Weather Futures
"Everyone complains about the weather, but nobody does anything about it."
19th Century Essayist Charles Dudley Warner
Mother Nature is unpredictable…. In the Northeast & Mid-Atlantic over the past several years we have experienced unusually cool springs, hot & dry summers, shortened fall selling seasons, and limited winter snowfall. Each event has a direct and damaging effect on your green-goods sales and income. When Mother Nature can directly affect your sales, there is a need to cover your risk.
Nursery Direct issues Weather Futures in partnership with WeatherBill, an online trading platform; Weather Futures contracts are fully guaranteed by Nephila Capital, a leading weather risk manager with over $2 Billion under management.
Weather Futures let you worry less about the weather and focus more on selling product because….
If you’re not hedging against the weather, then you’re betting against Mother Nature!
How do Weather Futures work?
Who would use Weather Futures?
How are Weather Futures different from insurance?
How do you research & purchase Weather Futures Contracts?
Who pays you when Weather Futures pay-out?
How do Weather Futures work?
Weather Futures are a derivative commodity known as ‘Event Markets’ created in the late ‘90’s to let a company reduce weather related losses by transferring some weather related risk to an investor. The investor selling a Weather Futures contract accepts the risk by charging a premium. If the conditions of the Weather Futures contract are met (eg. too cool in April, too much rain in May, too hot all Summer, no snow in January), then the contract ‘pays-out’ to you an amount agreed to in the contract. Weather Futures ‘pay-out’ according to published, weather center data in your region or zip code…. there are no claims adjusters or delays; when a contract requires payment to you, payment is forwarded automatically within 5 business days from the end of the contract period.
Who would use Weather Futures?
The following Weather Futures contract scenarios represent possible Weather Futures contract examples applicable to your business . . . customer names have been changed. For Weather Futures contracts specific to your business & region visit WeatherBill online and contact your Nursery Direct representative for contract availability & discounts.
Retail Centers & Nurseries
Homeowners are typically unable or unwilling to plant when water restrictions apply, when temperatures are cool, when rainfall is heavy, or when summer months are hot. Green-goods sales come fast & furious in any month; one bad week of heavy rainfall, cool temperatures, or hot & dry conditions in any month is common… more than one week with heavy rainfall, cool temperatures or hot & dry conditions in any month could be disastrous. Weather Futures contracts for retail centers & nurseries provide a hedge to protect your revenues and control your costs when homeowners can't plant or purchase.Stonehill Nursery in southeastern Massachusetts might purchase 2 Weather Futures contracts - 1 contract for heavy rainfall for May '08 & a second contract for cold days for May ‘08. A ‘Rainy Season Contract’ will ‘pay-out’ $3,000 for every inch total rainfall amounts are greater than 6” for May '08 in southeastern Massachusetts. A ‘Cold Season Contract’ will ‘pay-out’ $3,000 for each day temperatures average below 55 degrees for May '08 in southeastern Massachusetts. Cost of a ‘Rainy Season Contract’ would be $2,411, and cost of a ‘Cold Season Contract’ would be $1,504. Both ‘Rainy Season’ & ‘Cold Season’ contracts could ‘pay-out’ up to $100,000 to control Stonehill Nursery costs and offset revenue losses due to heavy rainfall & cold days in May ’08.
Evergreen Nurseries & Home Center in eastern Maryland might purchase a Weather Futures contract for drought conditions for August ’08. A ‘Dry Season Contract’ would pay $5,000 for every inch total rainfall in August ’08 accumulates less than 3”. Cost of a contract for Evergreen Nurseries & Home Center would be $2,562 for a proven ‘pay-out’ in August ’05 of $11,698, a proven ‘pay-out’ in August ’06 of $7,749, and a proven ‘pay-out’ in August ’07 of $5,698. A ‘Dry Season Contract’ for Evergreen Garden Center could ‘pay-out’ up to $100,000.
Wholesale Distribution Centers
Landscape contractors & landscape architects are typically unable or unwilling to plant when water restrictions apply, when temperatures are cold, when rainfall is heavy, or when summer months are hot. Weather Futures contracts for wholesale distribution centers provide a hedge to protect your revenues and control your costs in any or every weather event when landscape contractors & architects are unwilling or unable to plant.Gold Star Wholesale Distributors in Washington, DC might purchase 2 Weather Futures contracts - 1 contract for dry conditions & 1 contract for high temperatures for August ’08. A ‘Dry Season Contract’ would pay $10,000 for every inch total rainfall is below 5” in August ’08, and a ‘Hot Season Contract’ would pay $5,000 for every day average temperatures are above 80 degrees in August ’08. ‘Pay-out’ on Gold Star Whsle Distributors ‘Dry Season Contract’ in August ’07 was $7,992 and in August ’05 was $17,792; there was no ‘pay-out’ in August ‘06 . ‘Gold Star Whsle Distributors ‘Hot Season Contract’ could pay up to $100,000.
Greenhouse Growers
Greenhouse growers generate more than 30% of revenues over Easter Weekend, Mother’s Day Weekend & Memorial Day Weekend. Rainfall & cold temperatures drastically affect weekend sales. One bad weekend with cold temperatures & heavy rainfall is common in any month; two bad weekends with heavy rainfall or cold termperatures could be disastrous. To hedge against heavy rainfall and/or cold temperatures over any or every weekend, a greenhouse grower might purchase a ‘Cold Day Contract’ between April & June covering only weekends and a ‘Rain Day Contract’ between April & June covering only weekends.Wholesale Growers
When wholesale growers can’t dig due to snowfall in April, heavy rainfall in May, or dry conditions in August, green-goods sales cancel. Wholesale growers must hedge the risk of each and every weather event with Weather Futures to protect their revenues and offset digging, labor & irrigation costs.Hawk Nursery outside Baltimore, MD might purchase a Weather Futures contract for dry conditions for September ’08 if rainfall accumulates less that 1”. A ‘Dry Season Contract’ would cost $1,846. ‘Pay-out’ on a 'Dry Season Contract' outside Baltimore, MD in ’07 totaled $7,992 and ‘pay-out’ in ’05 totaled $17,792; there was no ‘pay-out’ in ’06.
General Contractors: Jobs
General contractors get paid when jobs complete, and weather is a primary factor delaying jobs. When frost, snow or heavy rain could delay or cancel jobs, most general contractors might choose to hedge against the effects of weather with Weather Futures.
DoneRight Contractors in western Pennsylvania might choose to purchase a ‘Snow Season Contract’ in April ’09 if snowfall amounts are greater than 5”. A ‘Snow Season Contract’ would cost $6,313 and ‘pay-out’ up to $100,000. ‘Pay-out’ in April ’05 was $49,000 when DoneRight Contractors was unable to complete work as a direct result of heavy snowfall.General Contractors: Snow Removal
General Contractors earn revenue on snow removal in winter. Snow removal contracts are calculated based on snow accumulation over 1 month or 1 season. Weather Futures contracts allow General Contractors to hedge equipment & labor costs when snowfall amounts over 1 month or 1 season vary.Daybreak Contractors issues snow removal contracts in winter to shopping centers & malls outside Worcester, MA. Daybreak Contractors might purchase a ‘Snow Season Contract’ for January ’09 if snowfall amounts are less than 5”. A ‘Snow Season Contract’ would cost $3,026 and ‘pay-out’ up to $100,000. ‘Pay-out’ in January ’07 was $12,000 which offset Daybreak Contractors equipment & labor costs.
How are Weather Futures different from insurance?
Insurance covers high risk . . . low probability events like fire or flooding while Weather Futures hedge against low risk . . . high probability events like unusual swings in average temperature, average rainfall or average snow accumulation over a 1 weekend, 1 week, 1 month or seasonal period. Unlike insurance, Weather Futures do not require your business to show proof of losses to receive your pay-out, and Weather Futures premiums cost significantly less than insurance. Most importantly, Weather Futures ‘pay-out’ according to easily accessible and published weather data in your region or zip code; 'pay-out' is automatically forwarded to your business within 5 business days from the end of your Weather Futures contract expiration.
How do you research & purchase Weather Futures Contracts?
Begin the investigative process of protecting your sales & income due to unusual swings in average temperature, average rainfall, or average snow any time of the year for any period of time by contacting your Nursery Direct representative about Weather Futures. The challenge for Weather Futures contract buyers is weighing the likelihood of bad weather versus the cost of protection. Your Nursery Direct representative will help you assess the likelihood of bad weather versus cost of protection using online tools and actual scenarios using previous years’ recorded data in your region. The process is simple and the ‘pay-out’ could be profitable.
Weather Futures are purchased by Nursery Direct through online brokerage accounts managed by WeatherBill, a leading online trading platform. Nephila Capital.guarantees your Weather Futures contract as a leading weather risk manager with over $2 billion under management. The process of research & purchase of your Weather Futures contract is almost instantaneous. Confirmation of your Weather Futures contract is also instantaneous. Begin the process of protecting your sales & income due to unusual swings in average temperature, average rainfall, or average snow any time of the year for any period of time by contacting your Nursery Direct representative today.
Who pays you when Weather Futures pay-out?
Nursery Direct in partnership with WeatherBill, an online trading platform, issues Weather Futures contracts based on your need to hedge your sales & income against bad weather. Your Weather Futures contract are guaranteed by Nephila Capital, a leading weather risk manager with over $2 Billion under management. Weather Futures ‘pay-out’ to your business according to easily accessible and published weather data in your region or zip code within 5 business days of your Weather Futures contract expiration.
