Summary

A recent working paper on agricultural decision-making by farmers in developing countries concludes that receiving a forecast and having trust in it changes farmer decisions and saves farmers money, whether the forecast is good news or bad news.

Context

In the face of escalating climate challenges, farmers worldwide find themselves at the frontline of adaptation and resilience-building efforts. One pivotal tool in the face of volatility is the use of accurate and reliable weather forecasts. A working paper by Fiona Burlig et al at the University of Chicago’s Energy Policy Institute (EPIC) delves into the impact of long-range forecasts on agricultural decision-making in developing countries. The study reveals insights into how both "good news" and "bad news" forecasts -- when coupled with trust in these predictions -- can significantly affect farmers' actions and financial outcomes.

The research questions

Burlig et al’s working paper is more than 100 pages long. At the heart of the research, the authors are trying to understand the answers to two important questions regarding farmers: Given forecast information, does it a) affect your decision-making and b) affect your bottom line?

The answers to these two questions are driven by 1) how much trust is placed in the forecast and 2) the accuracy of the forecast.

The power of prediction

Weather predictions in countries where agriculture is predominantly rain-fed, especially regions sensitive to monsoon patterns, hold the key to informed agricultural planning. The paper examines how forecasts, when trusted, enable farmers to make strategic decisions that protect income in a world of increasing weather volatility (read Salient on the "behind the volatility" here and here). Whether the forecast brings "good news" of an earlier monsoon or "bad news" of a delayed onset, the outcome remains consistent: knowledge empowers farmers.

Trust as a cornerstone

At the heart of the matter is trust -- trust in the accuracy and reliability of weather forecasts. The study underscores a truism: the utility of a forecast hinges both on the forecast’s accuracy and reliability and on the forecast user’s trust in the forecast and ability to leverage the forecast. Farmers who trust in the veracity of these predictions are more likely to adjust their practices accordingly, whether that means altering planting schedules, investing in water-saving technologies, or taking preventive measures against potential crop failures.

Aside: This is true in other places and for other use cases too -- trust in the accuracy and reliability of weather forecasts underpins the utility of the forecast, and this requires best data practices. Listen to Salient Climate Scientist Brian Zimmerman speak about this (~25-minute video). 

Economic implications

Beyond the practical implications for crop management, the study shines a light on the economic benefits of forecast-informed decision-making. Access to and trust in accurate forecasts can lead to significant cost savings for farmers, highlighting the role of advanced predictive models in enhancing agricultural profitability and sustainability in an era marked by climate uncertainty.

As Salient partner Brian Miranda of TomorrowNow said in early April 2024: “We spent the past week crisscrossing Kenya and it's very apparent how important a high-quality seasonal forecast will be for the smallholder ecosystem. [This is] one of the top needs continually requested by farmers and the many research and government teams supporting them.”

Innovative Approaches for the Future

We believe that the pathway toward climate-resilient agriculture involves the intersection of advanced predictive models with decision-support, education, and insurance mechanisms. Embracing a suite of approaches iteratively -- One Acre Fund’s experimentation with integrated agricultural support and education is one good example -- is crucial in empowering farmers to make informed decisions, safeguard their livelihoods, and contribute to global food security in an increasingly unpredictable world.

Here we share one of the graphics we use internally to illustrate this, though the concept deserves a white paper of its own: 

More Research is Required

The study’s findings are promising; however there are gaps in the current approach to integrating forecast data with agricultural practices. 

One opportunity that was not explored by this study is the concept of integrating forecast-based parametric (index) insurance with agricultural decision support systems that utilize the same forecasts. This type of system has the potential to encourage greater trust -- and therefore use -- of forecast information, distribute risk more efficiently across all ecosystem partners, and maximize welfare across farmers as a group. The upshot: fostering resilience over the long term.  

Another opportunity is for studies like this one to use larger sample sizes and longer longitudinal studies to achieve statistically significant results. This work has made relatively broad conclusions with a fairly limited sample size and a short study period -- just one year. 

While we agree with the study in principle, more robustness is required to fully capture the benefits of forecast-informed agricultural practices. Salient is in partnership with the Bill & Melinda Gates Foundation and TomorrowNow to do this for smallholder farmers in East Africa -- we are at the beginning of the project but stay tuned for results. 

Conclusion

As we navigate the challenges posed by climate change, the role of accurate, reliable, and trusted weather forecasts cannot be overstated. This is true in both the developed world (Salient’s work with ABInBev using S2S forecasts for the barley supply chain is one example 🍻) and the developing world. 

The economic benefits of forecast-informed decision-making are meaningful. 

The Bottom Line

Whether the forecast brings "good news" or "bad news", the outcome remains consistent: knowledge empowers farmers and decision-makers.