Wednesday, September 07, 2011
Climate Change Predictions: Benefitting from Floods and Droughts
When you “catch the weather,” what are you listening or watching for? Going to rain? Temperature? Wind speed? That probably covers 95% of the responses to that question, but the next generation is going to spend a lot more time studying meteorological phenomena than Dad ever did. They may be farming the weather, as well as the land.
This is not about global warming, so don’t stop reading if you disagree with those predictions. This is about subtle changes in our climate which will have a great impact on the way farming is conducted in future years. We can look back and see those changes, but there is an effort underway to predict such changes, and Iowa State University economist Don Hofstrand says the ability to make such predictions will yield a substantial payoff. So how will crop and livestock producers really benefit from knowing how the climate is changing?
Hofstrand says, “To maximize the value of climate prediction information for decision making the information needs to be combined and provided with other environmental information such as ground cover, soil type, soil organic matter, soil radiation, soil temperature, soil moisture and long-term drought conditions. This integration of environmental information will help farmers and agribusinesses utilize the information more effectively in decision making.” Consequently, if climate predictions are for specific shortages or excesses of moisture or temperature, then cropping decisions can be made along with decisions of whether to purchase crop insurance.
Climate predictions will also help in the purchase of crop inputs, says Hofstrand, because it will help with the decisions on type, amount, timing, and type of application of inputs, “For example, the maturity of the corn variety may be impacted by the expected length of the growing season.” And he adds, “Nitrogen fertilizer timing of application can be more accurately designed with information about expected temperatures and precipitation during various periods of the growing season.”
Hofstrand also says climate predictions will provide lead time on mitigating adverse weather, such as delayed planting to avoid a late spring frost, or early planting to allow the crop to mature to take advantage of the knowledge there will be an early fall frost. He adds, “Climate prediction information can help farmers decide whether to harvest crops early or wait for further dry-down to minimize crop drying expenses.” But what about excess rain fall? Hofstrand contends, “Climate predictions can provide essential information for decision makers of whether to install irrigation systems or drainage systems to optimize crop yields.”
Machinery purchases can also be made or leases arranged with the knowledge of the weather, since larger equipment would be needed to accommodate short weather windows, to allow farmers to take advantage of getting in and out of the field on a timely schedule in the event of frequent rains. “In addition to combine size, this includes ample grain movement capability from the field to storage and ample grain drying capacity for a wet and/or short harvest window,” says Hofstrand.
Your marketing could also be improved with the opportunity to know how the climate will change within the growing season, or over several, says the Iowa State economist. “Climate predictions help anticipate major weather events that impact the production levels of world crops. This will reduce the uncertainty of grain production which will subsequently reduce the volatility of world grain markets. Less volatility will lead to less risk for participants in the supply chain. This risk reduction will lead to a more efficient supply chain and lower and more stable grain and food prices.”
Like crops, livestock production can also benefit from climate change predictions, says Hofstrand, because of pasture and rangeland conditions; “Producers must either supplement feed levels or reduce breeding herd size during periods of drought. Advance notice of drought will help farmers and ranchers prepare for the drought and minimize its financial impact. This will also minimize the impact on the beef sector as a whole.” He also says climate change predictions will also help with alfalfa production for dairy herds and confinement facility decision for swine and poultry operations.
For agribusiness, Hofstrand says awareness of regional and local climate factors will allow them to provide an array of inputs designed for the conditions at hand. Seed companies will be better able to supply genetics that will accommodate the conditions that year. Crop insurance companies will be able to fine tune their products and better control their own risk. Fertilizer companies will be better stocked with the types of fertilizer that will work best with the weather factors of that growing season, and machinery companies will be able to provide equipment that will be used where it is needed.
Summary:
Knowing the weather for tomorrow helps us be more efficient today, but knowing the growing season weather will help us be more profitable this year. A long term knowledge of climate change will provide the insight to produce more and better foods and feeds, and yet manage risk and not only keep costs low, but also be better marketers of our efforts.
Posted by Stu Ellis on 09/07 at 12:00 AM | Permalink
Comments
Posted by: Jib at September 9, 2011 9:09PM
The Southwest is extremely dry, as we all know. Three states in this area: Kansas, Oklahoma and Texas, account for about two thirds (67%) of the hard red winter wheat (HRWW) planted acres. Growers in these states and others have three main options for managing these acres. The inclusion of federal crop insurance in their risk management plan is needed for some of these choices to unfold. They can hold for a spring crop looking for winter rains. They could prevent plant winter wheat. (It is believed drought is an insurable cause to prevent planting. Others have disputed this claim. Those directly affected will need to check with their agent prior to any action.) The last option is to plant their crop; “dusting it in” should the needed rain not arrive. Some have noted, a “good” general rain could sprout the wheat but will probably not be enough to carry a crop through the winter. This statement was generally directed at Texas, most of Oklahoma, southern parts of Kansas and parts of other states. The long term precipitation outlook for the area calls for below average chances for rain. The salvation for those wanting to plant winter wheat appears to be crop insurance. September 30th is the sales closing date for federal crop insurance coverage on this year’s winter wheat crop. (The reported HRWW planted acre could be greatly skewed from potentially harvested acres with many acres “dusted in”. It could be another crop where harvested acres are the value with merit.)
The final planting date for federal crop insurance is the last date one can plant without a decrease in crop insurance protection. (One can still plant but the insurance coverage is lowered.) The northwestern corner of Kansas has a final planting date for winter wheat of October 15th. The rolling plains region of Texas’s date is December 15th. The areas between have dates of October 30th, November 15th and November 30th. The final planting date is generally viewed as being past the “optimum” date for planting. To plant after this date generally requires abnormally strong economic motivation to endure planting cost with a declining yield potential. As these dates pass, without a major rain event, it might be viewed as a “lost chance” to receive a crop from those acres.
These dates might be important to corn growers as well. As these dates approach and past without a major rain event, the bull spreading of KC wheat over/against Chicago corn may become/continue to be popular. (This might increase wheat values while pressuring corn.) Currently Chicago Dec wheat price is about par with corn futures. Kansas City and Minneapolis wheat prices are at 15% and 24% premiums respectfully. The wheat to corn price relation hit an all time high 2.6 in August of 2009. The average for the October through December time frame is around a 50% premium for wheat over corn. The HRWW balance sheet should be able to “hold up” with a 5% reduction in domestic production with strong worldwide wheat production. A 20% reduction appears to head us for more challenges. Over 40% of hard red winter wheat’s potentially planted acres are under an extreme or exception drought. So “things” could be interesting in HRWW as well as corn in 2012.
The hard red spring wheat, grown mainly in North Dakota, South Dakota, Montana and Minnesota, can be somewhat of a substitute for HRWW. Low HRWW plantings this fall could push spring wheat (Minneapolis) prices up, trying to buy acres from corn and soybeans.
Jib aka Gibberish