Mark Twain once quipped, "Everyone talks about the weather, but nobody does anything about it."
Businesses are trying to get ahead of the weather by using long-term forecasts to make strategic decisions that go directly to the bottom line.
"Companies can take advantageous positions in energy futures and commodities or take out additional insurance and reallocate inventory as needed based on seasonal projections," says Michael Schlacter, chief meteorologist at Weather 2000, a long-range forecaster in New York. "The weather can change things in unexpected ways. A prolonged drought, for example, can affect an e-retailer because the price of cardboard boxes used to ship orders is likely to rise."
And then there's Katrina, which seemed to change everything. Hurricane Katrina slammed into the Gulf Coast in August 2005, killing about 1,800 people and causing an estimated $81 billion in damage. Insurance companies need to know what the prospects are for a storm season when writing policies. Last year was expected to be severe, but no major storms struck the United States.
This underscores the difficulty in making long-range forecasts, even with satellite shots and computer analysis of ocean temperatures, snow pack and the track of the jet stream.
"There's definitely a lot we don't yet understand," says Schlacter. "Climate researchers realize there are dozens of 'light switches' and looking at the variables in conjunction is the best way to get a decent handle on how things might pan out."
Schlacter says many people make a basic mistake of assuming that if they're not hammered in November and December, the winter will be mild. He advised his clients that autumn and early winter would be mild this year in the Northeast, but late January through March would likely bring severe weather. That's valuable information when betting on oil futures.
Dave Unnewehr, assistant vice president for policy development and research at the American Insurance Association in Washington, says the industry uses long-term forecasts to better assess risk and to set rates.