The prospect of climate change has revived both fears of food insecurity and its corollary, market opportunities for agricultural production. In Australia, with its long history of state-sponsored agricultural development, there is renewed interest in the agricultural development of tropical and sub-tropical northern regions. Climate projections suggest that there will be less water available to the main irrigation systems of the eastern central and southern regions of Australia, while net rainfall could be sustained or even increase in the northern areas. Hence, there could be more intensive use of northern agricultural areas, with the relocation of some production of economically important commodities such as vegetables, rice and cotton. The problem is that the expansion of cropping in northern Australia has been constrained by agronomic and economic considerations.
The present paper examines the economics, at both farm and regional level, of relocating some cotton production from the east-central irrigation areas to the north where there is an existing irrigation scheme together with some industry and individual interest in such relocation. Integrated modelling and expert knowledge are used to examine this example of prospective climate change adaptation. Farm-level simulations show that without adaptation, overall gross margins will decrease under a combination of climate change and reduction in water availability. A dynamic regional Computable General Equilibrium model is used to explore two scenarios of relocating cotton production from south east Queensland, to sugar-dominated areas in northern Queensland. Overall, an increase in real economic output and real income was realized when some cotton production was relocated to sugar cane fallow land/new land. There were, however, large negative effects on regional economies where cotton production displaced sugar cane. It is concluded that even excluding the agronomic uncertainties, which are not examined here, there is unlikely to be significant market-driven relocation of cotton production.