Introduction Directory UMM :Data Elmu:jurnal:A:Agricultural & Forest Meterology:Vol100.Issue4.Febr2000:

Agricultural and Forest Meteorology 100 2000 261–272 Comparing the value of Southern Oscillation Index-based climate forecast methods for Canadian and US wheat producers Harvey S.J. Hill Graduate Research Assistant a , Jaehong Park Graduate Research Assistant a , James W. Mjelde Professor a,∗ , Wesley Rosenthal Assistant Professor b , H. Alan Love Associate Professor a , Stephen W. Fuller Professor a a Department of Agricultural Economics, Texas A M University, College Station TX 77843-2124, USA b Blackland Research Center of the Texas Agricultural Experiment Station in Temple, TX, USA Received 9 April 1999; received in revised form 22 October 1999; accepted 31 October 1999 Abstract 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 used three-phase method of El Niño, La Niña, and other is compared to a five-phase system. Because of differences in growing season and yearly SOI classification schemes, two different three-phase methods are used. The five-phase system is based on the level and rate of change of the SOI over a 2 month period. Phases are consistently negative, consistently positive, rapidly falling, rapidly rising, and near zero. As expected, results vary by the method used. Winter wheat producers in Illinois place no value on either of the SOI-based forecasting systems. Producers at seven of the 13 sites prefer 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 the five-phase approach is up to 70 times more valuable than the three-phase approach. Producers growing spring wheat in Saskatchewan and Montana, along with winter wheat producers in Ohio and Kansas value the three-phase approach more than the five-phase. In this case, the value of the three-phase system 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 percentage of perfect forecasts, producers in Oklahoma, Texas, Manitoba, Saskatchewan, and South Dakota value either system more than producers in the remaining regions. Economic value and distributional aspects of the value of climate forecasts have implications for producers, policy makers, and meteorologists. Finally, the results clearly suggest all producers will not prefer one forecast type. Forecasts need to be tailored to specific regions. ©2000 Elsevier Science B.V. All rights reserved. Keywords: El NiñoSouthern Oscillation; Value of information; Wheat ∗ Corresponding author. Tel.: +1-409-845-2116; fax: +1-409-862-1563. E-mail address: j-mjeldetamu.edu J.W. Mjelde.

1. Introduction

El NiñoSouthern Oscillation ENSO events have recently received considerable attention. Various stud- ies have shown ENSO events in the tropical Pacific 0168-192300 – see front matter ©2000 Elsevier Science B.V. All rights reserved. PII: S 0 1 6 8 - 1 9 2 3 9 9 0 0 1 5 4 - 9 262 H.S.J. Hill et al. Agricultural and Forest Meteorology 100 2000 261–272 are teleconnected linked to seasonal climate vari- ations in other parts of the world Bjerknes, 1969; Ropelewski and Halpert, 1986, 1987, 1989; Kiladis and Diaz, 1989. Economic-based studies Marshall et al., 1996; Mjelde et al., 1997; Hill et al., 1998 have shown these events to have value to decision-makers because of their ability to forecast climate conditions. Classifying ENSO events and the terminology asso- ciated with the ENSO phenomenon, however, are not standardized. The objective of this study is to com- pare different ENSO classification methods to deter- mine which provides greater value to Canadian and US wheat Triticum aestivum L. producers. Current methods to classify ENSO events rely on sea surface temperature anomalies, sea surface air pressure differences across the Pacific, or some combination of these and other weather parameters. Methods using the Southern Oscillation Index SOI rely on sea surface air pressure differences. There are at least two SOI-based climate forecasting meth- ods. The most commonly used method classifies SOI events into three phases 3P: low SOI El Niño, other, and high SOI La Niña Climate Prediction Center, 1998. Within the three-phase method, two different classification schemes are used in this study. A second method classifies SOI events into five phases 5P: consistently negative, consistently pos- itive, rapidly falling, rapidly rising, and consistently zero Stone and Auliciems, 1992. Only these two SOI-based forecast methods, along with perfect fore- casts, are considered because sea surface temperature data are not available for a sufficient period to provide meaningful comparisons. This study is the first formal attempt to compare the economic value of different SOI-based forecast methods.

2. Methodology