Following the run up to nearly 33 cents, world (#11) sugar futures have retreated and stayed in the 22-24 cent range for much of the week.  The market is expecting strong production numbers from Brazil and India, the two largest producers, and there seems to be optimism among analysts that the global S-D balance will finally shift to the surplus side in the coming months.  In the USDA Foreign Agriculture Service (FAS) April attache report, their outlook stated that Brazil cane production will increase 2% (to 631 mmt) in the 2011/12 marketing year (MY), with 569 mmt of this volume coming from the Centre-South; the 569 mmt projection is +12mmt over the 2010/11 MY and largely the result of an expansion of hectares for sugarcane, rather than a favorable weather pattern.  See the table below taken from the attache report for harvested hectares over the last 6 seasons.  This is confirmed by the relatively flat total reducing sugar (TRS, or industrial yield) when analyzed Y/Y.  Readers should note that a drier pattern in key mid/late crop months actually serves to boost yields, and tends not to be an inhibiting factor.

While the Weather Trends view is also for an increase in Y/Y production for BR (between +1.3% and +1.6%), we feel that the USDA estimate may be too optimistic.  Further, even with higher production numbers out of Brazil, domestic ethanol demand for flex-fuel cars coupled with high crude prices will still keep a premium built into the #11 price, so the downside price potential remains limited between now and October.  Satellite derived vegetation indices for many of the Centre-South cane growing regions are on par with last year which was considered an average weather year for cane in BR.

Other FAS estimates carrying significance include their view for Indian sugar production to increase 10% for the 2011/12 marketing year (Oct/Sep) to 28.3 mmt raw value as a function of higher total cane production.  The April FAS attache report fort India includes the illustrative chart below from the India Ministry of Agriculture, which shows total cane production and sugar production since the 1990/91 MY.  This shows how in recent years, technological advances as well as the increased demand for raw sugar is allowing growers to extract more sugar per metric ton.  Last year’s gain was also in part due to higher plantings following the Monsoon failure during the previous 2009 season, so the first year in the new retune crop will provide the strongest Y/Y lift; we will still look for a similar increase this year as projected plantings are up again, but as with Brazil, the numbers may be slightly lower than the FAS expectation.

So what does this mean for price?  The onset and the seasonal behavior of the 2011 Indian Monsoon will therefore become a key factor in assessing yield potential this year, and this will be a key variable towards ultimately translating what the crop potential means for the global supply balance sheet into 2012.  Further, while Brazil is looking at a favorable supply scenario, ethanol demand, crude oil prices and the relative strength of the BR real will be equally important in assessing price risk and potential.  Readers are encouraged to refer to this site as more discussions around these topics will appear in the coming weeks and months. 

Please feel free to contact Weather Trends directly if you wish to have a direct consultation around these or other weather/commodity topics.

Google noted that a recent investment of $100 million will assist in enabling the Shepherds Flat Wind Farm to become the world’s largest wind farm by 2012; this follows their $168MM solar investment into the BrightSource Energy tower project.  The company has now invested nearly $350MM into clean energy to date.  Such investments from non-traditional cleantech investors are starting to receive more attention, and the sustainable increase of large scale infrastructure investments in the alternative energy sector will likely be accompanied by a rise in the demand for data-driven services that can help optimize efficiency of the related operational costs.  

Enter the growing need for timely and accurate weather data.  Last month I touched upon the potential for the weather services sector to contribute their expertise to the smart grid arena.  Demand anticipation, efficient raw material utilization, baseload and peak usage forecasting, logistics planning  – these are just a few of the many areas where atmospheric analytics can contribute to this growing global market. More frequent and more precise weather data can help utilities anticipate demand surges, and in the process reduce both unnecessary expenditures and unnecessary emissions. Such supporting weather data is not just limited to the network of government maintained observation stations – cheap ubiquitous sensors can be placed just about anywhere, and more granular data that can help make a decision more efficient translates to more streamlined raw material procurement and utilization, not to mention lower costs passed on to the consumer.

At many energy conferences of late containing the cleantech theme (look at tomorrow’s Green:Net event sponsored by GigaOm), there has been a lot of talk around the benefits of ‘smart’ meters and ‘smart’ algorithms which will in part be used to help transform the energy infrastructure. These tools and techniques can only truly be considered ‘smart’ if they are embedded with ambient data feeds which can in turn supply timely and accurate data streams which can be developed into weather-driven efficiency algorithms (largely based upon persistence) – the resultant algorithms can then help to enable the energy management systems to operate in sync with their surroundings, in essence, becoming smarter. As short range demand anticipation models are largely based on a set of standard assumptions, there will be limited human involvement once a system is constructed (as long as good input data is available), and this will fit in nicely with the functionality associated with automated demand response systems. WeatherTrends360 provides examples of granular hourly weather data feeds and displays that can be embedded into such systems (see chart below). While the cornerstone of applied modeling (garbage in = garbage out) is implicit, it should be noted that a smart algorithm will only be as good as the data upon which it has been trained.

As the shift towards increasing the size of the share that renewables make up in the total energy generating matrix, the need for data services providing temperature, wind, solar analytics will strengthen. Look for innovative ways in which weather industry, including both data providers and forecasters, can generate new sources of returns in this space, as the industry evolves.

The Next-Gen Smart Grid: It’s All About Apps

The future of the smart grid will be software and applications. While infrastructure giants will be responsible for building out the hardware and networking pieces of the next-gen smart grid, software developers will be making the game-changing applications. Those killer apps will be the next pot of gold! At Green:Net, you’ll meet the the software innovators focused on the power grid.

Opportunities in Connected Cars

The first generation of electric vehicles is here: Nissan’s LEAF and GM’s Volt. These early EVs will be laced with chips, software and wireless networks to help monitor their batteries and soothe driver anxiety. The connected car is the next technology platform ripe for development and will lead to a more sustainable future for transportation. For example, network-connected and software-enabled electric cars will be able to charge from the smart grid during off-peak hours, leading to lower-cost vehicle charging for consumers. Come see how.

Now a Competitive Advantage: Green Data Centers

For the first time in history, companies like Google and Yahoo are innovating around greener, more efficient data centers in an effort to save money on energy bills and remain competitive in their industries. If the free markets won’t convince the Internet giants to operate more sustainable data centers, nothing will. Learn how cutting-edge companies are leading data center innovation.

Energy Storage: The Lynchpin of Energy Breakthroughs

No, we haven’t found a Moore’s Law for batteries yet, and we haven’t made all that much progress in being able to store energy in general. But to utilize clean power for the grid, to make longer-range electric vehicles and to develop cell phones that run a lot longer, we need energy storage breakthroughs. What’s on the horizon?

How the Social Web Can Drive A Green Economy

The Internet has made way for a new revolution in sharing “stuff,” as companies have sprouted up to help us share our vehicles (Zipcar), living spaces (Airbnb), and tools (Zilok). This trend is just beginning, but savvy Internet companies are using social networks to allocate resources more efficiently and build trust among members. The kicker? It can be an eco-friendlier way of life.

The Future of the Smart Energy Home

Home-sweet-digital home has been the dream deferred of the consumer electronics industry for decades. But now, utilities, startups and investors are morphing the digital home dream into smart energy reality, where consumers are actively involved in their home energy management. What are the barriers to, and possibilities for, this ecosystem?

Digital Energy: Are We Making Money Yet?

Venture capitalists, conglomerates like GE and banks, all have an end goal of investing in digital energy to make money. What sectors and companies are showing the most promising returns for the intersection of IT and green, and what’s up with this post-recession dip?

Green:Net Big Ideas

Our editorial team will select 10 companies and individuals who are changing the way we think about the intersection of the digital and energy worlds. Chosen from submissions and direct invitations, Green:Net Big Ideas will present five-minute lightning talks throughout the day. Come and be inspired by some of the greatest ideas for the next year.

La Nina conditions to continue, with effects on prices of everything from corn to coal.  Weather Trends map below shows current snapshot of Pacific cold SST anomalies.

In a related note, many hedge funds were blindsided by this move as last week there was a net reduction in net long positions in oil, per the recent CFTC Commitments of Traders weekly report (18% reduction in net long positions). 

The following week, I will be attending the Strata Conference in Santa Clara, presented by O’Reilly Media.  The theme of turning data into products is very important and exciting for Weather Trends with regards to some of the new avenues that we are pursuing with current clients and prospects.