Cost Benefit Analysis for Using Climate-based Models as a Risk Management Strategy in Saskatchewan

By March Agricultural Ltd

Executive summary

The feasibility of developing a system that allows the agricultural sector to develop and use climate-driven risk management products to help Saskatchewan farmers was examined. Through the examination of a system that is presently working in Manitoba, it was found that, with certain adjustments, such a system could also work in Saskatchewan.

In examining financial issues, it was determined that the system should be developed in a progressive, five-year phase-in. In examining grower and independent crop input retailer interviews conducted for this study, it is apparent that a user-pay system would be feasible. In interviews conducted with life sciences companies, with crop insurance people and other agencies, it is apparent that other stakeholders would be interested in supporting or using the products that would be developed from such an enterprise.

Overview

All agricultural economies around the world must deal with weather risk. In the case of Saskatchewan, weather risks come in the form of drought, heat, wind and frost. Weather-related losses to Saskatchewan's economy and to specific growers come in the form of reduced yield, lost crop quality, and in livestock feed deficits. Losses due to weather also manifest themselves in the form of climate-driven pest or disease events that damage crops and lead to subsequent income losses.

Given the importance of the agricultural sector to the economy of Saskatchewan, it has always been important to monitor and manage weather risks. Policy makers, farm support personnel and farmers need three broad tool sets to deal with weather impacts on the economy or on specific farms. These include (1) public policy instruments and programming, (2) financial risk management tools and (3) agronomic management tools. All of these are important at one level or another, either in terms of agricultural policy or in terms of individual field or pasture management. Each depends on having an adequate system in place for measuring the vagaries of weather as they pertain to agricultural production.

Farmers in other areas of North America (Oklahoma, North Dakota, Manitoba, Nebraska, Colorado, Kansas, South Dakota, Texas, Arizona) are using information models that help them manage weather risks associated with growing their crops and pastures. These information models are delivered to farmers on a regular basis through maps or charts that show them how 'invisible' threats (drought, disease) are impacting their crops in near real time. These knowledge products are powered by climate data that is collected in highly localized stations that collect data on multiple weather variables that are impacting the immediate area surrounding the farm. By using them, the growers can make better, timelier decisions on weather related decisions on input expenditures, livestock feeding plans, crop marketing and yield potentials. This capability also has the potential to assist those who help farmers (extension personnel, suppliers of crop inputs, crop insurance agencies) to more effectively respond to drought, manage existing farm water supplies, create new risk management tools, detect and react to large scale production threats, and deliver accurate and crisply executed agricultural policy.

Weather monitoring in Saskatchewan requires a review. The current technology relies heavily on a synoptic network of 32 Environment Canada stations along with a volunteer network. The number of these synoptic stations has trended towards lower numbers over the past few years. The most advanced capabilities within this science are not available to Saskatchewan growers. The purpose of this investigation is to assess and evaluate the benefits and costs associated with bringing such capabilities to Saskatchewan.

Of the jurisdictions currently using this technology, (powered by mesonet technology1), the closest in proximity to Saskatchewan is Manitoba. As well, Manitoba has had the most success of any jurisdiction mentioned above in engaging multiple stakeholders in an economically sustainable, credible and carefully built climate data collection system. As such, this study will explore the Manitoba case in Phase I. Then the lessons, challenges and successes from the Manitoba experience will be overlaid onto Saskatchewan's circumstance and will be discussed in Phase II of the report.