Readers of this column should no doubt be aware of our bias towards the importance of India with respect to the amount of physical sugar that is available to the world market at any given time.  We have stated numerous times that the sub-optimal pattern with respect to where rain has been falling and where the country’s sugarcane plantations in northern India are located will result in a crop next year which is shorter than many analysts are currently expecting.  India’s position in the market notwithstanding, Brazil, as the world’s largest sugarcane producer, has the potential to move the market with short notice.  Our clients have also been able to take advantage of the current volatility in the raw sugar futures space, as the ‘news’ of Brazil’s dryness now has traders worrying that supply estimates may have to be revised downward again.  To our clients, however, this is not news.  We have expected decent numbers for both current and upcoming crop year production from Brazil, but our crop expectations have been much more conservative than the rest of the market.  The Weather Trends outlook has been built upon the view that the dry pattern that has affected Sao Paulo and western Parana will serve as a production (and yield) inhibitor, and the current market support (OCT-10 futures up over 3% today) is a result of this realization.  The charts below show the Weather Trends long range forecast by week (y/y change) and the solid line is the observation.

BRAZIL – Country Precipitation Summary

BRAZIL – Sao Paulo Precipitation Summary

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Weather wires are buzzing this morning with talk of Hurricane Earl, as they should be – this is a big system with a lot of energy.  But don’t lose sight of what is following behind Earl.  While Fiona looks to take a track farther to the east, the system in the central Atlantic has organized quite a bit over the last 24 hours, and conditions are favorable for developing into a depression within the next day or so.  And this is followed by another wave off of west Africa, so as expected, the tropics are heating up as we are entering the most active portion of the 2010 season.

It is that time of year again….while we are still in cooling season, forward-thinkers are starting to plan for winter.  That includes ski resorts, and the number of inquiries has risen quite a bit from my lift-ticket seeking friends. Vail is set to open this season on November 19th.  Our forecast is for a low of 11, and a high of 38, and we are expecting more moisture in the atmosphere for each of the three weeks leading up to opening day.  Go to weathertrends360 to plan for the upcoming season.

The seasonal rainfall in the northern Indian sugarcane producing regions is still deficient, despite an improvement in the country weighted average (moving from -5% to -2% since last week).  Rainfall over Uttar Pradesh has been consistent over the last three days, and looks to remain favorable for the next 1-2 days, but higher totals are expected in central to southern India after day 2.  We can see that the deficiencies in the heart of the cane belt have improved, but this is still well below what developing sugarcane needs at this stage in the crop cycle; further, this pattern to date will already translate to some yield limitations as we discussed last week.