Understanding Wildfire Risk in Agriculture Through Data Management

Wildfires represent a material risk to the agricultural industry. Grist reports that wildfire insurance costs are quadrupling for farmers in some regions when they’re even available at all:

“Hundreds of farm owners in California have found themselves forced to go without insurance coverage this past year, from ranchers along the Central Coast, nut growers outside San Diego, and winery owners … in Sonoma and Napa Valley.”

At the same time, an article in Science magazine points out that “Agricultural policy can reduce wildfires,” since irrigated farmlands, including orchards and grasslands, are less susceptible to fires than abandoned farms that accumulate dry plant material. By being proactive about wildfire risk, and using data management to inform financial decisions, ag finance professionals can reduce the impact of wildfires on their portfolios.

This post will explore the connection between wildfire risk and water risk in agriculture, and how data-driven intelligence can help to mitigate that risk.

The Rise of Wildfire Risk in Agriculture

Wildfires have become a pressing issue in many parts of the world, as climate change increases the severity of droughts and other extreme weather events, including in the agricultural regions of the American West. Some regions are at increased risk of crop damage due to wildfire, while others may be exposed to high levels of smoke, which can harm livestock and agricultural workers.

As the U.C. Davis Western Center for Agricultural Health and Safety explains:

“In addition to the dangers of an active fire, wildfire smoke, ash, and chemicals used to treat fires negatively affect air and water quality.”

Ag finance professionals must be proactive about addressing these risks, both through better data management practices and by better understanding the conditions that lead to wildfire risk. Only by acclimating financial data to take climate change into account can ag finance professionals be prepared to withstand its effects on farming.

Wildfire Risk is a Type of Water Risk

In many ways, wildfire risk can be looked at as a type of water risk, because it’s closely linked to drought risk and changing weather patterns. Scientific projections show that there’s a growing potential for wildfires in California, which will directly impact the risk profiles of farmland in an agricultural portfolio.

Currently, the state of California provides Fire Hazard Severity Zone maps that show which areas are most at risk of wildfire – but the most recent maps were produced in 2007 and may not account for the latest wind and weather patterns.

These maps categorize regions by hazard level (moderate, high, and very high) and type of landscape (such as “urban unzoned” and “non-wildland, non-urban”), using factors such as vegetation and topography to determine fire risk.

Wildfires as an Acute Physical Risk

Depending on the location of a parcel of farmland, ag professionals may need to do additional research to properly assess its wildfire risk. Wildfires are an example of an acute physical risk, because they happen suddenly and unpredictably, as opposed to drought, which is a chronic risk that happens over time. Wildfires may burn crops or produce smoke that can damage crops (such as wine grapes).

As the risk of wildfires increases, wildfires will present additional risks to ag lending portfolios and should be factored into the due diligence process. As the EPA points out, the impacts of a wildfire can last well beyond the fire’s own duration:

“In the aftermath of a large wildfire, rainstorms flush vast quantities of ash, sediment, nutrients and contaminants into streams, rivers, and downstream reservoirs. The absence of vegetation in the watershed can create conditions conducive to erosion and even flooding.”

Knowing a farm’s water rights situation and water conservation practices can inform decisions about wildfire risk, because farms with an adequate water supply may be better able to withstand or bounce back from the impacts of wildfire. Likewise, farming operations that practice regenerative farming may have healthier water and soil quality and be more resistant to flooding and erosion.

How Data-driven Intelligence Can Help Ag Finance Address Wildfire Risk in Their Portfolios

Data acclimation is a process by which organizations such as financial institutions can geospatially contextualize their data in order to better understand the impact of climate change on their loans and investments. By acclimating bank data with third-party risk datasets, as well as top-tier proprietary water datasets in the case of GIS Connect, ag professionals can obtain a more comprehensive picture of material risks, such as water and wildfire risk, and monitor them as they change over time.

For example, AQUAOSO’s GIS Connect tool offers wildfire monitoring capabilities that can put wildfire risk into the context of agricultural portfolios, alongside other risks, on an interactive map. By combining these datasets in a single, map-based platform, users can toggle multiple layers on and off and see how these risks interact with one another as well as the parcels in a portfolio.

By identifying the farms most at risk of wildfire, Farm Credits, ag lenders, and investors can protect their bottom lines while helping to build water and climate resilience.

The Bottom Line

Wildfire risk is increasing in many agricultural regions in the U.S., requiring ag finance institutions to incorporate wildfire risk data into their loan and investment decisions. At the same time, the growing quantity of climate data that’s available makes it easier to put financial data into context, provided it is acclimated into their data.

Ag finance professionals can use geospatial tools like AQUAOSO’s GIS Connect to acclimate their data with once-disparate datasets and gain real-time insights into wildfire risk. Users can view land ownership data, water rights and water quality information, wildfire maps, watershed boundaries, and more.

With the right GIS tools, ag finance institutions can save time and money and future-proof their lending and investment decisions to a changing climate.

Contact the team at AQUAOSO to learn more, or download a free white paper or PDF cheat sheet from the Resources page.

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