Once again, we make the case for space-based research combined with advance weather outlooks as a simple yet powerful suite of tools for early identification of crop problems in key agricultural producing regions.  As an example, the map below is an indicator of vegetation health as derived via satellite for the wheat regions to the north of the Caspian and Black Seas.  There has been no shortage of coverage regarding the current crop problems afflicting Russia and Kazakhstan, so this region is an obvious area of focus. 

The source of the data for this map is from MODIS, and this particular graphic depicts the Normalized Difference Vegetation Index, or NDVI, for the region, shown as an anomaly vs. the 5-year average (for mid to late July).  The NDVI derives information from both the NIR and the Red wavelengths in the electromagnetic spectrum, and a simple calculation is performed to assess vegetation health.  The index then assigns a value for crop health, and based on the color scale shown in the legend, it is clear that the region has been exhibiting severe vegetation stress – the important thing to note here is that wheat futures started to increase in July, then exhibited a violent spike in early August.  As this map is from mid to late July, we show that by using tools such as satellite indices in conjunction with the Weather Trends long range weather forecast for the region, the current impact in wheat prices could have been anticipated and financial effects avoided through a proactive physically based risk management strategy. 

Last month, Weather Trends CEO Bill Kirk and Technology VP Michael Ferrari conducted an educational workshop for a group of 2nd graders on how weather impacts the global supply chain! Yep – not easy! Bill and Michael had all 25 kids play a specific role in getting a seasonal summer toy for the beach made in a China factory; shipped across the ocean while dodging storms across the way; moving product from U.S. ports to trains and trucks and then from warehouses to a local Toys”R”us store and ultimately to a happy young customer 6-9 months later. For doing such a great job, all the kids received Weather Trends most coveted weather super hero – “My Skeye Guy”…proudly displayed in this photo. The teacher confirmed that Skeye Guy can fly as she witnessed first hand, repeatedly…ALL DAY LONG!

In April 1998, a Foresight workshop was convened which focused on seasonal weather forecasting as a tool for better understanding the risks to the global agricultural supply chain. This event was represented by attendees from academia, agro/chemical companies, retailers, growers/manufacturers, and the government, and the focus was on developing a better understanding of how long and short range weather forecasts could be applied as an operational tool for the various participating sectors. A 1999 paper was published describing the objectives and outcomes from the workshop. While the workshop conclusions supported the notion that long range forecasting can provide a very useful strategic and competitive advantage, the ensuing 11 years since the workshop have not produced very much in the way as actionable follow up.

This article provides a high level view on the background information related to what will soon be a new addition to the Weather Trends International (WTI) series of applied weather/climate white papers. It should be stressed that the food supply problems have a component which extends well beyond the commercial financial and consumer goods sectors. In the forthcoming paper, we attempt apply components of our global weather and climate research to one of the most pressing global social and environmental problems facing society today – agricultural production, and more importantly, global food security. According to a recent Food and Agricultural Organization (FAO) briefing, one sixth of the Earth’s population suffers from hunger and/or malnourishment. There is no other single factor that is more important to building a more equitable global society than ensuring an adequate daily supply of food and nutrition to every mouth. While weather is usually pointed to as the cause of such events, this crisis is as much an economic problem as it is an environmental one. The incestuous cycle of poverty and hunger is predicated upon a myriad of fundamental factors which are so interconnected that it is becoming increasingly difficult for marginal populations to escape this trap once they are placed below a financial threshold that can be seen to provide an adequate standard of living. What is even more alarming is that according the US Census Bureau, global population is estimated to have increased from 6.71 billion in 2008 to 6.78 billion in 2009, which is roughly a 1 % change; during that same time, the FAO estimate of hungry people went from 902 million to 1.02 billion – an increase of 13%.

The physical side of this equation will be addressed in the paper, but here we first look at the macroeconomic drivers underlying the situation. Global food supplies, focusing primarily on commercial stocks of grains, oilseeds and rice, have been steadily increasing since the 1970s. We should note, however, that while weather variables certainly affect production and ultimately the amount of raw material which makes up physical supply to the market, food shortages are largely problems rooted in economics, geography and infrastructure. In any given year, supplies (production + stocks) of staples are in sufficient quantities to feed the planet, while the weather’s effects on crops, price, or both, become secondary factors. However, it is precisely these secondary factors that prevent many of the world’s poor from feeding their families. When a weather event triggers a supply curtailment or a price reaction, the economic ramifications then serve to feed back on the system, essentially reinforcing the primary problem, which boils down to the fact that food is not afforded by these populations. The global fiscal events witnessed over the last year included some very dramatic swings in the futures and domestic market prices associated with many staple commercial crops, including corn, soybeans, wheat and rice. What we saw after the rapid rise in prices, was that even after a retreat from the peaks seen in 2008, relative prices are still high when compared to the price levels that were common before the price spike. So while the risks associated with the 2008 financial turmoil amplified the situation, pushing more people to the brink of starvation in the process, we are now in late 2009 and real prices continue to be the primary barrier in preventing both the economic and environmental stability needed for a sustainable global agricultural production model.

The FAO has released a number of briefings and technical papers addressing the impact of the events of 2008 on the economies located in many of the world’s agricultural origins. In many of these communications, they have highlighted three points why the recent economic crisis is unprecedented. Their first point is that the global food security crisis was the result of rapid rise in food prices between 2006 and 2008. Secondly, they note that the crisis affected large parts of the world at the same time. And finally, they highlight the precarious role that the financial exposure of the developing countries played in these events. Upon closer analysis, however, we see that the details associated with high food costs are not unique to the events of 2006-2008. The paper then will also attempt to take a look back at previous food supply events which culminated in high prices, and put the most recent two years in context.

This gets to the role of seasonal weather forecasting as a tool for averting some of the negative ramifications (financial and biophysical) of the last year. While no crises can ever be predicted in absolute terms, our research into weather and food security highlights the question: what can the role of long range weather outlooks play in averting such disasters in the future? We can turn to the role that proactive weather risk management can play in (a) identifying potential physical production problems well in advance of an event, (b) promoting measures that extend from financial hedging to farm level risk management to reduce potential negative impacts, and (c) develop scenarios to quickly and effectively respond to such crises, in this case food supply shortfalls, before the event is confirmed and most of the response is reactionary. The current year’s rainfall deficit associated with the weaker Indian monsoon, where a healthy seasonal rainfall distribution is a prerequisite for a strong Indian economy, underscores this point; the potential food production disruptions that may accompany a 2009/10 El Nino event (both discussed elsewhere in WTI content) make a long view on the year ahead equally important.

As stated at the beginning of this article, global food supply, or lack thereof, is not the primary cause of the hunger problem. Prices will always react to the perceived effects of weather on supply and demand, and these events are what can be prepared for. Whenever there is a weather ‘event’ in a commercial origin, this can be either a short term disruption or a prolonged pattern. In either case, the market finds a way to react to the event, and price reactions, in either direction, typically hurt the poor growers first. Future posts and related WTI papers will start to explore these and related issues in more detail.

Yesterday, I had the privilege (compliments of SeekingAlpha) of attending the first WIRED Magazine Disruptive by Design conference, held at the wonderful Morgan Library and Museum in New York. The majority of conferences that I attend are usually research and/or application oriented, where most of the real value from attending comes from discussions at the poster sessions; speaker-only conferences more often than not do not live up to their expectations. But yesterday’s event provided an exception. From the opening address by WIRED’s Editor-in-Chief Chris Anderson to the final discussion with GE’s CEO Jeffrey Immelt, every talk provided a healthy balance of challenge and opportunity, and from my perspective, at a small and growing technology company, the timing of the event was perfect.  Others (including Tim O’Reilly) have done a great job in capturing many of the memorable moments of the day, and many of the videos are already available, so I will just offer a couple of notable points offered by a few of the day’s speakers.

Nearly all of the talks contained some version of the ‘now is the time to innovate’ mantra.  Anderson’s opening talk was dead-on.  He focused on the central argument in his new book, titled ‘Free’.  Using Jell-O to illustrate his point, he successfully demonstrated how a 19^th century business model is just as, if not more, important in 2009. Judging from a few of the comments heard outside, some in the crowd might not have gotten the point of free (or near free) product distribution in order to gain an advantage via branding and loyalty, but for those in technology/product development, particularly at leaner organizations, the message was clear. There were three successive talks that I was looking forward to hearing (Elon Musk, Shai Agassi, and Vivek Kundra), and none of them disappointed.  As I have been following from the periphery some the things that Musk’s companies have been doing in recent years, I was very interested in hearing his thoughts. Most interesting from his talk, and refreshing, was his emphatic stance that science/technology companies should be largely run by science/technology people.  As Weather Trends is a company where nearly all of the management has a technical background, it was nice to hear this. He actually stated his thoughts on what it takes to be a successful manager today more bluntly, which the video clip will attest to.

Whether or not you agree with Agassi’s ideas (I happen to), listening to him talk about his vision of a world that is built around renewable energy was inspiring. What was better was how he was extremely well versed with facts to back up any criticisms of his idea; everything that was thrown at him from the session’s moderator was tactfully answered with an answer that was so appropriate, it almost seemed staged. And his description of Detroit as a ‘Man-Made Katrina’ underscored reasons why something new is necessary.  Finally, I honestly did not know much about the Federal Government’s CIO Vivek Kundra before yesterday morning, but after seeing his vision for data.gov, I am putting him on my radar as well.  

These were, in my view, the highlights of the conference. A short story could be written about Bezos’ talk, which again was entertaining and enlightening. Skipping over the Kindle stuff, he emphasized his views on the importance of innovative R&D, and risk taking.  Successful leaders always emphasize the need to encourage risk taking and failure, but Bezos went further by drilling home the point that that there is a misconception that failure is always expensive; this far from true.  This is the same as science in general. More knowledge is usually gleaned from failed experiments than those that reproduce prior results.

In addition to the numerous references to this topic in our weekly commodity newsletters, one of our posts last week mentioned  that we have been monitoring ocean conditions over the last few months to track and forecast conditions that serve as precursors to El Nino development later this year.  To monitor these changes, we now have a feature in our MYskeye global weather mapping tool that allows for visualization of daily ocean temperature anomalies vs. the previous year.  When we analyze phase transitions between El Nino and La Nina, looking at temperatures vs. last  year is more useful than comparing to ‘normal’, which is what most providers show.

This global temperature mapping function is just one more of the many useful features that we are incorporating into MYskeye for our clients. 

This is another new global mapping capability that is incorporated into our MYskeye  global weather mapping platform.   We have taken global maps that were developed to forecast minimum relative humidity and wind speed/direction, and combined them to construct an index that will be useful to identify global crop regions that may be susceptible to weather induced stress or disease.  One example would be rust, which is a fungal disease that affects numerous commercial crops, primarily soybeans.  While moist conditions are favorable for development, dry windy conditions are precursors for transport, so anticipating these conditions, even within the 14 day window, can be very valuable for growers and traders alike.  The top image in the above map shows the global daily forecast for these parameters.  Users can then zoom in on a continent or growing region of interest and anticipate when and where a potential problem could arise.  These maps are available through a daily forecast for days 1 through 14, and in the near future, they will be available from day 1 through day 335, along with the other suite of Weather Trends forecasts.