Investors are increasingly turning to weather intelligence to gain an edge in commodity markets. Several funds have hired teams of meteorologists. While there is an abundance of publicly available and government weather models, certain characteristics play a significant role in their accuracy. In this report, we summarise the alternative data landscape for weather intelligence. We also highlight third-party vendors that use proprietary weather observations to build sophisticated forecast models with increasing accuracy.

the CURRENT DATA CLIMATE

Weather observations (known as actuals) and forecasts are applicable across multiple asset classes. The Financial Times recently highlighted how one hedge fund generated significant commodity trading returns after hiring a dedicated team of meteorologists.

We previously published a report, Back to Basics: Weather data, outlining the key sources and relevant vendors. In this piece, we detail the characteristics that differentiate weather models, provide an overview of the most popular use cases and an updated view of the data landscape.       

The use cases we highlight are:

• Energy trading
• Agri-commodity trading
• Equity trading
• Weather derivatives