Weather affects every aspect of the economy

c. 2004 Chris S. Orr CCM

Weather affects every aspect of our lives. It impacts our pocketbooks, our menus, our schedules and even our health.

We are aware of how cold weather drives up the price of natural gas and propane (just look at your heating bills from this year!) and how our insurance costs are adjusted for the amount of storm damage we sustain. Changes in the weather, either real or predicted, will affect the price of everything we buy, from peas to plywood. Sometimes the effect will be in our favor, sometimes it won't. How much did you pay for vegetables last winter? Why are limes -- small and hard as they are -- so expensive right now? Is the quality of lettuce comparable to its price?

Contract prices on the Chicago Board of Trade are very weather sensitive. Weather has such a huge impact on the commodities market that traders and analysts pay hundreds and even thousands of dollars a month for commentaries on long-range weather forecasts. These commentaries make the rounds among traders and analysts two or three times a week. Based on these commentaries, the price of grain, cattle, beans, and all sorts of agriculture products is driven up or down.

Traders look for the elusive normal weather. If the summer rainfall forecast for the C Corn Belt of Nebraska, Iowa, and Illinois is for above normal rainfall, futures may rise in anticipation of the crop getting too much moisture, stunting its growth. The same principle applies if the forecast is for too little rainfall. If the forecast calls for near normal rainfall, invariably the price of corn will fall in anticipation of a very good crop and too many bushels of corn on the market in the fall and winter. In other words, if the trading price is high, you'll pay more at the grocery store; if it is low because of "normal" weather, you pay less.

Are you planning to do a little construction later this summer? Buy plywood before the first tropical storm forms over the Atlantic Ocean. The price of plywood soars as tropical storms and hurricanes approach the coast of the United States. People in the path of these storms buy up plywood to "batten down the hatches," creating local shortages. Those shortages are filled by drawing on supplies from the rest of the country, limiting stocks and driving up prices.

Accurate weather forecasts help some businesses compete. The retailer Sears, Roebuck and Co. had its own meteorologists for many years so they could sell items based on the weather. Fans and air conditioners were in stock before a heat wave hit. Umbrellas went on sale when it rained. Subway's corporate headquarters tracks individual store sales against the weather. It uses a history of weather and store sales along with the forecast to predict store volume. Their stores in southern California even give discounts on rainy days.

Let me pose a question to you