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Considering climate risk in decision making

Climate variability is a major source of risk to the profitability of southern Australian grain growers. A GRDC project aims to improve how seasonal outlook forecasts are used to increase grower profitability. 

Part of the project includes working with advisors from South Australia, Victoria and Tasmania to see if and how seasonal climate forecasts can be better used in the management of grain farms. This project component is led by Dr Peter Hayman (SARDI), working with Barry Mudge and Mark Stanley. 

Defining decisions

Decisions can range from simple to complex. The complexity usually increases as the time scale  and uncertainty increases.

  • Short term operational decisions such as whether to apply urea ahead of a rain front can be relatively simple decisions that can be guided by radar and short-term weather forecasts.
  • Medium term decisions such as how much nitrogen (N) to apply during the growing season are generally more complicated decisions. The outcome is heavily dependent on subsequent rainfall, which explains the interest in seasonal forecasts. But the decision is made easier by existing knowledge such as the soil’s water and N status.
  • Longer term decisions such as changing the type of crop grown are classed as complex decisions. These influence longer-term programs such as crop rotations and can have significant economic consequences.

Weighing things up

One of the challenges of using seasonal climate forecasts is the use of probabilities rather than stating it will be wet or dry. As part of the project, a simple Excel-based program has been developed. This program analyses the risk and return of a decision such as topdressing N using the long term climate record. It then looks at how these change according to the seasonal forecast. While not meant as a decision support tool, the program creates discussion about how much probability change is needed to justify altering a decision. 

Another decision comparison may be whether to plant lentils for grain or vetch for pasture. The program compares the downside (risk) with the potential gains (profit) for the two crops over varying seasons. 

Take home messages

  • Growers often make decisions whose outcomes are sensitive to subsequent climatic conditions.
  • Slowing down and thinking through the potential outcomes can support the decision-making process.
  • Analysing the expected range of outcomes (rather than focussing on a specific point) increases decision robustness.
  • ‘Seasonal outlook’ forecasts can be useful in the decision-making process, but their application needs to be carefully considered
  • ‘Slow thinking’ can have both economic and psychological benefits.

More

More information, including worked examples of climate sensitive decisions, can be found at Climate Sensitive Decision Making

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