Agriculture companies are turning to big data to profit from climate change

Monsanto has made its first acquisition of big data technology with the purchase of Climate Corporation.

The Conversation

This is a guest post by Jo Bates of University of Sheffield, republished from The Conversation

The recent news of Monsanto’s US$930m acquisition of data science company Climate Corporation, raises important questions about the economies developing in response to climate change.

A new generation of companies have emerged that harness new methods of data analysis to turn vast datasets (“big data”) into exploitable, marketable information. As the Financial Times reported, Monsanto’s purchase signals the first significant “big data” acquisition.

Climate Corporation offers an online self-service weather insurance for US farmers. In addition to the company’s standard crop insurance, this Total Weather Insurance pays out solely on the basis of observed weather conditions, rather than crop damage. If the observed weather conditions trigger a pay-out, a cheque is automatically generated and arrives within days of the end of the policy coverage period.

In order to calculate the price of policies and pay-outs, Climate Corporation data scientists analyse three million new data points a day from 22 datasets using advanced analysis techniques. The data comes from a range of third-party providers such as the US National Weather Service, which publishes its data free for re-use.

Old dog, new tricks
Total Weather Insurance is a new form of financial product being sold direct to farmers, but what underlies it is not new. Weather derivatives were developed by the likes of Enron, Koch Industries and Aquila in the mid-1990s. Enron found insurance companies were unwilling to insure against non-extreme weather events, so the company created its own, which worked in a similar way to Total Weather Insurance, paying out if certain conditions are met, regardless of any actual loss. By presenting it as a derivative, and therefore a financial product rather than an insurance product, Enron could skirt the regulatory constraints placed on energy companies’ use of insurance products.

Weather derivative contracts can be traded across any type of weather, the most popular by far are based on the divergence of the average daily temperature from 18 degrees. These products are known as Heating and Cooling Degree Days contracts. The mid-2000s saw massive growth in the weather derivatives market, but it crashed alongside everything else in 2008.

However, the Weather Risk Management Association is hopeful for weather derivatives, pointing to continuing growth outside the US markets throughout the downturn, growing interest in non-temperature-related weather derivatives, and increasing interest from outside the energy industry.

Free the data
Until recently, UK traders had to purchase weather data from the Met Office in order to conduct forecast analyses and price weather derivatives contracts. The financial services sector has long complained that the weather risk and derivatives markets in the UK have been restrained by the lack of freely available weather data, and accordingly have lobbied for a data access and re-use policy similar to the USA. In 2011, the new coalition government obliged, announcing that, as part of its Open Government Data initiative, “the largest volume of high quality weather data and information made available by a national meteorological organisation anywhere in the world” would be opened for anyone to re-use without charge.

The entrance of Monsanto into the weather risk market represents the growing interest in these products outside of the energy sector – in this case agriculture. The combination of increasing amounts of freely available and re-usable weather data, the development of more advanced big data analysis techniques, the growing global demand for a variety of weather products, and the development of simple online self-service portals for buyers all suggest that the exploitation of unstable weather systems is still in its early days.

Big players, big risks
Crucially, these developments expand the range of players with a financial interest in continuing climate instability. Whilst the claim is often made that weather derivatives and similar products balance out the financial impact of weather on affected businesses, thus smoothing adaptation to climate change, serious political-economic questions do arise about who actually benefits from these financial products.

The model of paying out based upon observed weather means, in effect, placing bets on future weather conditions – rather than a business insuring itself against a specific loss. Clearly, during a time of instability in global weather, there is a lot of potential profit to be generated from such financial products. The emergence of this developing data-driven weather derivatives and risk market is, therefore, troubling.

It exploits common threats in order to generate private wealth and favours those in a financial position to protect their interests at the expense of those most vulnerable to climate instabilities. Most dangerously, this practice could reduce the incentive for those profiting from these markets to engage in action to mitigate climate change.

Jo Bates does not work for, consult to, own shares in or receive funding from any company or organisation that would benefit from this article, and has no relevant affiliations.

This article was originally published at The Conversation. Read the original article.

Droughts and floods may be exploited by some. (Photo: Getty)
Lecturer in Information Studies and Society at University of Sheffield.

The Prime Minister still has questions to answer about his plans for Syria

Cameron needs a better plan for Syria than mere party-politicking, says Ian Lucas.

I was unfortunate enough to hear our Prime Minister discussing the vexed issue of military action in Syria on the Today programme yesterday. It was a shocking experience - David Cameron simply cannot resist trying to take party political advantage of an extremely serious crisis. It is quite clear that there are massive humanitarian, military and political issues at stake in Syria. A number of international and national powers including the United States and Russia are taking military action within Syria and David Cameron said in the broadest terms that he thought that the UK should do so too.

The questions then arise - what should we do, and why should we do it?

Let me make it clear that I do believe there are circumstances in which we should take military action - to assist in issues which either affect this country's national interest and defence, or which are so serious as to justify immediate action on humanitarian grounds. It is for the Prime Minister, if he believes that such circumstances are in place, to make the case.

The Prime Minister was severely shaken by the vote of the House of Commons to reject military action against President Assad in 2013. This was a military course which was decided upon in a very short time scale, in discussion with allies including France and the United States.

As we all know, Parliament, led by Ed Miliband’s Labour Opposition and supported by a significant number of Conservative MPs, voted against the Government’s proposals. David Cameron's reaction to that vote was one of immediate petulance. He ruled out military action, actually going beyond the position of most of his opponents. The proposed action against Assad action was stressed at the time by President Obama to be very limited in scope and directed specifically against the use of chemical weapons. It was not intended to lead to the political end of President Assad and no argument was made by the governments either in the United States or in the UK that this was an aim. What was proposed was short, sharp military action to deal specifically with the threat of chemical weapons. Following the vote in the House of Commons, there was an immediate reaction from both United States and France. I was an Opposition spokesman at the time, and at the beginning of the week, when the vote was taken, France was very strident in its support for military action. The House of Commons vote changed the position immediately and the language that was used by President Obama, by John Kerry and others .

The chemical weapons threat was the focus of negotiation and agreement, involving Russian foreign minister Sergei Lavrov and his connections with Syria.  The result was that Assad agreed to dispense with chemical weapons on a consensual basis and no military action took place.

David Cameron felt humiliated by this outcome and loses no opportunity to suggest that the decision was wrong.  He is determined that he should revisit the issue of bombing in Syria, though now action there has elided to action against Islamic State. He has delegated Michael Fallon to prepare the ground for a vote on military action in Parliament. Fallon is the most political of Defence Secretaries - before he became a minister he was regularly presented by the Conservative party as its attack dog against Labour. He gives me the impression of putting the Conservative Party’s interest, at all times, above the national interest. Nothing in his tenure at Defence has changed my view of him.

I was therefore very sceptical what when, in September, Fallon suggested that there should be briefings of members of Parliament to inform us of the latest position on Syria. It turns out that I was right - at the Conservative party conference, Mr Fallon has been referring to these briefings as part of the process that is changing minds in the House of Commons towards taking military action in Syria. He is doubtless taking his orders from the Prime Minister, who is determined to have a vote on taking part in military action in Syria, this time against Islamic State.  

If the Prime Minister wishes to have the support of the House of Commons for military action he needs to answer the following questions: 

What is the nature of the action that he proposes?

What additional impact would action by the UK have, above and beyond that undertaken by the United States and France?

What is the difference in principle between military action in Syria by the UK and military action in Syria by Russia?

What would be the humanitarian impact of such action?

What political steps would follow action and what political strategy does the government have to resolve the Syrian crisis?

The reality is that the United States, UK, France and other western powers have been hamstrung on Syria by their insistence Assad should go. This situation has continued for four years now and there is no end in sight.

The Prime Minister and his Defence Secretary have yet to convince me that additional military action in Syria, this time by the United Kingdom, would help to end Syria's agony and stem the human tragedy that is the refugee crisis engulfing the region and beyond. If the Prime Minister wishes to have support from across the House of Commons, he should start behaving like the Prime Minister of a nation with responsibilities on the United Nations Security Council and stop behaving like a party politician who seeks to extract political advantage from the most serious of international situations.

Ian Lucas is the Labour MP for Wrexham.