Era of Extremes Climate Change

Lauren McKinley:

Hello everyone. Welcome to our session today, Era of Extremes: Climate’s New normal Hit Supply Chains. Before we get started, I have a couple of quick housekeeping notes. All of our attendee lines are muted, but please send questions at any time in the question toolbox in the upper right corner of the GoTo Webinar window. You can close any windows to prevent buffering. And we are recording the webinar and we will email it out to everyone within 24 hours after the webinar concludes. And with that, let’s get started.

My name is Lauren McKinley and I’m joined today by my colleagues at Everstream Analytics. Jon Davis is Everstream’s chief meteorologist. Jon supports clients around the globe providing weather and climate information past, present, and future. Mark Russo is Everstream’s chief science officer who supports clients by advising them with weather forecasts and past weather analysis and maintaining the integrity of our weather data and climate data in the Everstream platform.

For our agenda today, Jon will give a preview of the current state of the world, the record extreme events and the air and ocean statistics behind them. Mark will then discuss planning for black swan events and the tools to track extremes and to help mitigate your supply chain risk in advance of these events. We will then take any questions as time allows, so please add the questions in the Q&A box. Now I will turn it over to Jon Davis.

Jon Davis:

Great, thank you so much Lauren, and good day everyone. So before we get into the presentation, just a quick history on one of the items in the title. Era of Extremes, that is actually a term that we coined about 20 years ago when the core of the meteorology team at Everstream was the core of the meteorology team at another firm. So early on the century we were looking at risk management in arenas such as energy, in agriculture. And looking at global weather on a day-to-day basis we had observed tendencies and we had coined that period that we must be in the era of extremes because so many extreme events had been occurring in those prior years. And that became a term that we then used from that point on and certainly has become part of some of the research that we continue to do.

Since that timeframe 20 years ago when we coined the term era of extremes, it’s really become more and more appropriate with each and every passing year, having more and more extreme events out there. In other words, it’s almost like the era of extremes has taken on a whole new level from how it began 20 years ago. When we talk about era of extremes, we’re talking about extreme weather events and over the past decades, in this case four decades, the number of extreme weather events has increased markedly. In fact, there’s been an 83% increase from the final two decades last century to the first two decades this century overall.

And those extreme events, the disruptors in the supply chain, they have been increasing in virtually every category out there. Wildfires, heat risk, drought, water risk, storm systems, tropical and also mid-winter storm systems here as well. But in every category out there, the extreme weather events have been increasing and these are the events, the tails of the distribution if you will, that really cause the big issues within the supply chain and certainly cause headaches and issues for individuals on this call within the supply chain industry here overall.

And at this stage of the game, we’re going to begin to talk about the climate system, how we got here. And for the first time in modern history, all parts of the climate system are breaking records. So this is looking at the last four decades or so, but the number of extreme events and the implications because of them are continuing to increase. If we just look at some of the extreme events over the past month or so. And again, these events have continued over the last year or so. These are some of the extreme events just in the last month’s timeframe. Hurricane Hilary in southern California, the Canadian wildfires, record setting for this year, the Hawaii wildfires, a tragic situation a couple of weeks ago in Hawaii, China flooding, Slovenia flooding the Europe heat wave in the US heat and drought situation overall. So if anything, the amount of weather extremes are actually increasing over time and we’re beginning to see an acceleration of these weather extremes overall.

On a global basis so far this year we’ve had 32 weather events that are coined as billion dollar loss events. So in other words, the ramifications of those events were a billion dollars. Just on this tier, four of these are billion dollar events and we’re just a little bit more than halfway through the season here upcoming.

So now we want to talk about why, why is this happening overall. In other words, the drivers of the pattern. And we’re going to look at statistics and again, the drivers of these era of extreme events, they are the oceans and the atmosphere. That is what’s driving the situation and that is what’s causing these issues. We’re first of all going to look at water temperatures and we’re going to look at the ocean, which is really kind of the crux as to why we’ve been increasing these overall events here over time. The map that we’re looking at is sea surface temperature anomalies just a week ago, and this is a 10 year average. Areas in red are areas that have above normal ocean temperatures. Areas in blue have below normal ocean temperatures. As can be seen. The oceans are phenomenally warm and most areas have extremely warm ocean temperatures overall. And the map that we’re looking at here features the warmest ocean temperatures in the past three or four decades. And when we combine that and looking at paleo meteorology, looking back at thousands of years, this is likely the warmest oceans that we’ve seen in thousands of years out there.

And what’s happened here the last five months is unprecedented. So if we average out the global oceans and we graph that out over this year compared to all other years, here is the graph of the overall global oceans. The levels that we’ve attained are at the highest levels… And that started back in the springtime in March and they’ve actually increased here in magnitude, but the global oceans are at the highest levels that we’ve seen over this particular timeframe, which is 1982 to current, and much higher than the last couple of years and far, far higher than anything that we’ve seen in the past decades overall. Warm ocean temperatures drive the overall pattern and is really the fuel that leads to extreme weather events on a global basis overall.

The other portion of this equation is air temperatures, the global air temperatures here overall. How does that impact the extreme events? So the situation that we’re in here right now, and again, things are really driven by the oceans, but of course one of the ramifications of that is heat and the high global air temperatures that we’ve seen. This year will almost assuredly be the warmest year in recorded history on the globe. Over the past two or three months, the air temperatures around the globe have been at their highest levels. June was the warmest on the globe in recorded history. July was the warmest on the globe in recorded history. And as can be seen, we’ve certainly gone to another level from a standpoint of the era of extremes in global air temperatures overall.

And of course that has led to record heat, record heat waves across areas of the globe, there’s a myriad of countries that have established their hottest temperature of all time and certainly hundreds of locations that have had their hottest temperature ever recorded here overall.

So that combination of water and air is the reason why we’ve seen this market increase in extreme weather events. And that situation is accelerating and becoming greater as we go through this year with the levels here that we’ve seen, which are unprecedented in data timeframes the last couple of hundred years and also the last couple of thousand years from a paleo meteorology standpoint here overall.

So I’m going to hand it over to Mark Russo, and Mark is going to take a look at some of the black swan events that are being caused and mitigating that due to these extreme conditions in the EOE that we’re in.

Mark Russo:

Thank you Jon, and good day everybody. The era of extremes is not business as usual. With the increasing extremes that we are seeing around the world, that is certainly elevating the risk of rare and severely impactful black swan weather events in global supply chains. And our goal and passion here at Everstream is to provide the best visibility and earliest insights to our customers when the risk is increasing for these potential black swan events. These insights help mitigate the risks in the supply chains and you can help adapt operations and ultimately the safe costs and productivity. So with that, let’s take a look at some examples of planning for these potential upcoming events, these rare events for logistics, operations and procurement.

So first I want to talk about logistics. And with logistics one item or issue and risk that we’ve seen more of here in recent years is lower river levels and canal levels driven by drought. And here at Everstream we are monitoring and forecasting these key global waterways as these have become key choke points in the overall global supply chain. We have several examples here on how we monitor and predict these river levels as well as canal levels. As an example, we’re looking here at the bottom left, this is a chart of Mississippi River levels at New Orleans and comparing data this year compared to the past 10 years.

What we’re seeing right now on the Mississippi River, a critical waterway for transportation of commodities, especially crops, but also minerals and other types of commodities including some energy commodities as well. But back a year ago there were issues on the Mississippi River due to drought and we are seeing that again this season. In fact, as we begin to get into the harvest season for the US summer crops such as corn and soybeans, we feel that this issue here is going to take on more importance as we’re not seeing any indication of significant rainfall coming up that would improve levels and reduce this risk of transportation issues and associated ramifications of those issues.

Also, and this has been something that has been ongoing for quite some time, but in the Panama Canal we’re seeing now low canal levels. And the reason for this is due to long-term drought. The drought has not been just recent in the past few months, but it extends back to the previous wet season. This bottom right chart shows march through August percent of normal rainfall across Panama. And we have seen here that comparing this year to all other years since 2000 that this is the driest across Panama during this march through August timeframe. So that is the reason why levels and the issues that we’re beginning to see right now and some of the restrictions are taking place and we expect this to actually worsen over time because of no significant relief here in the short term. And as we start to approach the dry season again later on in the season, then again not seeing the setup that would begin to improve the situation here overall.

So with these issues on river and canals here coming up, again, mitigating the risk in advance and looking at alternative methods here for transportation, whether that’s transferring to road or rail again depending on the type of product or different waterways here to help again mitigate the risk of these issues. And then along the same lines in terms of shipping, whether it’s maritime or whether it’s on land, as we’ve seen here a lot lately in our era of extremes, not only in North America but in East Asia and other parts of the world, tropical impacts are huge. And we’re seeing more powerful storms, more disruptful storms that not only cause several days of disruptions, but seeing long-term impacts as a result of the destruction that these tropical storms and hurricanes and typhoons are causing, especially in major population areas, but more importantly, the lanes that are connecting these key supply chain nodes around the world.

Next on the list is operations. And in terms of black swans of operations, first off heat risk mitigation for workers and facilities. We see increasingly number of heat waves around the world, right here in the middle of one in the middle of the US right now. Also, Southern Europe is in the midst of a record setting heat wave. These heat waves which are becoming increasing, not only spatial extent across the globe but also the duration of them. This is extremely important for worker heat stress as well as potential issues with facilities. And so with mitigation for these upcoming severe heat waves going on across the world, again, this does not take place overnight. These upcoming heat waves can be seen days, even weeks in advance. We have applications that are tracking the risk of the excessive heat around the world. And along with that too, providing even longer term seasonal outlooks here, what is the risk of seeing higher frequency of major heat waves and upcoming more severe heat events that again could disrupt supply chain networks.

Also of note, and again another item that does not change overnight, but monitoring and ultimately forecasting is key, that is water availability. And obviously water is a finite commodity, due to our era of extremes we’re seeing risks on both sides of the water coin here, whether it’s the lack of water, drought. Also on the other side, excessive wetness and flooding. Both of those extremes, the tails of the distribution, are the most impactful here to supply chain networks. We have water risk tracker product here, monitors and tracks the real time availability of water and deciphers the driest areas and the wettest areas around the world and how that changes and how things have changed here in recent months. What is the trend in wetness and dryness as we’ve gone through time.

Another example is thinking longer term planning for these potential black swans for those operations where you need information and some decision making for longer term planning, whether that’s out 10 years, 20 years, whether that’s with your own facilities at your corporation or monitoring and being out ahead of your suppliers and the risks associated with their facilities and overall sourcing areas. So, we are in the process of developing our climate product here that looks at the impact of heat risks, drought and flood risk, wildfire risks and tropical threats here at a location or a facility looking out several decades out into the future.

Finally, in terms of procurement, as we’ve gone through our era of extremes and as the world here has become certainly more connected in terms of global trade and we’re seeing more disruptions in these networks around the world, certainly the monitoring and prediction within these key sourcing areas such as crops and livestock or whether it’s energy or mines and minerals becoming increasingly important. With more diversification of portfolios if you would, in terms of networks and having backups, certainly being on top of not only where your main sourcing areas are for your materials or ingredients, but also what’s happening in other areas to decipher where’s the best area that has the less risk of having these extreme issues here, whether that’s for a season or even longer term looking ahead over the next several seasons. That’s also in terms of extreme tropical activity such as one example with Hurricane Hilary moving into the southwestern US and southern California, the first tropical storm to hit California directly in over 80 years and being a key area here with heavy rainfall, certainly more significant impacts there. And again, we’ve already seen more tropical impacts and certainly from a rainfall standpoint, knowing days in advance what is the risk of flooding and magnitude of rainfall, extremely important here in your operations here and planning coming up.

So with that, let me hand things over to Lauren who will present a few case studies.

Lauren McKinley:

Great, thank you Mark and thank you Jon for the content today. So we just wanted to quickly run through a few case studies or examples of ways that clients have worked with our team to help get around mitigate some of these risks when it comes to weather and climate and how they integrate that data with their operations. So across a few industries we pulled out a few examples. We work with a major life sciences company and the goal of the company when they approached us was to help identify some of the climate related risks to their business operations and work towards carbon-neutral goals. So as Mark mentioned, we are building out a climate solution in our platform, we have climate and weather data from a short-term to long-term perspective that we can offer clients. So in the platform we were able to collect and share site specific drought, water stress, increased temperature and heat stress risk scores by location to help the company track trends and get a good understanding of where they were facing potential risks related to some of these climate impacts specific to the locations where they do business. So with that information they were able to build that into their long-term resilience planning and business continuity efforts and really call out those climate related risks as they begin their journey towards more climate sustainable operations and work towards their carbon neutrality.

From a commodities perspective, so Mark and Jon work with a number of our clients and support with information related to commodities and commodity risk. So a major beef processing company that we work with wanted to assess the risk of extreme weather events on their feed yards and the impact on their cattle. With Everstream we were again able to apply weather risk scores to each yard with location-based data to get specific to each field yard based on latitude and longitude. And we were able to point weather data to each of those yards on an hourly basis over 15 days. So with that information they were able to quantify risk at each individual feed yard based on those specific locations using our weather data and understand and calculate the total overall risk based on those predictive analytics.

And finally, a major food and beverage company was looking to monitor global wheat growing areas for weather risks. So we know there’ve been a number of challenges with wheat and other grains and commodities and risks over the last few years from a geopolitical perspective. Also, from a weather and climate perspective. With the information through Everstream, we are able to provide a digitized global wheat production insights across their network and apply our risk scores based on the stages of crop development by geography. So even specifically to where the stages of crops were growing and really build the connection between that and the risks. So with that information the manufacturer was able to highlight risks in certain source areas and make purchasing decisions prior to price bites in the market with the data that we were able to provide them in advance.

All right. So thank you everyone. We hope those examples were helpful and the data that we shared today was valuable as you continue to build out your supply chain operations to handle this era of extremes and mitigate risks that are coming your way.

So with that, I’ll open up to questions. We see a few that have come in so far. Again, if you have any that you have in your mind, please drop them in the questions panel. And let me pull up one right now. Okay. To Mark and Jon, what could be potential black swan events or things to watch out for this upcoming weather that we should start preparing for?

Mark Russo:

I could take that one. Looking ahead here for later in this year and for the upcoming winter one thing that we’re watching, well, number one, we got the rest of the tropical season. We’re just getting into the heart of the tropical season and as we all know, the Atlantic has turned very active, but watching for very powerful hurricanes or typhoons that could again be very disruptive as they have a large amount and in some areas just a record amount of octane here via the very warm waters to be extremely powerful and ultimately disruptive.

Another item down the road into winter is the threat for stronger winter storms that could produce either blizzard conditions or ice conditions. And again, tied to the exceptionally warm sea surface temperatures. Once you get into the colder season and cold air starts flowing southward into areas such as like North America or Europe, then you can have that clash of cold air coming in with the exceptionally warm sea surface temperatures and that is a setup for stronger storms. So that’s something that we’ll be watching as we head into winter. A lot of what happens as far as what’s going to drive cold air flowing into Europe or Asia or North America is going to be the polar vortex and how stable or unstable it is and it’s going to be important item to monitor and we’ll be providing more details on that here in the months ahead.

Lauren McKinley:

Great, thank you. We had a question come in. You had mentioned the trend and clearly warmer oceans now more than ever. How do warmer oceans impact shipping? What have you noticed working with clients and how they’ve adapted based on those warmer ocean temperatures?

Jon Davis:

Yeah, that’s a great question. So the fact that the global oceans are at these unprecedented warm levels, that certainly has an effect on overall transportation. As the oceans warm up, then you tend to see changes in jet stream patterns, which means that you’ll tend to see changes in wave heights, for example. So you’ll tend to have differences in overall routes, that affects certainly emissions, it affects fuel consumption here overall. And changes in overall water temperature certainly have an effect on the routes themselves. And the dramatic rise that we’ve seen, especially over the last year in this, certainly has changed items and certainly has changed route structure in the shipping industry.

On vessels themselves there’s also implications. So the water temperatures are so warm around the ocean that you tend to have what we call haul fouling. So in other words, you have accumulation of marine growth as you do on small ships, big ships, and with the warmer oceans that overall accelerates. Why is that important? Well, it reduces vessel speed when you have that much more activity on the overall hull heres overall. It takes workers to begin to clean that off, so more money, more economics here from that standpoint. And of course it affects fuel efficiency overall in those situations. So the fact that the oceans have warmed so dramatically definitely affects overall shipping interest, both from a route standpoint and a vessel standpoint overall. And we’re even looking into other items here going forward as to how things have been and will be affected in the future.

Lauren McKinley:

Great. Thank you so much Jon. And thank you Mark again for the great content shared today. We are at time, so I wanted to quickly mention that you can subscribe to receive weekly updates from Mark and Jon and our applied meteorology and climate team by scanning here to subscribe and you can get all of the latest insights right to your inbox. Again, we will send the recording out after this session. Thank you so much. If you have any additional questions about any of the content covered today or if you are interested in learning more about the Everstream platform to deliver these insights directly to you and apply to your supply chain, please reach out to us at [email protected]. With that, we will conclude the session today. Thank you so much.