What if you were able to predict the weather not just 14 days from now accurately but an entire year out? While year-ahead weather predictions might sound like a ridiculous concept, the technology empowering long-range forecasts has been in existence for more than twenty years. They’ve enabled Fortune 500 businesses across a variety of industries to plan inventory, avoid major losses and ultimately maximize profit margins.
Below, you’ll find a comprehensive analysis of year-ahead weather forecasting, including how the technology works, the industries that have the most to benefit from it and what to expect weather-wise for the rest of this year and into 2025.
How year-ahead forecasting works
If Al Roker struggles to predict the weather two days out, how can one predict the weather one year in advance with absolute certainty that you won’t need to change your forecast? The key components include a historical perspective. For example, weathertrends360 considers 125 years of weather history, 24 oceanic climate cycles (patterns that repeat on an annual basis) and literally trillions of statistics to decide our forecasts.
Logically, it makes sense to start with oceanic cycles since water covers 70% of the Earth. Knowledge of these patterns, combined with advanced math, stats and probabilities, make it possible to provide much more accurate and granular year-ahead forecasts. Physics-based meteorological models are only helpful in predicting a week or two out.
At this point, even AI cannot compete with holistic, historical methods. AI is speedy of course, being able to draw up a 14-day forecast in seconds. However, AI Roker (just a joke) has trouble analyzing long-range data. If you ask Siri, Alexa or ChatGPT what the weather will be like in May 2025, they will respond with, “I only have forecasts for the next 10 days.”
Industries that benefit the most
Year-ahead predictions allow retail companies to more accurately map out the amount of inventory they want to have on hand for an upcoming season, the allocation of the inventory, and the marketing and advertising budgets to match the campaigns. This is especially true for seasonal items such as winter gear, air conditioners, fan appliances, etc. For example, if you had advanced, veritable knowledge that the Northeast will experience the hottest summer in several years, you will appropriately stock up on air conditioners, pool chemicals, cold beverages, auto batteries and other items. Midea had significantly more AC inventory because they planned for heatwaves. They didn’t simply stick their finger out or recollect what the summer season has been like for them the last few years. That is not an accurate predictor of what lies ahead.
Just a one-degree Fahrenheit uptick in heat year-over-year causes a 10% increase in sales for various seasonal items. A one-degree Fahrenheit drop (colder) results in a 10% decline. Retailers will not want to botch inventory planning repeatedly. The costs add up.
Insurance is another industry that benefits mightily from year-ahead forecasting. These models can foresee severe hurricane seasons, record-breaking tornados and horrific wildfire events. This was the case during the 1993 floods that devastated the Midwest, the 2017 Atlantic hurricane season and the fresh in memory 2023 Canadian wildfires. Property and casualty carriers with these year-out mechanisms were warned to get reinsurance coverage for their high-risk exposure areas in Texas, Florida, the Midwest and California. The one simple low-risk, high-reward call came from knowing the specifics about extreme weather and an assessment of past claims payout due to weather events.
Lastly, these predictions help Wall Street, who want to understand how all kinds of public companies are going to perform in the short- and long-term future. If a rainy spring will harm Home Depot, Lowe’s and other retailers, Wall Street will want to know that before these companies report weak earnings and the stock craters. Investors can then turn their attention and money to companies that thrive in bad weather, such as ecommerce brands, Amazon chief among them.
Upcoming weather patterns
So, what kind of weather will we see for the remainder of 2024 and into ’25?!
The world has experienced a very volatile climate cycle in the last few years. We went from a moderate El Niño (warming of the Equatorial Pacific, causing wet conditions) in 2018 to an unusual three-year-long La Niña (cooling of the Equatorial Condition, causing droughts). These extreme droughts spurred record-high agriculture prices. 82% of the U.S. and much of the land mass in Brazil saw prices soar for things like sugar, wheat, and coffee, all coinciding with exacerbated inflation. This weather rarity, combined with other oceanic cycles, has only happened twice in the past 175 years.
With the return of La Niña, the last quarter of 2024 and 2025 will see a dramatic shift from flooding to droughts, wildfires, winter auto accidents and another intense hurricane season. Unfortunately, 2025 will be a completely out-of-sync weather year, with debilitating conditions for retail and seasonal sales, possibly a recessionary signal.
There are many unpredictable elements in the business world, but weather does not have to be one of them. Proactive weather planning is implemented by some of the world’s most successful and admired companies and is, in fact, part of the recipe for why they are tremendously successful. Through year-ahead forecasting, businesses have a clearly defined insight into upcoming weather trends, allowing them to prepare for them. With even a change in one-degree Fahrenheit significantly affecting consumer behavior, companies must anticipate changes in weather and capitalize on them or be surprised, resulting in panic and disappointed customers.
Opinions expressed by SmartBrief contributors are their own.
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