There has been a quiet story brewing in the global agricultural commodities sector for some time now, which has been overshadowed by the usual suspects amongst the larger economic indicators.  The Indian monsoon is setting up for a below normal season, and this comes in a year when the country needs healthy rains to stimulate the agricultural sector more than most other years in recent history.  Some of the acute effects can be seen in world sugar futures, where the OCT09 contract is now approaching the 18 cent mark.  A potential monsoon failure has notable implications to the Indian domestic sugar market.  After improving production to become a net exporter a couple of crop years back, the current campaign in India will be the second straight year where the country reverted to net importer status….based on the current lack of physical domestic stocks coupled with the developing El Nino’s potential to impact the 2009/10 crop, import status might be extended for another year.  Sugar is just one example.  While India’s GDP figures that are directly attributed to agricultural activity do not look all that impressive upon first glance, overall economic activity that is agriculturally dependent approaches 2/3 of the economy when we consider the ancillary sectors such as machinery, fertilizer, chemicals, etc.  So a drought in India can be extrapolated as a drought for the Indian economy. 

Some regions have been receiving rains during this monsoon (see current satellite above), however, this only provides a false sense of security to those thinking conditions are good everywhere.  While the regions that have received a healthy rainfall pattern have been noted in the media as having received too much (leading to localized flooding, etc), for the majority of the agricultural production regions, areas needing the rains the most, have been largely deficient.  Adding to the problem is that at the start of the season, the Indian Meteorological Department, which is the sole source of weather information to many, had forecast a normal monsoon.  We are not even halfway through the official monsoon season, and the IMD has since decreased their forecast twice, and is likely to do so again in the near future.  The point of this post is that there are alternatives that people should be aware of.  Earlier this month, I gave a talk at Sugar Asia 2009, an industry conference for agricultural technologists and marketers, and the topic of the lecture was timely in light of the circumstances.  In the talk, I discussed the Weather Trends seasonal precipitation forecast for India over the monsoon season, and my impression at the time was that all of the rainfall deficiencies I was describing appeared to be news to many in the audience (the second part of the talk focused on the El Nino pattern which has the ability to cause problems for Indian sugarcane growers next year). 

Instead of rehashing the entire discussion, I am posting what was conveyed to reporters in the press room after the talk.  To keep the context of what was originally reported, I only made a few grammar and language edits for ease of reading.  While some of the points discussed below do not exactly explain what was said in the interviews (as can be expected with any press interview), I will still leave as is for the benefit of others who first read this directly.

INTERVIEW: US expert says El Nino to adversely impact India rains

Tuesday, Jul 7

    NEW DELHI – Uniform spread of southwest monsoon rains in India this year

could be marred by disturbances in the weather pattern, partially caused by El Nino warm water currents in the Pacific, said Michael Ferrari, PhD, vice-president at Weather Trends International, a US based weather data provider.

    The development of El Nino conditions could impact rains this

season and next year, thereby affecting agricultural output, Ferrari said in an interview.  He expects the southwest monsoon rain this year to be 85% of the long

period average, at best.

    The India Meteorological Department has projected the southwest monsoon this

season to be 93% of long period average.  The southwest monsoon rainfall so far has been very poor. According to IMD, the weighted average rainfall in the country during Jun 1-Jul 2 was 102.9 mm, 43% below normal.  During the period, rainfall was deficient or scanty in 29 meteorological sub-divisions.

    "At this stage, I am concerned over the current transition of weather conditions to an El Nino pattern this year. Also there are certain conditions of unpredictability prevailing about the situation," Ferrari said while referring to various weather prediction models and satellite images.

    El Nino refers to the extensive warming of the central and eastern Pacific that leads to a major shift in weather patterns across the globe. Dr. Ferrari said several surprise elements might impact India’s monsoon and agricultural output adversely by next year, adding that impact of an El Nino phenomenon was already visible in this year’s monsoon season.

    Indian weather officials say while there were chances of El Nino conditions developing this year, there has generally been no one-to-one correlation between development of El Nino and the performance of the monsoon rains.

    Philadelphia-based Weather Trends International has proprietary forecasting technology that provides forecast on a weekly basis for 4,000 markets in 129 countries to manage "weather risk" for its clients, including fund houses and hedge funds.

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LA NINA TO EL NINO

    "The biggest (weather) trend this year that I would say had me really concerned for Indian agriculture in particular, is that we are on the cusp of a potential monsoon failure, followed by a transition from a La Nina year to El Nino," he said.

    He said the concern was over the "suddenness of the transition" in weather conditions. "This is going to be an especially alarming year." Last week, the Australian met department had observed a sudden rise in sea surface temperature in central and eastern Pacific Ocean.

    According to observations the temperature rise had picked up from June. "As the trends indicate, in July too this is going to be higher," Dr. Ferrari said.  The warming of the Pacific waters is indicative of El Nino conditions approaching. The El Nino weather phenomenon typically repeats itself once every seven years, but has returned this time after a gap of just five years.

    "This is quite early. In fact, in just about five years the conditions have started reappearing. While La Nina conditions prevail for around a year, El Nino conditions prevail for about 12-18 months," he said. During 2007-08 La Nina phenomenon were witnessed, which spelt favourable rainfall in many parts around the globe, Ferrari said.

    "Generally there is a gradual built up to El Nino, but what had us concerned is the sudden rise in temperature of sea water. This is much faster than other years which is definitely unusual and a big concern," he said.

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MONSOON IMPACT

    Dr. Ferrari said there was a definite co-relation between El Nino and Indian monsoon, though there were other factors that impact the quantum of rains.  Referring to two visible transitions in weather conditions which could impact this year’s rainfall, Ferrari said, "This time, water temperature in the Indian Ocean and Bay of Bengal are cooler instead of warm. Warm water facilitates accumulation of moisture in convective monsoon clouds.  "So effectively the change in sea water temperature is resulting in monsoon winds carrying much lesser moisture while moving inland."

   Secondly, he pointed to a relatively strong high pressure system centred around northwest India and progressing towards central India affecting progress of the southwest monsoon currents. "Usually a high pressure area prevails before monsoon appears and it just backs off with the onset of the monsoon currents. This time though the currents are having to go around the high pressure area, and in doing so diverting a fair amount of rainfall from the region," he said.

    Dr. Ferrari said the lingering of the high pressure region this time could be explained as the "dipole impact" of low pressure regions created over Pacific as El Nino conditions develop.

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SUGAR OUTLOOK

    Based on current observations, Ferrari held that the impact of El Nino was already being experienced this year and would become more visible next year. "We see rainfall in India to be at least 15% below normal this year and rains next year could be similar to this year’s level or lesser," he said.

    "This is going to be bad for sugarcane output, especially with a Oct-Sept crop cycle," he added.  Dr. Ferrari who also heads the applied technology and commodity research division at Weather Trends International, said most south east Asian nations cultivating sugarcane would be impacted because of the El Nino phenomenon. But output in Brazil, the largest sugar producer, might not be so severely impacted as the weather in the growing regions would be good, he said.     End

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Transcription errors notwithstanding, the interview highlights the importance of having a second opinion when it comes to a feature as important (economically and socially) as the Indian monsoon.  As it stands, it looks like our Indian forecast will verify; what is more important is that for our clients, this information was available as part of our long range forecast as early as the fall of 2008.  While many are now reacting to the pattern that has developed, taking an early view allows commercial users to be proactive, mitigating some of the unpleasant experiences that many in the market are now suffering through.  

This entry was posted on Wednesday, July 22nd, 2009 at 2:02 pm and is filed under Agriculture, Biofuels, Energy, Global Commodities, Global Weather, Grains, Softs, Sugar, United States, weather. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.