After the Bell: It’s been a record year for billion-dollar weather disasters
The weather is simply going wild, and so are the costs linked to this trend.
So far in 2023, the US has had 23 weather- and climate-related disasters that caused damage of $1-billion or more, a record for any calendar year since the recording of such events started in 1980.
This has surpassed the previous record of 22 for all of 2020.
This is according to the US National Oceanic and Atmospheric Administration (NOAA), which says numbers are still being crunched for two other 2023 disasters: Tropical Storm Hilary, which slammed southern California, and the Southern/Midwestern drought.
The breakdown for the year-to-date is as follows: 18 severe weather events; two massive floods; one tropical cyclone (Hurricane Idalia); one blazing wildfire; and one winter storm.
“These events caused 253 direct and indirect fatalities and produced more than $57.6-billion in damages,” the NOAA said.
“Since 1980, when [the] NOAA started tracking these events, the US has sustained 371 separate weather and climate disasters where overall damages/costs reached or exceeded $1-billion (including CPI adjustment to 2023). The total cost of these 371 events exceeds $2.615-trillion,” it said.
The $2.615-trillion figure exceeds the current gross domestic product (GDP) of all but the seven largest economies in the world.
This is a stark warning to the rest of the global economy as human-induced climate change linked to fossil fuel usage burns our planet.
Of course, this all requires some context. The US, as the world’s largest economy, simply has more highly priced assets such as infrastructure and property that can be damaged by extreme weather.
The GDP of Malawi, for example, is around $12.6-billion, and the cumulative worth of its infrastructure and property — which is not the same as GDP — probably would not reach the US damage total of over $57-billion this year, unless it was subjected to some creative Steinhoff-style accounting.
But drought and flooding inflict damages that amount to a far bigger percentage of Malawi’s GDP. One UN study found that at least 1.7% of Malawi’s GDP is lost each year due to such events.
The US also, because of geography, finds itself often in the eye of the storm. The US has by far the most recorded tornadoes each year, not least because they usually occur in mid-latitudes. And the flat topography of the Midwest draws warm, moist air masses from the Gulf of Mexico and cold, dry air from Canada — a perfect twister recipe.
The US also gets hammered by hurricanes galore, which form off the West Coast of Africa and get carried westward by trade winds — the same winds that once carried boatloads of slaves — and when they hit the relatively warm and shallow Caribbean, they intensify and often veer north.
While geography has also been a blessing for the US — it was kind of hard for the Nazis to invade — it is hardly the only country to be cursed by weather.
Its wild and costly weather year so far is a stark warning for the rest of the world, including global markets. Record rainfall on 8 September forced the Hong Kong Stock Exchange to close, and it also halted trading on 16 July because of a typhoon.
Such events can be material for companies. JSE-listed Sibanye-Stillwater last year had to suspend operations at its palladium-rich operations in the US state of Montana because of flooding.
But the US, on account of its staggering wealth and relative prosperity, is also able to absorb the damages of extreme weather events better than almost any other country in the world, and react to them — though it has been found wanting on this front at times, such as when Hurricane Katrina hit New Orleans and the Bush administration dropped the ball.
It all serves as a warning to South Africa as the El Niño weather pattern, which typically heralds drought in these parts, sets in against the backdrop of record-breaking temperatures across the world.
The 2014-2016 El Niño scorched much of South Africa’s agricultural sector. In 2016, South Africa’s maize crop was about 7.8 million tonnes, less than half of this year’s harvest.
In 2016, South African economic growth slowed to 0.7% from 1.3% in 2015. This year, economic growth is unlikely to reach even 0.7%, and El Niño will probably only begin reaping its bitter harvest next year, presenting another headwind to growth when it does so.
South Africa’s debt-to-GDP ratio in 2016 was also a sort-of-manageable 51.6%. It is now close to 70% and the Treasury is basically running on fumes — it doesn’t have cash to spare.
South Africa is in no way prepared for record-breaking weather and climate events, a state of affairs that will have grave social consequences. Aside from a lack of cash, you also need reliable power, rail and road networks to properly address weather-related disasters.
And for markets across the board, this extends well beyond maize futures. Domestic stocks, bonds and the rand are all in the line of fire. The inflationary impact and GDP losses from an extended drought will affect all three in different ways.
That, in turn, will affect millions of the poor and working class who might not count themselves as “investors” but will feel the heat of inflation and the chill of melting pension funds. DM