aWhere, Inc. leverages our 5 arc min (~9km x 9km) global ‘virtual weather station’ database (> 2M daily, current, complete agro-meteorological datasets) to monitor sugar, coffee and all global agriculture/soft commodities with unparalleled spatial and temporal fidelity. With our weekly commodity reports launch in Q3 2015, we have monitored closely the 2015/16 El Niño event and its impacts on crop production across the planet.
For example, in the weekly report of November 2015, we called for the increase in sugar futures prices that the market is seeing now. On November 11, our price projection for end of Q1 2016 was 14.8-17.67. Today (22 March 2016), May 2016 sugar futures are currently trading at 16.42 cents/#. Similarly, during the week of Dec 16, 2015 our 3 month outlook was 14.7-18, and on Feb 24, 2016 we suggested May futures to be trading in a range between 14.1 to 18.3. This week – March 21 – we see a price of 16.5. In addition, our discussions have been referenced numerous times in the commodity press, including the recent mention (shown below) from the Wall Street Journal.
From the Wall Street Journal, March 17, 2016 By Carolyn Cui
Sugar Prices Hit 16 Month Highs
“Globally, supply side factors remain supportive via increased crop risk, and broader macroeconomic fundamentals will help this market continue to strengthen, we feel, through the end of 2016,” wrote Michael Ferrari, vice president of commodities & risk analytics at aWhere, an agricultural intelligence company.
Mr. Ferrari noted in the report published on Thursday (March 17) that Brazil, India and Thailand – three of the world’s top producers – are showing ongoing signs of production risk. In Brazil, while the El Niño continues to slowly fade, “we have not seen the widespread return of a wet pattern hit Centre-South, as would be expected during a ‘typical’ fading El Niño transition,” he wrote. As a result, numbers for sugar-cane estimates may start to decrease, further widening the global deficit.
Our data science leverages multiple satellite constellations for daily rainfall (calibrated across the planet with > 12,000 ground-station observations) and we then 3D (include elevation!) interpolate the adiabatic weather variables from the ground stations – temperature and relative humidity – to create a weather station’s complete package of data for every rainfall observation. This combination enables aWhere to calculate the environmental demand for water (how hot and dry is it? – Potential Evapotranspiration or PET) with accuracy. Water stress indices emerge. We can track seasonal crops from their planting data and track ‘the last 4 week’. We have forecast out to 15 days – so we are able to examine crop stress and the possibility of it continuing into the near future. We can compare this year to the last 10+ years and thus gain an understanding of how ‘out of normal’ the ag weather really is.
Examine the maps and charts below. This is the current situation, tracking the last 4 weeks, for cane sugar in India (2,696), Thailand (809) and Brazil (6,062). The histograms show the count of the particular index (the number in parenthesis is the number of daily weather data sets in the sugar area) as calculated by each weather station package of data. This is coverage of the sugar production areas like no other. To compare, in the sugar area of Brazil, we have 6,062 daily data sets and the WMO station list shows a total of 31. Our number of agro-met datasets describe 80% of that countries cane-sugar production area. We know where the cane is grown (there are multiple studies linking area of production, remote sensing etc.) and our localized daily weather data plus agronomic models thus provide a comprehensive look at production characteristics across the whole area.
The P/PET (Precipitation / Potential EvapoTranspiration) compared to normal (average) for India sugar areas is not too bad. Drier than normal, yes, but this is the dry season.
Dryer than normal conditions in terms of rainfall are often simultaneously accompanied by hotter days with lower humidity – an additional penalty for healthy plant growth. The P/PET for Thailand shows that 65% of the production area is under significantly drier conditions than compared to normal.
For Brazil, the situation is not as dire as in Thailand though as can be seen in the map and chart combination below, a considerable area of NE Brazil is hotter and drier than normal.
aWhere has brought a wholly new and scientifically viable ‘supply side’ information and environment monitoring system to the commodity risk market. Our data are available via an excellent API and these aggregate products are also available. Other commodities, for example, our current assessment of coffee production, provide further indication that our ability to see production early is real: we’ve been predicting a price increase in coffee that we are seeing now as well. We will be monitoring the upcoming northern hemisphere growing season – tracking wheat, maize, soybean, rapeseed etc. inclusive of North America, Europe, and Asia.
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The chart below is the 6 month May2016 No.11 ICE Sugar futures contract price as of March 24, 2016. The strong bullish channel was correctly identified and publicly called in October/November 2015, and at this stage we still see additional upside potential through mid-year for Jul/Oct 2016 futures.