In the first half of 2016, the US had eight $1 billion+ weather events, all involving heavy rain. At the same time, 42 percent of the US is under drought conditions with 9 percent in severe, extreme or exceptional drought. Severe weather events are an enormous and expensive problem. In the past three years alone, the combination of extreme drought and Arctic conditions in the US cost several billion dollars in insured losses, government aid and lost productivity.
It’s a Global Problem
July 2016 was the warmest month of any month on Earth since instrument records began in 1880, and 2016 is on track to be the warmest year on record, surpassing the record set in 2015. Mitribah, Kuwait, recorded a high temperature of 129.2° F in July, the hottest temperature ever recorded in the Eastern Hemisphere. Siberia’s July 2016 record heatwave had temperatures above 82° F for 18 consecutive days, thawing ice that had been frozen for over half a century and unleashing 100 year old Anthrax spores on the population.
Extreme Weather’s Impact on Commodities
Extreme weather drives volatility in commodities. Droughts reduce crop yields and floods and violent storms can destroy entire crops causing supply shortages and driving up prices. Violent storms like hurricanes, blizzards, and tornados disrupt transportation and production, shuttering refineries and other production facilities while closing roads, rivers, railroads and airports - wreaking havoc on supply chains. Droughts can also disrupt supply chains by shrinking rivers and making passage difficult or impossible for barges transporting goods. A storm that lasts just a couple of days can impact commodity prices for years to follow.
How Smart Commodity Management Helps
It’s impossible to stop extreme weather, but smart commodity management can help mitigate the impact. Solutions like Eka’s InSight CM and Commodity Analytics Cloud provide real-time, end-to-end visibility over positions, inventory levels, and P&L across commodities and products at all locations. Companies can evaluate the impact of severe weather on their positions and use predictive analytics to control risk and exposure. They can test different scenarios to determine the best course of action as market conditions evolve.
Volatile markets require vigilance, lots of data and smart analytics to ensure the best decisions are made as prices, quality and quantity of goods change. Eka’s solutions deliver the analytical and operational solutions commodities companies need to thrive in today’s increasingly volatile markets.
