SugarAsia 2009 presentation, Delhi, India

1. Long Range Global Weather Outlook and the
Implications to the World Sugar Market
Michael Ferrari, PhD
VP, Applied Technology and Research
03 July 2009

2. Disclaimer

4. Topics for Discussion
• Global Weather Pattern
• 2009/10 Transition
• Impacts to Indian Sugar
• Global Commodity Market Impacts
• What to Expect

5. Weather Trends Approach
• Differences from traditional
meteorological forecasting
• Rely on a blend of diffeq,
datamining, pattern seeking in
historical data, neural networks
• Directional vs. point FC
• Success of global approach

6. Traditional Forecasting Methods

7. Quasi-Biennial Oscillation
(QBO)
Stratospheric Directional Winds

10. Supports late 09
ENSO
development
Strong nino Downscaling
precursors with finer scale

11. El Niño:Onset and Ending Dates

12. Southern Oscillation Index – transitioning from La Nina to El Nino

13. Global Climate Driver this year is the
Developing El Nino

14. 2008 Subsurface anomaly 2009 Subsurface anomaly
Much larger +4.0°C
temperature anomaly

15. SST anomaly:
rapid ENSO transition seasonal
•Equatorial Ocean warming
•Shift in convection
•Increased SSTs off of monthly
western South America
•Warmth in south/central
Indian Ocean
weekly

16. Current Global SST pattern

17. Current Global SST anomalies (vs. LY) highlights ENSO transition

18. Global precip 7 day forecast
week 1

19. Global precip 7 day forecast
week 2

20. Shifting global precipitation patterns (OLR)
seasonal
weekly

21. May precipitation anomaly

22. JUN precipitation summary

23. JUN precipitation summary

24. JUN precipitation summary

25. JUN precipitation summary

26. JUN temperature summary

27. Two Week Forecast

28. Two Week Forecast

29. Two Week Forecast

30. Two Week Forecast

31. Two Week Forecast

32. Two Week Forecast

33. Forecast: August into September
• Split pattern between
the northern and
southern cane growing
belts. Last year’s
dipole to cease.
• Warmer and slightly
wetter pattern in the
north
• Normal to slightly
cooler pattern, and
drier then normal

34. July Soil Moisture Deficiencies

35. June 2009 Soil Moisture

36. Current NDVI

37. Monsoon Progression

38. Brazil 2 week precip forecast (vs. LY)

40. UV Index

41. Sunshine Index

44. OCT ICE Sugar
(02 Jul)
*Bigger issue now becomes OCT/MAR spread

45. Verification of Methods
2008 Weekly Precipitation

46. Verification of Methods
2007 Weekly Precipitation

47. Verification of Methods
2006 Weekly Precipitation

48. ALL INDIA RAINFALL FORECAST
ver: 2009 Weekly Precipitation (to date)

50. What does this mean for sugar?
• Fundamentals are supportive of a significant rise
in sugar prices.
• Monsoon deficit coupled with ENSO progression
will start to quantify crop expectations; upside
price potential exists.
• ENSO pattern will be problematic for next year’s
crop in major origins...India, Thailand, Australia
& Brazil. Upside potential for OCT/MAR futures.
• With uncertainty in market, we advise to
capitalize on all short term pullbacks in the
market, while overall extending long positions.

51. Extended outlook – Important fundamentals to monitor
In nearly every source of commodity news, the talk of food crises and/or inflation is pervasive. As
such, 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 prices have nearly doubled since August 2007, and the speculative ranges for future
oil prices span $100 to $200 per barrel within the next 6-24 months. As long as oil prices are high
($70 is still high crude), biofuels remain attractive (corn/sugar ethanol & biodiesel from soybeans)
for producers, and higher raw material prices will therefore be supported. Our range for crude by
late 2009 is in low to mid $70 range.
Related commodity news: The global raw material supply chain is now so inter-related that news in
one area nearly always has a ripple effect across the commodity spectrum.
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.
China: While it is often used too freely by analysts and traders, China’s role can not be
underestimated. Buying power (especially with a weak USD) can take significant tonnage off of
the world market, leading to tighter global stocks and additional upside price risk.
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.

52. Weekly grains, energy
and sugar reports

55. WTI Year-Ahead Forecast Areas
WEEKLY & DAILY year-ahead Forecast Available

56. Weather Intelligent Clients

57. QUESTIONS ?

58. For any questions, please contact:
Michael Ferrari, PhD
Vice President, Applied Technology and Climate/Commodity Research
Weather Trends International, USA
Tel: 610 807 3582
Mobile: 484 542 0111
Email: mferrari@wxtrends.com