Managing Weather Risk in Agricultural Production | Kyle Tapley, Meteorologist, Maxar
Weather variability is one of the major drivers of change when it comes to crop yields and crop production from one season to another. Extreme weather often leads to disruptions in the agricultural supply chain, resulting in unexpected changes in income for farmers and major shifts in commodity prices. It ultimately impacts how much consumers spend on food and other consumer products.
Maxar’s WeatherDesk helps stakeholders across the agricultural supply chain manage the inherent risk that weather represents.
Weather and Agriculture in India
In India, agricultural production is significantly influenced by the strength of the Indian monsoon. India is a major producer of rice, wheat, cotton, soybeans, sugar and a wide array of other crops. Production of these crops is heavily dependent on rainfall during the monsoon season. A weaker-than-normal monsoon results in drought conditions that can lower yields and production of these important crops.
While reduced crop production obviously has a negative impact on individual farmers, it can also send ripples across the agricultural supply chain, resulting in changes in commodity prices globally. As a result, it is important for any stakeholder in the agricultural supply chain to monitor changing weather patterns to ensure they can hedge their risks and protect themselves against supply shocks and sudden changes in commodity markets.
Maxar’s WeatherDesk portfolio of products is used by hundreds of customers around the world to manage weather risk, particularly for commodities. Maxar provides commodity-specific information reports that include forecasts and analysis of weather conditions globally, besides interactive web applications that allow users to conduct their own analysis through creation of maps and charts of historical and forecast weather information.
At the same time, they can use Maxar’s comprehensive data services, that push weather data to customers that they can use for a variety of use cases, including yield and pricing models. Maxar WeatherDesk’s wide-ranging customers include food companies, commodity trading houses, banks, hedge funds, agricultural cooperatives and precision farming companies.
Subsoil Moisture Departure from Normal for September 1, 2015, from Global Weather Interactive. Source: Maxar
Global Weather Interactive
To demonstrate the power of Maxar’s weather products, it would be useful to examine a case study involving the Indian monsoon and its impact on soybean production. As already noted, the strength of this season is critical in determining agricultural production in India. Global Weather Interactive, a Maxar web application available in WeatherDesk, allows users to monitor historical and future weather conditions, as well as compare conditions against long-term averages. This is particularly useful during monsoon season as it allows for comparisons to benchmark years.
For example, users can generate a chart that shows accumulated rainfall during the monsoon season for a given location for each year dating back to 2000. Using this chart, a user can easily identify the years where monsoonal rainfall was below normal. In the case of Mumbai, the years 2002, 2009 and 2015 all exhibit below-normal rainfall. Not surprisingly, each of these years with belownormal monsoonal rainfall also resulted in below-trend yields and drops in soybean production in India. Knowing this information, the user can track rainfall during the current monsoon season to evaluate the risk of reduced soybean yields.
It is important for any stakeholder in the agricultural supply chain to monitor changing weather patterns to ensure they can hedge their risks and protect themselves against supply shocks and sudden changes in commodity markets.
Beyond just tracking current conditions, a 15-day forecast is also provided, which can help WeatherDesk customers anticipate whether crop conditions will decline or improve in the coming weeks. In addition to typical weather parameters such as temperature and precipitation, Global Weather Interactive also allows users to generate maps of agricultural-specific variables such as subsoil moisture and Normalized Difference Vegetation Index (NDVI). These variables help to illustrate the impact weather conditions are having on the total moisture in the soil and crop health.
Using Weather Data to Model Crop Yields and Prices
Maxar also provides unique datasets that can be ingested by models to help customers understand how crop yields and commodity prices may react to changing weather patterns. Maxar’s crop-weighted dataset has proven particularly useful for agricultural modeling. Rather than provide massive amounts of weather data with no context, this dataset provides data that is weighted by crop production.
Areas with the highest crop production within a given region are weighted more heavily than minor growing regions, resulting in an index value that can be easily ingested into a yield or pricing model. For instance, soybeans in India are grown in Madhya Pradesh and Maharashtra. The crop-weighted dataset takes this into account and provides country-level and state-level data that better represents weather conditions in the areas that matter most for crop production.
Historical data provides context and allows users to understand the correlation between weather in different crop regions and crop yields and/or prices. Forecast data enables users to project forward 15 days and determine if crop yields or prices may change due to the upcoming weather pattern.
Weather is a critical factor in determining crop yields and crop prices and Maxar’s WeatherDesk helps those in the agricultural supply chain monitor changing weather conditions and manage their weather risk. While this use case focused on Indian soybeans, WeatherDesk covers all major crops and growing areas globally and also serves customers in the energy industry.