The value of precipitation forecast information in winter wheat production

Many aspects of agricultural production can be adversely affected by weathe r. Weather forecast services tailored for the specific needs of the farming community are available throughout North America. Estimating the value of these services to farmers is increasingly important as weather service budg ets are under increasing scrutiny. A framework to characterize the value of precipitation forecast information to winter wheat producers in the provin ce of Ontario, Canada, is developed. A mean-variance model is used as the b asis for this framework. This theoretical framework is applied to precipita tion forecast data from the Windsor and the London weather offices for the crop years of 1994 and 1995. Four forecast methods are compared. A naive fo recast based on precipitation over the last four days is used as the baseli ne forecast. The second forecast considered is the daily Environment Canada farm forecast. A third forecast was constructed by arbitrarily improving t he accuracy of the Environment Canada forecast by 50%. The fourth forecast considered assumed perfect foresight on the part of producers, in the sense of knowing the actual pattern of precipitation over the next 4 days. Preci pitation damage relationships during harvest are developed based on availab le agronomic data. The value of weather forecast information was found to v ary considerably between 1994 and 1995. The level of risk aversion of the p roducer was also found to be an important determinant of the value of weath er forecast information, although some of our results indicate that the val ue of weather forecast information may be inversely related to the degree o f risk aversion. Estimates of the value of precipitation forecast informati on averaged $100.00 (CDN)/ha per year. (C) 1999 Elsevier Science B.V. All r ights reserved.