsurance.  “Unlike some other countries, the UK does not have a drought insurance scheme. In the US, Canada and some European countries, farmers can buy insurance against drought as part of heavily subsidised private multi-perils coverage, ” he explains.

The crop reinsurance market worldwide is estimated at around $3 billion and Lloyd’s plays a significant role in reinsuring some of these schemes.

Ralph says that farmers are more financially independent in the UK than in most other countries and take bigger risks with their businesses. If crops fail in the UK, the losses come out of the farmer’s capital.

As a result, farmers in the UK are getting adept at coping with dry conditions by reviewing the types of crop they grow. “As the climate has changed we’ve even seen UK farmers switching from potatoes to sunflowers, for example, or even moving into vineyards and wine production, something unheard of 20 years ago, ” Ralph says.

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