I suspect this is what is happening somehow...
Last night I was playing, and when the AC hit the threshold, I noticed several of my plots turned desert (I know because I had already made water-adepts a priority and I had total "green" coverage")
However, no message, and not all farms were removed.
then NEXT turn I got hit *again*, this time with the message, and I lost ALL granary resources (but I kept cows and pigs) and had a TON of desert land ( I didn't do the math but I'd estimate 40-50%).
(I had the ashen veil holy city, but no hell-territory not sure that might matter)
Later, when it came time... I also thought that there were a lot of hell-holes and fly creepies around, but I rarely play veil {I like to be the good guys} so I
didn't have a good base of comparison for that.
Finally, when it hit AC 100 (one of the few games I've let it do that) the effects were devastating! I had 50% of the landmass, and I lost *EVERY SINGLE ONE* of my garrison troops in every city, and about half of my invading army, including 2/3 of my archmages/summoners, and including 2 of 3 heroes!! Illian was clearly not affected even close to the same amount, and was able to mount a massive counteroffensive and push me back almost off the continent before I recovered.
If I had not already consolidated my home continent I would have been out of the game in one stroke from the total loss of garrison troops.