1. Weather, Climate and the World Sugar Market
Michael Ferrari, PhD
Director, Climate Informatics
CSC
May 16, 2012

2. Agenda I. II. III. IV. V. VI. VII. Global Weather Pattern
2011/12 Transition
III.
El Nino in 2012?
IV.
Sugar Production & Market Impacts V.
ClimateEdge – Manage the Risk
VI.
What to Expect in 2013
VII.
Questions

3. La Nina of 2011/12 dissipating – El Nino signals starting to emerge
Source: Australia Bureau of Meteorology
Source: NOAA ESRL

4. Higher potential for negative crop conditions for BR/IN/AU
Source: NOAA

5. Conditions are favorable in BR C-S now….
may start to shift
Source: NASA-MERRA

6. La Nina of 2011/12 dissipating – El Nino signals starting to emerge
Source: NOAA ESRL

7. Westerly anomalies starting to emerge….
Source: TOA/TRITON

8. …Subsurface warm mass increasing
Source: TOA/TRITON

9. Convective activity indicative of healthy start to the
Monsoon, but BR Centre-South risk appearing
Source: NOAA ESRL

10. Pressure anomalies supporting favorable Monsoon onset
Source: NCEP

11. However, some hints of 2009 are present in the data
MERRA
June v LY
Source: NASA/MERRA

12. Monsoon Progression

13. JAS Risk Favorable onset period, particularly in south
Seasonal dipole eroding
Y/Y pattern: drier in both production belts for Jul/Aug
Highest risk: Aug
2009 analogs appearing
Risk to cane yields
Aug v LY
Source: JAWF

14. Vegetation Health
Source: NASA MERRA

15. #11 Market Snapshot
Source: ino.com

16. Commodity Snapshot
Source: FinViz.com

17. Extended outlook – Important fundamentals to monitor
Supply side risk needs to be viewed in the context of broader global macro indicators. In addition to the ‘normal’ weather fundamentals, there are numerous factors that require constant analyst attention. Some of these factors include (but are not limited to):
Energy: Crude Oil prices are high, but have softened in recent sessions (trading yesterday at $94). However, as long as oil prices are high, defined as above $84, biofuels remain attractive (corn/sugar ethanol & biodiesel from soybeans) for producers, and higher raw material prices, including raw & white sugar, will be supported.
Related commodity news: There has been a broad sell-off in commodities, but the agriculture sector remains relatively strong.
Global S&D: Increasing global demand for grains from both the food and fuel sectors looks to remain constant over the next 6-12 months. Longer term support in the biofuel sector is more speculative, so a reduction in demand from the energy side may ease price pressure for food raw materials.
Open interest: New investment instruments in commodities have contributed to an increase in relative long positions in grains. While this does not translate directly to price support, it does lend itself to increase volatility in both futures and physical prices.
Severe weather: Beyond the weather outlook which shapes our view on supply, any acute weather impact affecting crop operations and distribution will add to volatility. Monsoon will be key in 2012.
Technical indicators: Even if the long range market direction is driven by the fundamentals, analysts should bear in mind the key technical signals for over/underbought markets.

18. Risk and Losses are on the Rise
Source: Munich RE

19. CSC ClimateEdge – Managing Agriculture Risk

20. Why Climate Data as a Service (CDaaS)?
“Today analytics is moving to center stage as more people can access the tools and analyze all the data, leveraging data from multiple sources and unleashing the power of a distributed grid of computing resources to do the heavy lifting involved with the analysis.”
“. . . many of today’s analytics are using ‘in-database’ techniques that are faster and more efficient because the data are not moved to a separate analytics server “

21. Source: Lloyds, Forecasting Risk, 2011
‘Traditional’ risk management methods introduce significant error.
A Climate Data Service model will provide a data-driven approach coupled with subject matter expertise to better identify and quantify weather and climate risk.

22. Identification of Weather Black Swans

23. For any questions, please contact: Michael Ferrari, PhD Director, Climate Informatics CSC Tel:

24. Thank You