On the surface, Monsanto’s recent purchase of Climate Corp., makes sense. To fully capitalize on global agricultural production, you need to be able to anticipate the weather – especially when it comes to the unpredictability of advancing climate change.
After all, climate is the one variable that can’t be controlled in agricultural production. A farmer can improve soil conditions, for example, in the clay-entrenched fields of North Idaho and Eastern Washington. He can control irrigation with sophisticated technology in drought-prone areas like the Galilee in Israel or the orange groves of Southern California. In some cases, she can protect crops from the sun or rain with greenhouses or temporary shelter methods.
But farmers can’t – yet – control the weather. Being able to predict climate conditions, however, is right up there with controlling the agricultural output of a plant seed: read the weather ahead of time, and Monsanto can not only anticipate its customers’ food outputs, but predict and control its own profits.
Or a bad day.
What Climate Corp. gives Monsanto, in a nutshell, is a means to benefit from those bad climate days – that irascible weather system that we read about every season and that has been devastating crops from drought and flooding, from high winds and freak snowstorms. As extreme weather conditions become more frequent and anticipated, farmers need to be able to ensure that their profits will have some sort of coverage that extends beyond the delayed payments that the Federal Crop Insurance system doles out months after the loss has occurred. If Monsanto controls both the cost of seeds and the cost of insurance, they stand to have a significant impact on the cost of food.
In this case, however, Climate Corp.’s insurance system uses data that includes past weather conditions, the kind of crop you grow, real-time soil conditions, past history of problems and other variables. It then gives the farmer a price for what it will cost to purchase what is, effectively, climate change insurance.
It’s reasonable to assume that just like auto, house, and flood insurance, climate change insurance won’t go down in price as the risk goes up. Its price will likely rise as more Iowa fields are damaged by drought or hail storms. And like car, medical or house insurance, it has the potential to become an assumed cost that every farmer would eventually need in order to grow his crops.
The Climate Corp. purchase also occurs at a time when Monsanto’s reputation is under increasing pressure in India, where thousands of farmers are alleged to have committed suicide due to crushing debt from signing onto Monsanto’s agriculture program. The release of the documentary Bitter Seeds, in October, and the growing number of articles that are asking questions about Monsanto’s technology has likely placed some pressure on the company’s quarterly profits.
So the Climate Corp. purchase makes perfect sense for a company that continues to be embattled by rumors about GMO technology. Call it Monsanto’s own insurance policy to ensure that falling stocks won’t eat into the company’s own projections for growth.
As Dr. Jo Bates from the University of Sheffield writes, Monsanto’s Total Weather Insurance program is more a system of “placing bets on future weather conditions – rather than a business insuring itself against a specific loss. Clearly, during a time of instability in global weather, there is a lot of potential profit to be generated from such financial products. The emergence of this developing data-driven weather derivatives and risk market is, therefore, troubling.”
Monsanto may be hedging its bets while it weathers the controversy over 21st century biotechnology – which is only reasonable. Still, as Bates notes, the biotech company, which also owns an insurance company, stands to benefit no matter what the prevailing weather conditions. In doing so, it will also have the leverage to raise rates that directly affect world food prices whenever it feels the commodity warrants it, and no matter the storm that may be brewing on the horizon.
Jan Lee is a former news editor and award-winning editorial writer whose non-fiction and fiction have been published in the U.S., Canada, Mexico, the U.K. and Australia. Her articles and posts can be found on TriplePundit, JustMeans, and her blog, The Multicultural Jew, as well as other publications. She currently splits her residence between the city of Vancouver, British Columbia and the rural farmlands of Idaho.