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The Smith Report: Could extreme weather cost the wine trade?

Published:  06 October, 2014

The economy of any agriculturally based industry can be dramatically affected by the weather, but what's the long-term forecast and what are the financial implications?

The wine trade is starting to see some of the implications of extreme weather come to life, but is this a blip on the radar or could these more extreme weather patterns be here to stay? And what are the consequences?

Last week, the Bulletin of the American Meteorological Society published a report called Explaining Extreme Events of 2013 from a Climate Perspective. The report examined a few extreme weather events that coincidentally overlapped with some wine-producing regions around the globe, specifically in Australia and California during the 2013-14 year.

Severe weather events of 2013-2014Smith Report: Extreme weather events 2013-2014Source: American Meterological SocietyThis month's Smith Report looks at a few case studies of where extreme weather for 2013-2014 has been located

The report looked at the 2013-14 California drought, which, according to the report, was an extreme weather event and "most of California received less precipitation in 2013 than during any previous calendar year in the 119-year observational record".

Further, the report said: "Observed precipitation over the 12-month period ending on January 31, 2014 was the lowest for any consecutive 12-month period since at least 1895. Thus, the one-year precipitation deficit associated with the 2013-14 event was larger than any previous one-year deficit observed during California's historical droughts, including the notable events of 1976-77 and 1987-92."

The report did not find whether or not global-warming trends are contributing to these events, however it did find that the incidents to these types of events "occur much more frequently in the present climate than in the absence of human emissions".

The report also looked at the extreme weather in Australia. "The 2013 Australian calendar year was the hottest in the observational record of over 100 years in terms of area average mean surface air temperature."

Again the report found, "anthropogenic climate change has caused a very large increase in the likelihood of extreme events such as the record Australia-wide average temperatures in September, spring, and the 2013 calendar year".

Further, the report found "human activity has increased the risk of experiencing the hot Australian summer of 2012-13 as measured by simulated heat wave frequency and intensity, by two and threefold respectively".

Burgundy and Bordeaux have suffered more frequent hailstorms in recent vintages than in the past. The negative implications for the en primeur system have been well documented. But from smaller producers in these regions the financial impacts can be tough.

The frequency with which Gavin Quinney of Château Baduc in Bordeaux has experienced catastrophic hailstorms seems to be higher in recent years than when he first started in 1999. In 2003 he was affected by hail, but in 2009 and 2013 he was "severely" affected by hail. "The idea that lightning doesn't strike twice is total nonsense," said Quinney.

With the improvements of weather forecasting he has also seen a rise in the number of hail warnings issued. "I have had 10 hail warnings this year, which is noticeably more than when I started. The increase in information and hail warnings is enough to drive you crackers. You're mad if you don't look at it, but even madder after you do."

What's the damage?

So what is the cost of the increasing frequency of extreme weather? In Australia the drought of 2013 cost AUD$320 million in an assistance package for affected farmers.

New Zealand also suffered a drought on the North Island in 2013, which, according Mark Blackham, editor of Water & Atmosphere, cost an estimated "NZD$2 billion over the entire period - knocking 0.7 percentage points off the annual GDP."

A study conducted by the University of California, Davis (UC Davis) in July found the "total state-wide economic cost of the 2014 drought is $2.2 billion", with an estimated 428,000 acres of irrigated cropland going out of production in California.

Official figures from the Chilean department of agriculture show a fall of 23% in production in 2014 due to extreme frost, which is helping to alleviate an excess of supply on the global wine market, but could impact wine producers' revenue this year. It also may have a knock-on effect for next year's production.

As Quinney said: "It is a known risk." But one that in the long term we as an industry will need to address.

As farmers, one might expect that the wine industry would be intrinsically linked to being a steward of the land. But, on the off-chance that the social responsibility aspect of respecting the earth is not enough, there does seem to be big financial implications as well.