Commodities Report: December 22, 2011

European markets traded higher today ahead of US unemployment claims and consumer confidence data which is expected to be on a positive note. If the data comes in as expected then, it will also support upside in the US markets today.

But concerns with respect to Euro Zone debt crisis still persists as ECB failed to boost confidence in the global markets. Any negative news or developments from the Euro Zone will lead to downside in the markets.

India’s food inflation eased sharply to 1.81 percent for the week ending on 10th December from the previous 4.35 percent in previous week, as costs of onion, potatoes, wheat, rice, cereals and vegetables decreased, according to data by the Ministry of Commerce and Industry. Fuel inflation remained unchanged at 15.24 percent for the same period.

Gold prices declined around 0.3 percent as investors remain cautious about Euro Zone’s ability to tackle the debt problem. However, dollar weakness cushioned sharp decline on the international markets. The yellow metal touched an intra-day low of $1602/oz and was hovering around $1610/oz till 4.45.pm IST today.

Taking cues from a weaker dollar spot silver rose around 0.1 percent today and touched an intra-day high of $29.68/oz till 4.45 pm IST. On the MCX, the white metal prices traded on a flat note and were hovering around Rs53,138/kg till 4.45 pm IST.

The base metals pack traded on a mixed note on the LME today with nickel and aluminium traded in the red while copper, zinc and lead traded higher. Nickel prices declined the most by 0.4 percent on the LME as well as on the MCX till 4.45 pm IST. The metal inventories on the LME warehouse rose sharply by almost 2 percent to 89,568 tonnes today which acted as a negative factor for prices.

Nymex crude oil increased around 0.3 percent today on the back of sharp decline in US crude oil inventories. Additionally, a weaker dollar and sanctions from US and EU on Iran also acted as a positive factor for the commodity. Oil prices were hovering around $98.99/bbl after touching an intra-day high of $99.39/bbl till 4:45pm IST. On the MCX, prices increased by 0.1 percent and were trading around Rs.5221/bbl after touching an intra-day high of Rs.5247/bbl till 4:45pm IST today.

The US Energy Department (EIA) is scheduled to release its weekly inventories report today and natural gas inventories are expected to decline by 103 billion for the week ending on 16th December 2011.

Outlook

Gold and silver is expected to trade higher today on account of a weaker dollar. But, investors are still doubtful about the ability of Europe to solve the debt crisis and this may cap sharp gains in the precious metals.

Base metals are expected to trade with a sideways bias taking mixed cues from dollar weakness and mixed sentiments in the global markets.

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We expect crude oil prices to trade higher today on account of supply concerns due to sanctions on Iran coupled with a weaker dollar.

Courtesy: Angel Commodities

NCDEX soy complex settles down on global cues

Soybean spot prices have declined by '10/quintal on Wednesday which kept the futures prices under pressure. Stockists and millers were inactive as spot prices have steeply surged in last fortnight which kept the prices down side.

CBOT soybean prices ended higher bad weather conditions across Latin American regions is supporting the positive trend.

Soy oil prices declined on Wednesday amidst of absence of fresh cues in spot markets. Spot prices declined by '5-7/10kg in Indore market which had negative impact on soy oil prices. Palm oil prices also dropped '1-2/10kg.

CBOT soy oil gained in line with the soybean on concerns of lower supply of soybean from Latin American regions.

Mustard seed prices extended gains on Wednesday as meal and oil demand is rising gradually across major spot markets.

Despite spot prices remaining mostly stable in producer markets prices of seed and oil across consumer markets are higher. Overall weather is reported not so congenial for mustard crop which supported the prices.

Courtesy: Karvy Commtrade Ltd.

NCDEX turmeric surges on extended buying

Turmeric Futures extended gains of the previous day and settled at the upper freeze of 4% on Wednesday owing to improved buying by market participants. Spot prices traced Futures and settled 1.25% higher yesterday on account of increased in the offtakes.

Production, Arrivals and Exports

Arrivals in Nizamabad and Erode mandi are steady around 1,000 bags and 12,000 bags respectively on Wednesday.

Turmeric production for the year 2011-12 is projected at historical high of 82 lakh bags (1 bag= 70 kgs) compared to 69 lakh bags in 2010- 11. Erode is expected to produce45 lakh bags of turmeric a rise of 29% as compared to previous year. According to Spices Board of India, exports of Turmeric during April 2011- October 2011 stood at 50,000 tonnes as compared to 32,000 tonnes in 2010-11, rise of 56%. Targets set by the Spices Board have already been met till October 2011.

Exports are expected to touch new historical levels in 2011-12.

Courtesy: Angel Commodities

NCDEX jeera slumps on long liquidation

Jeera prices after trading firm in the last few trading session witnessed long liquidation by the market participants and settled 1.70% down on Wednesday. Demand from the local stockists amidst reports of surge in the exports of jeera led prices to remain supported in the last few sessions.

According to Gujarat farm ministry, area sown under jeera till December 19, 2011 stood at 2.64 lakh hectares (lh) up 20% as compared to last year. Carryover stocks of jeera is expected to be around 9-10 lakh bags as compared to 4-5 lakh bags in the last year.

Prices in the global markets of Indian origin are quoting around $2,800-2,950/tn while Syrian origin is quoting at $3,100-$3,150/tn.

Production, Arrivals and Exports

Unjha markets witnessed arrivals of 4000 bags 1500 bags more as compared to Tuesday amidst off takes of 3,000 bags on Wednesday.

Production of jeera in 2011-12 is expected to be around 35 lakh bags  as compared to 29 lakh bags in 2010-11. (Each bag weighs 55 kgs).(Source: spot market traders).

According to Spices Board of India, exports of Jeera during April 2011-Ocotber 2011 stood at 20500 tonnes as compared to 19,800 tonnes in 2010-11, an increase of 3.5%.

Courtesy: Angel Commodities

NCDEX jeera slumps on long liquidation

Jeera prices after trading firm in the last few trading session witnessed long liquidation by the market participants and settled 1.70% down on Wednesday. Demand from the local stockists amidst reports of surge in the exports of jeera led prices to remain supported in the last few sessions.

According to Gujarat farm ministry, area sown under jeera till December 19, 2011 stood at 2.64 lakh hectares (lh) up 20% as compared to last year. Carryover stocks of jeera is expected to be around 9-10 lakh bags as compared to 4-5 lakh bags in the last year.

Prices in the global markets of Indian origin are quoting around $2,800-2,950/tn while Syrian origin is quoting at $3,100-$3,150/tn.

Production, Arrivals and Exports

Unjha markets witnessed arrivals of 4000 bags 1500 bags more as compared to Tuesday amidst off takes of 3,000 bags on Wednesday.

Production of jeera in 2011-12 is expected to be around 35 lakh bags  as compared to 29 lakh bags in 2010-11. (Each bag weighs 55 kgs).(Source: spot market traders).

According to Spices Board of India, exports of Jeera during April 2011-Ocotber 2011 stood at 20500 tonnes as compared to 19,800 tonnes in 2010-11, an increase of 3.5%.

Courtesy: Angel Commodities

NCDEX pepper settles higher on weak arrivals

Pepper Futures traded weak in the early part of the trading session but bounced back towards the end and settled 0.32% higher on Wednesday.

Spot prices however, ended 0.77% lower owing to lower offtakes yesterday. Demand from the local stockists amidst lower arrivals may support prices in the coming days.

Pepper stocks with Vietnam are expected to be around 10 thousand tonnes while that in India is expected to be 12 thousand tonnes.

Indian parity in the international market is being offered at $7,050- 7,100(c&f) a tonne and remained competitive while Vietnam 550 gl was quoting its pepper at $7,250 per tonne (fob).

Exports

According to Spices Board of India, exports of pepper during April 2011- October 2011 stood at 13,750 tonnes as compared to 10350 tonnes in 2010-11, rise of 32.8%.

According to International Pepper Community (IPC) exports of black pepper during January to October 2011 from six major exporting countries (Brazil, India, Indonesia, Malaysia, Vietnam and Sri Lanka) was around 2.04 lakh tonnes a decline of 4.6% as compared to 2.14 lakh tonne in the same period last year.

Exports from Indonesia posted significant decrease of 40% as compared to previous year. Exports stood at 29,000 tonnes as compared to 48,500 tonnes in the last year.

During Jan to Oct 2011, Brazil exported 25,331 tonnes of pepper a rise of 4.74% as compared to previous year. U.S. remained the major destination of the pepper imports.

Production and Arrivals

Arrivals of pepper in the domestic mandi on Wednesday stood at 18 MT as compared to 12 MT on Monday while offtakes on the other hand stood at 17 tonnes.

Global Pepper production in 2012 is expected to increase 7.2% to 3.20 lakh tonnes as compared to 2.98 lakh tonnes in 2011 with sharp rise of 24% in Indonesian pepper output and in Vietnam by 10%. Pepper production in Vietnam and Indonesia is projected at 1.10 lakh tonnes while that in Indonesia is projected to be 41 thousand tonnes. (Source: Financial Express).

On the other hand production of pepper in India in 2011-12 is expected to be scale down further by 5% to 43 thousand tonnes as compared to 48 thousand tonnes in the last year.

Courtesy: Angel Commodities

NCDEX soybean drops on global cues

NCDEX January soybean futures traded lower on account of weak overseas market. Total arrivals of soybean in Madhya Pradesh were 1.70 lakh bags, Maharashtra was 1.20 lakh bags and Rajasthan was 55,000 bags(Bag=90-100 Kg). Soybean prices in Indore were at Rs2300- 2340/qtl (auctions in Mandi) and plant delivery was quoted Rs2400- 2430/quintal.

Brazil has exported a total of 31.51 million tonnes in January to November 2011 an increase of 2.73 million tonnes as compared to previous year. China was the largest buyer of 354,200 tonnes.

Cumulative soybean sales stand at 63.7% of the USDA forecast for 2011/2012 (current) marketing year versus a 5 year average of 68.5%.

Meal sales came in at 103,700 metric tonnes for the current marketing year and 3,600 for the next marketing year for a total of 107,300. Net oil sales came in at 5,500 metric tonnes which was near the low end of expectations. As per local statistics bureau of China, soybean output in China's Heilongjiang province, the top-producing area, fell 7.5% to 5.42 million metric tons this year.

Rape/mustard Seed

NCDEX January RM Seed futures ended lower on account of profit taking after continuous rise in the last week. Weakness in other oilseeds and edible oil also added bearish market sentiments. Sowing acreage of Rabi oilseeds in India was 7.56 million hectare as compared to 8.15 million hectare a year ago. Oilseeds area in the Maharashtra declined 23% to 207,000 ha, with safflower acreage falling 17.4% to 121,600 ha. Mustard seed accounts for about 70% of India's winterseason oilseed output. As per WASDE (USDA) monthly supply & demand report which is released on December 09, 2011 shows that the Canada rapeseed production raised 1.3 million tons to 14.2 million based on the latest survey results from Statistics Canada.

Refine Soy Oil

NCDEX December refined soy oil futures traded lower on account of weak overseas market. Lower demand at prevailing prices and lower exports figures of Malaysian palm oil also provided support to the bears. As per SGS (cargo surveyor), Malaysian Palm Oil exports from 1- 20 December fell by 10.1% to 9.34 lakh tonnes as compared10.37 lakh tonnes in the same period previous year.

As per Solvent Extractors Association of India, India imported 827,684 tonnes of vegetable oils in the first month of oil marketing year (November to October), up 27 percent from 652,262 tonnes a year ago.

Marker share of palm oil imports was about 90% of total vegetable oil imports. However, soybean oil’s share was less than 1% and rest was sunflower oil. India imports palm oil from Indonesia and Malaysia and a small quantity of soy oil from Argentina and Brazil.

Courtesy: Angel Commodities

NCDEX sugar tumbles on cane crushing

Sugar prices witnessed rangebound trades throughout the day and settled 0.38% lower on Wednesday. Prices had declined sharply last week on reports that Maharashtra Sugarcane crushing and Sugar output improved and is up from the year ago period. Further, sufficient supplies and lower demand from the bulk manufactures amidst winter season kept prices under pressure.

According to the Food Minister, Ministry is planning to discuss with States, the Finance and Agriculture Ministries on removing some of the controls such as doing away with the mandatory obligation to offer sugar for the public distribution system (PDS) in the New Year(Source: Hindu Business Line.

Government has released 19.1 lakh tonne (tn) of Sugar for the month of December which includes 2.07 lakh tn of levy quota, 17 lakh tn of non levy quota and 600 tn of Sugar refined from imported raw.

The Food Ministry has issued permits for the export of nearly 37,000 tonnes of sugar so far out of the one million tonnes that the government has allowed for overseas shipment in the ongoing 2011-12 marketing year.

Liffe white sugar & ICE Raw settled 0.74% and 0.72% lower on Wednesday on reports of global supply surplus from India, Thailand & EU.

Domestic Sugar updates

Sugar output in Maharashtra rose 9% between Oct 01 and Dec 15 to 18.6 lakh tonnes compared with the 17 lakh tonnes same period last year. The output was earlier down by 6%. Recovery rate also increased to 10.07% from 9.70% a year ago.

According to ISMA, India is likely to have crushed 14.4 mln tn cane during Oct 1-Nov 23 and produced 1.3 mln tn sugar during the current crushing season. Maharashtra Oct 1-Dec 8 sugar output is up at 1.45 mln tn vs 1.31 mln yr ago due to higher recovery at 9.8% from 9.344% last year.

Indian Sugarcane production is estimated higher by 0.9% at 342 mn tn for 2011-12 season starting October 1, 2011. ISMA has projected sugar production at 26 million tonnes for 2011-12.

With the opening stocks of 6 mn tn, domestic Sugar supplies are estimated at 32 mn tn against the domestic consumption of around 23 mn tn. Thus there is a wide scope for exports from India.

Global Sugar Updates

Thailand has crushed 9.4 mn tn cane this season against 3.3 mn tn a year ago. Thailand sugar output could reach to 9.9 million tonnes in 2011-12 compared to 9.64 million tonnes in 2010-11.

According to UNICA, Sugar output in Brazil's center-south in the first half of November fell 13.8 percent from a year ago, as more mills ended crushing the 2011/12 cane crop. Sugar production in the period totaled 1.26 million tonnes, compared with 1.46 million tonnes a year earlier.

Swiss sugar consultancy Kingsman lowered its global 2011-12 sugar surplus estimate by 940,000 tn to 8.22 mln tn.

Courtesy: Angel Commodities

NCDEX chana weakens on profit booking

Chana futures settled 2% lower on Wednesday on profit booking amidst reports that weather conditions in Maharashtra have turned favorable for the crop since the beginning of the week.

Rajasthan, rabi pulses area is 1.60 mln hectares as compared to 1.56 mln hectares as on 16th December 2011. Area covered under Chana stands around 1.56 mln hectares as compared to 1.54 mln hectares in the same period previous year(State Farm Ministry)

However concerns over unfavorable weather in Ap and Karnataka still persist and lower area under Chana in these states may restrict sharp downside in the prices.

Forward Market Commission (FMC) has scrapped special margin of 10% on Chana on long side on all running contracts with effect from Friday December 09, 2011.

Sowing progress and Production

Chana is the main Rabi Pulse crop grown in India, sowing of which is done during October-December, and harvesting begins in January. Sowing of Chana began on a brisk note; however, the progress was not satisfactory in Maharashtra, Karnataka, UP, Bihar and AP.

The area under pulses has been marginally lower by 0.8% on account of lack of rains. Area under Chana, a dominant pulse crop has been lower at 83.55 lakh ha against 86.36 lakh ha in corresponding last year.

Indian government is targeting total pulses output of 17 mln tn in the current crop year that started July 2011, down marginally from last year's record production of 18.09 mln tn on account of 10% decline in Kharif Pulses output. Although government has targeted higher Rabi Pulses output, it is difficult to achieve the same taking into consideration the sowing progress and prevailing weather conditions.

According to the first advance estimates, Kharif Pulses output for 2011- 12 season is down by 9.6% at 6.43 mt. Tur output estimates is up by 0.35% while moong & Urad is down by 21% & 16% respectively. Kharif Pulses sowing is down by 9% as on 23rd September, 2011. 109.41 lakh ha has been covered against 120.3 lakh ha in the last year.

Courtesy: Angel Commodities

NCDEX guar seed edges higher on firm export demand

Guar seed and Guar gum futures continued its volatile session for the third consecutive day and settled 0.98% and 1.94% higher respectively on Wednesday. Demand from the overseas buyers is keeping the prices supported. Unconfirmed reports of decline in the arrivals in the major mandi also supported prices.

Prices traded higher despite of high margin 30% on the long side of Guar seed and Guar gum contracts.

Reports of discrepancies in the latest export figures released by the APEDA (Agricultural & Processed Food Products Export Development Authority) coupled with talks of high manipulation has led to high volatility in the Guar prices.

As per the NCDEX circular dt 16/12/2011, further Special Margin of 10% in cash on the Long side of Guar seed and Guar gum will be imposed w.e.f. from Monday, December 19, 2011 on all running and yet to be launched contracts.

Indian Guar gum Association has sought the FMC’s intervention so as to curb rising Guar seed and Gum prices. They clarified that the price surge is not only defeating the futures trade, but also hurting the export prospects. (Newswire 18).

Besides imposing special margin, FMC is also considering various measures like cutting position limits on Guar seed , soughing data on top guar traders in NCDEX etc.

Although long term fundamentals remain supportive for the prices, such rise was not expected at the time when arrivals are at its peak.

Arrivals of late sown Guar crop is ongoing in Rajasthan. Arrivals currently in Rajasthan and Haryana stand around 1.35 lakh bags (Newswire 18).

Production

Guar seed output in Rajasthan is estimated at 11.36 lakh tonnes for 2011-12 season, down by 25% compared to 15.46 lakh tonnes in 2010-11 (Rajasthan Farm Dept). Production of Guar in Haryana and Gujarat is expected to be 0.2 lakh tonnes and 0.07 lakh tonnes respectively in 2011- 12.

Thus, with lower carryover stocks and lower output the supplies would not be sufficient in the long run if Guar gum export trend continue to remain the same as last year, thus supporting the upside rally in the longer term.

Exports

Exports of Guar gum from April to July of the current fiscal year 2011-12 stood at 1.93 lakh tn a rise of 82% compared to 1.02 lakh tn during the same period last year. However, the latest figures from April to August are 5% lower than the April – July number published last month. This has created panic in the markets.

Courtesy: Angel Commodities

CBOT Updates: Wheat gains on firm demand

CHICAGO (Commodity Online): US wheat futures rally on short-covering and support from corn. With speculative funds net short the market, traders says it's primed for a short-covering rally, which was a factor today.

Gains in corn and crude oil added to the supportive tone. "There really is no fundamental reason for the rally," says RCM Asset Management's Doug Bergman.

Weak export demand limits gains. CBOT March wheat ends up 1.5%, or 9 1/4c, to $6.17 a bushel; KCBT wheat closes up 3c to $6.71; MGEX March wheat closes up 2 1/2c to $8.41 3/4.

Courtesy: CME Group