Comparing the value of Southern Oscillation Index-based climate forecast methods for Canadian and US wheat producers

Southern Oscillation Index (SOI) based forecasting methods are compared to determine which method is more valuable to Canadian and US wheat producers. Using decision theory approach to valuing information, the more commonly u sed three-phase method of El Nino, La Nina, and other is compared to a five -phase system. Because of differences in growing season and yearly SOI clas sification schemes, two different three-phase methods are used. The five-ph ase system is based on the level and rate of change of the SOI over a 2 mon th period. Phases are consistently negative, consistently positive, rapidly falling, rapidly rising, and near zero. As expected, results vary by the m ethod used, Winter wheat producers in Illinois place no value on either of the SOI-based forecasting systems. Producers at seven of the 13 sites prefe r the five-phase method over either of the three-phase method (spring wheat producers in Manitoba, Alberta, North Dakota and South Dakota, along with winter wheat producers in Oklahoma, Texas, and Washington). The value of th e five-phase approach is up to 70 times more valuable than the three-phase approach. Producers growing spring wheal in Saskatchewan and Montana, along with winter wheat producers in Ohio and Kansas value the three-phase appro ach more than the five-phase. In this case, the value of the three-phase sy stem is up to two times more valuable than the five-phase system. Depending on expected price and region, the values of the SOI-based forecasts range from 0 to 22% of the value of perfect forecasts. In both absolute and perce ntage of perfect forecasts, producers in Oklahoma, Texas, Manitoba, Saskatc hewan, and South Dakota value either system more than producers in thr rema ining regions. Economic value and distributional aspects of the value of cl imate forecasts have implications for producers, policy makers, and meteoro logists. Finally, the results clearly suggest all producers will not prefer one forecast type. Forecasts need to be tailored to specific regions. (C) 2000 Elsevier Science B.V. All rights reserved.