Commodities Report: November 30, 2011

Latest move by China has come in as a relief to the ailing global financial markets as the world’s fastest growing economy has cut reserve requirements of banks by 50bps. This move has come in after prolonged monetary tightening and could help boost market sentiments, helping ease concerns of slowdown in Chinese demand for commodities.

Despite continuous efforts to resolve the Euro Zone debt crisis, concerns with respect to the 17-nation region remain. European and Asian equities remained under pressure today and American stock futures are also trading in the negative territory. But hopes of some solution towards the debt crisis builds up again as Euro area finance ministers approve enhancements to their bailout fund and also seek a bigger role for the International Monetary Fund (IMF) in fighting the debt crisis.

Gold prices came under pressure today as strength in the US Dollar weighed on the yellow metal in the international markets. But prices on the MCX platform were up by 0.3 percent till 4.30pm IST on account of a weaker Rupee. Silver prices also witnessed downside pressure, taking cues from movement in gold and base metals which are also trading in the red. Spot Silver prices are down by more than 2 percent till 4.30pm IST and are trading around $31.24/oz currently.

Bears dominated trading in the base metals space and copper, the leader of the base metals pack declined by more than 2 percent on the LME till 4.30pm IST despite support from supply-side fundamentals. Nymex crude oil declined by almost 1 percent today, taking cues from cut in credit ratings of world’s biggest lenders by the Standard and Poor’s (S&P). Additionally a stronger dollar also put pressure on the oil prices. Prices are trading around $99.12/bbl after touching an intra-day low of $98.92/bbl. On the MCX, prices remained flat as downside was cushioned on account of Rupee depreciation.

The US Energy Department (EIA) is scheduled to release it weekly inventories report tonight and crude oil inventories is expected to decline by 0.2 million barrels for the week ending on 25th November 2011. Gasoline stocks are expected to rise by 1.5 million barrels whereas distillate inventories are expected to fall by 1.1 million barrels.

Outlook
China’s latest move to cut reserve requirements of banks will lead to positive sentiments in the global financial markets today. This will exert downside pressure on the US dollar which will help gold and silver to move in the northward direction.

Base metals are expected to trade higher today as China’s latest step will help ease concerns of future demand prospects, thus supporting an upside in prices.

Crude oil prices are expected to trade with a positive bias today, taking cues from geo-political tensions in Iran, OPEC’s second-largest oil exporter. Sharp gains however could be capped during the trade if risks associated with the European economies rises.

Courtesy: Angel Commodities


Base metals settle on mixed trend, copper gains

The base metals pack traded on a mixed note in yesterday’s trading session with aluminium, nickel and lead ending in the red while copper and zinc closing in the green. However, sharp decline was cushioned on the back of a weaker dollar.

Copper
Copper prices rose around 0.6 percent on the LME and by 0.2 percent on the MCX on Tuesday. Workers at Collahuasi copper mine in Chile stopped working over fears of coming layoffs on Monday. As a result of this, copper concentrate output has been stopped and copper cathode production has been limited.

The company has implemented a contingency plan to face the workers action, into which about 10 percent of workers are participating.

Collahuasi is world’s third largest copper mine and produces around 3 percent of the world’s copper production. It had produced 504,000 tonnes of copper in 2010. This supply concerns coupled with favorable economic data from the US acted as a positive factor for the red metal prices yesterday.

Copper touched an intra-day high of $7523/tonne and closed its trading session at the level of $7475/tonne on Tuesday.

Unwrought aluminium stocks declined to 1.406mn t in Oct–IAI According to the data from the International Aluminium Institute (IAI), western countries unwrought aluminium stocks declined to 1.406 million tonnes in October as compared to a revised 1.414 million in September. Unwrought stocks totaled to be at 1.334 million tonnes in October 2010.

Courtesy: Angel Commodities


Crude oil remains higher on US economic data

Nymex crude oil prices increased by more than 1.5 percent yesterday, taking cues from favorable consumer confidence data from the US.

Additionally a weaker dollar also acted as a positive factor for the commodity.

Oil prices touched an intraday high of $100.15/bbl and closed at $99.8/bbl in yesterday’s trading session.

On the MCX, oil prices gained by 1.9 percent and closed at Rs.5189/bbl after touching an intra-day high of Rs.5202 on Tuesday.

API Inventories Data
As per the American Petroleum Institute (API) report, crude oil inventories increased by 3.44 million barrels for the week ending on 25th November 2011. Gasoline inventories fell by 173,000 barrels and distillates inventories increased by 1.3 million barrels.

EIA Forecast
The US Energy Department (EIA) is scheduled to release it weekly inventories report today and crude oil inventories is expected to decline by 0.2 million barrels for the week ending on 25th November 2011. Gasoline stocks are expected to rise by 1.5 million barrels whereas distillate inventories are expected to fall by 1.1 million barrels.

Courtesy: Angel Commodities


Precious metals edge higher on weak dollar index

Weakness in the US dollar acted as a positive factor for gold prices in yesterday’s trading session. The yellow metal rose around 0.3 percent and touched an intra-day high of $1719/oz.

On the MCX, Gold December contract declined by 0.3 percent on account of Rupee appreciation and touched an intraday low of Rs.28, 621/10 gms on Tuesday.

Silver
Spot silver prices declined up to 1.7 percent on Tuesday and touched an intra-day low of 31.48/oz. But, due to dollar weakness silver prices recovered from its low and ended at the level of 31.93/oz yesterday.

On the MCX, Silver December contract declined almost 1 percent on account of appreciation in the Indian Rupee and touched an intra-day low of Rs.54, 551/kg yesterday.

Courtesy: Angel Commodities


Mixed trend at base metals on US economic data

Base metals traded a mix though the equity markets performed better consecutively for the second day. Lead and Zinc posted some gains whereas the other base metals lost as overall selling was witnessed in the markets yesterday.

From the Inventory perspective, apart from Nickel and Aluminum all the base metals have witnessed drawdown. The economic data releases from the Euro zone and US had a mixed impact and it failed to provide any cushion to the investors.

Today morning the Asian equities are trading low after the two days bull rally and base metals are also trading down by 0.5 to 1.5 percent at LME owing rating agencies down graded 15 banks from US and Europe.

The Japanese Industrial production has increased considerably but still not much change has been witnessed in the metals pack. Overall, the metals are moving on news based trend and not able to set any defined trend.

The metals are expected to remain under pressure for the day. From the data releases, today retail sales data from Germany and Employment change, non-farm productivity and pending homes sales from US are expected to be positive and the same may provide some solace to the metals.

Aluminium
Aluminium prices ended down by 1.48 per cent on LME while in India closed down by 1.5 per cent.

Aluminum cancelled warrants have reduced, the prices also decreased indicating the short term bearish trend, however the future demand are prospective.

Copper
Copper prices ended down by 0.07 per cent while in Indian market was up by only 0.11 per cent.

The Cancelled warrants ratio reduced from 7.42 percent to 7.2 percent, whereas there has been a drawdown of Inventory at the LME.

The open interest for the three month forwards contract at LME is also increasing suggesting the future demand for the metal.

Lead
Lead prices ended up by 0.30 percent in LME while in MCX closed down by 0.38 per cent.

The cancelled warrant ratios are continuously maintaining above six per cent mark indicating that the spot demand is increasing.

The open interest at futures markets had increased providing a slight bullish trend for the short term.

Nickel
Nickel prices at LME ended down by 0.76 per cent while in MCX it ended down by 1.11 per cent.

The cancelled warrants though have been improving but now are in the down side trend and reduced from 6 per cent to 3.04 per cent indicating a fall in the spot demand.

The backwardation effect is slowly reviving indicating increase in future demand for the metal.

Zinc
Zinc prices witnessed up trend and ended the session at $1958 up by 0.05 per cent, while in MCX the metal closed down by 0.20 percent.

The cancelled warrant ratios decreased slightly from 5.81 percent to 5.76 percent.

The future trend is building positively showing some gains in the near term.

Courtesy: Karvy Commtrade Ltd.


India soy complex settles lower on global cues

Soybean prices marginally declined in near month futures contract as international prices remained weak through out the day.

Stockists and millers buying in Indian spot markets kept spot prices firm at '2200/quintal despite the arrivals being 6.5 lakh bags all over India.

CBOT bean prices closed higher marginally due to weakening dollar index and spill over support from grains.

Soy oil prices declined on Tuesday owing to the weak demand and peak soy oil producing season domestically. Demand for palm oil is also sluggish which has kept edible oil prices under pressure.

However CBOT prices yesterday ended higher due to weak dollar index and spill over support from soybeans.

Supply disruptions in palm might shift the buyers towards soy oil which also supported positive market sentiments.

Courtesy: Karvy Commtrade Ltd.


NCDEX turmeric trades down on weak exports

Turmeric Spot and Futures continued to trade lower and settled 0.29% and 2.77% lower respectively on Tuesday on account of weak demand from the domestic and overseas buyers. Anticipating better crop output for the 2011-12 season is also inducing market participants to create sell positions.

Production, Arrivals and Exports
Arrivals in Nizamabad stood at 1,000 bags while Erode market witnessed arrivals of 7,000 bags on Tuesday.

Turmeric production for the year 2011-12 is projected at 82 lakh bags (1 bag= 70 kgs) compared to 69 lakh bags in 2010-11. However, area covered under turmeric till 21st September 2011 stood at 0.67 lakh ha 2.9% lower as compared to 0.69 lakh ha in the previous year.

According to Spices Board of India, exports of Turmeric during April 2011- September 2011 stood at 41,500 tonnes as compared to 28,500 tonnes in 2010-11, rise of 46%.

Courtesy: Angel Commodities


NCDEX jeera tumbles on subdued demand

Jeera prices traded firm in the early part of the trading session but profit booking at resistance levels led prices to correct and settle 0.83% lower on Tuesday. Lacklustre trades at the domestic led Spot prices to settle 0.12% lower yesterday.

Sowing of jeera in Rajasthan has gained momentum due to favorable weather condition. According to Gujarat farm ministry, area sown under jeera till November 21, 2011 stood at 1.13 lakh hectares (lh) up 56% as compared to 0.725 lh in the same period 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 steady arrivals of 3,750 bags amidst offtakes of 3,000 bags on Tuesday.

Production of jeera in Gujarat and Rajasthan in 2011 was around 22 lakh bags and 7-8 lakh bags respectively. (Each bag weighs 55 kgs). (Source: spot market traders).

According to Spices Board of India, exports of Jeera during April 2011- September 2011 stood at 16,000 tonnes as compared to 18,800 tonnes in 2010-11, decline of 15%.

Courtesy: Angel Commodities


NCDEX pepper rises on limited stocks

Black pepper prices continued to trade firm and settled 0.43% marginally higher on Tuesday. Spot prices however remained closed due to protests over Mullperiyar dam safety concerns. Reports of lower pepper crop in India in 2011-12 are expected to support pepper prices.

Lower stocks with Vietnam and Indonesia, the major suppliers of pepper till fresh arrivals commence next year (April and July respectively) will also support prices.

Indian parity in the international market was at $7,450-7475(c&f) a tone and remained competitive and was attracting overseas orders while Vietnam 550 gl was quoting its pepper at $7,350 per tonne (fob).

Exports from the major countries
According to Spices Board of India, exports of pepper during April 2011- September 2011 stood at 11,250 tonnes as compared to 9,250 tonnes in 2010-11, rise of 22%.

According to International Pepper Community (IPC) exports of black pepper during January to September 2011 exports of pepper from six major exporting countries (Brazil, India, Indonesia, Malaysia, Vietnam and Sri Lanka) was around 188,000 mt, 4% lower from the corresponding period of 195,000 mt. Vietnam has reportedly sold 1.12 lakh tonnes of pepper from January to September 2011 a rise of 14% as compared to previous year.

Sharp fall of 38% in pepper exports was witnessed in Indonesia during above period. Exports stood at 26,300 tonnes as compared to 42,082 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 Monday stood at 7 tonnes as compared to 10 tonnes on Saturday. Offtakes on the other hand stood at 8 tonnes.

Global Pepper production in 2012 is expected to increase 4% to 2.70 lakh tonnes with Vietnam the largest producer producing around 1.40-1.50 tonnes. Carryover stocks are projected at 50,000 tonnes as compared to 60,000 tonnes in 2011. (Source: Peppertradeboard). While, production of pepper in India in 2011-12 is expected to be 43 thousand tonnes according to the market sources a decline of 5% as compared to 48 thousand tonnes in the last year.

Courtesy: Angel Commodities


NCDEX soybean declines on weak fundamentals

NCDEX December soybean futures traded with mixed sentiments amid subdued trading activity on lack of fresh fundamental. Arrivals of soybean in Madhya Pradesh were around 2.75 lakh bags, Maharashtra 1.5 Lakh bags and Rajasthan 0.75 lakh bags (bag=100 kg).

Arrivals of soybean declined slightly because farmers are holding their stocks in anticipation of higher prices in coming days.

USDA’s weekly export sales released on Friday (November 25, 2011) which shows that the Weekly export sales for soybeans came in at 921,600 metric tonnes which was well above trade expectations. China was a net buyer of 936,000 tonnes for the week.

Mustard Seed
NCDEX December RM Seed futures ended in red on account of profit taking after higher levels. Higher sowing acreage of RM Seed this year as compared to last year and weakness in vegetable oil also provided support to the bears. Rape/mustard seed accounts for about 70% of India's winter-season oilseed output.

As of November 25, 2011, sowing acreage of Mustard Seed increased to 56.54 lakh hectare (up by 1%) as compared to 55.51 lakh hectare last year till date.

Sowing acreage of RM seed increased mainly higher sowing acreage in West Bengal, Haryana and Rajasthan due to 35% hike in RM Seed MSP (Current Rs 2500/qtl). However, Area under groundnut (1.89 vs 2.18 lakh ha), sunflower (2.31 vs 2.99 lakh ha) and safflower (1.57 vs 1.99 lakh ha) is declined slightly. Overall Rabi oilseed declined marginally to 65.68 lakh ha as compared to 65.94 lakh hectares.

Refine Soy Oil
NCDEX December refined soy oil futures ended lower on account of profit taking after yesterday’s sharp rise. Imported crude soy oil price 60,800 rupee/tonne on Tuesday as compared to 61,000/tonne on Monday.

India won't hike the base price of imported refined edible oils immediately to prevent any price rise in the local market. India levies a 7.5% import tax on refined oil, but the duty is calculated on the basis of base prices fixed by the government and not the market price. Imports of crude edible oil are tax-free. As per SGS ( a cargo surveyor).

Malaysia's palm oil exports during the November 1-25, declined to 1.34 million tons, down 1.7% as compared with 1.37 million tonnes during the October 1-25. Crude palm oil price were $990/tonne C&F Mumbai on Monday vs $995/tonne on Friday.

India’s Vegetable Oil Imports:
According to Solvent Extractors Association of India, India’s import of vegetable oil in the month of October 2011 was 8.78 lakh tonnes, up 12% as compared to 7.81 lakh tonnes in October 2010. However, from November 2010 to October 2011 (Oil Marketing year), India’s import of vegetable oil was 83.71 lakh tonnes, fell more than 5% as compared to last edible oil marketing year of 88.23 lakh tonne.

Courtesy: Angel Commodities


NCDEX sugar settles lower on long liquidation

Sugar Futures traded firm in the early part of the trading session but witnessed long liquidation on reports that government might release higher sugar quota for the month of December.

Prices settled 0.43% down on Tuesday. Notification for the recently allowed 1 mln tn sugar exports is likely to be issued soon and the entire quantity will be in a single tranche. This is likely to control prices from falling sharply.

However, crushing has gained momentum across India and is thus expected to cap sharp upside in the prices.

India has extended the deadline for mills to seek export permits for around 30,000 metric tons of unsold sugar from the marketing year ended Sept. 30 until Dec. 6, 2011.

ICE Raw Sugar futures and LIFFE traded 1.6% and 0.52% higher owing to demand from the buyers and on possibility of arriving at positive action by European leaders to solve the debt crisis.

The Brazil white Sugar prices have declined to $ 630 /tn last week ended 23rd Nov, 2011 compared to $657 per tonne (FOB), in the week ended 19th November, 2011. Current offer prices stands at Rs 32770 per ton in rupee terms compared to current domestic price of Rs 30500 / tn.

Domestic Sugar updates
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.

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 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.

China, the world's largest sugar consumer, has imported 1.6 million tons of sugar in the first 11 months of 2011, with preliminary data for the full year likely to be issued around October 10.

Courtesy: Angel Commodities


NCDEX chana weakens on selling pressure

Chana futures witnessed selling by the market participants on account of lacklustre trades at the domestic and better area covered under chana in Rajasthan till date.

According to the Ministry of Agriculture, pulses have been sown in 61.30 lakh hectares as on November 24th 2011 as compared to 57.29 lakh hectares in the same period last year.

Area sown under Chana in Rajasthan till 22nd November 2011 was 14.59 lakh hectares (lh) as compared to 11.81 lh in the same period previous year. Area under Chana is up by 23% in Rajasthan, by 9% in MP and by 6% in UP as on 22nd November. However, the pace is slow in Maharashtra and AP.

There are reports of decline in the output of dry peas and Chickpeas in Canada for 2011. Chickpeas output is expected to fall by 58% to 54 MT while that of peas will fall by 33% to 2 MT (Source: Agriwatch)

Currently, imports from Australia are viable. Cost and Freight (C & F) quote declined marginally by $20 per MT to $630/MT. Thus, fresh import contract may execute in the coming weeks due to import parity . Landed cost currently stands at Rs 32130 / tn against domestic price of Rs 34100 / tn in Mumbai.

Sowing progress and Production
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.

Chana is the main Rabi Pulse crop grown in India, sowing of which is done during October-December, and harvesting begins in January. If the sowing trend is maintained India may witness another bumper crop of Chana in the coming season.

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 surges on firm exports

Guar spot prices and Futures continued to extend the gains of the previous day and settled at the upper circuit of 4 % owing to robust export demand for the Guargum and expectations that Guar output in the season might be lower than earlier projected estimates of 11.3 lakh tonnes.

Arrivals of Late sown Guar crop has started across Churu, Bikaner and other growing areas of Rajasthan and thus arrivals have increased in the last 2-3 days and stands around 1 lakh bags.

However, arrivals are not expected to cross 1.2 lakh tonnes as harvesting of early sown Guar crop (Guari) is almost completed.

Weaker rupee is seen gearing up exporter’s profit margin. However, export demand may hit to some extent amidst higher prices and weaker rupee.

On the back of record high exports, the exports federation has urged the Government to withdraw export promotion incentives and impose export duty on guar seeds. If Government considers the removal of export incentive and imposes export duty exporters profit margin will be reduced.

Traders believe that if India considers imposition of export duty countries like China would be forced to roll back import duty on Guar gum powder and splits and this may benefit India in the long run.

Production
Guar seed output in Rajasthan is estimated at 11.36 lakh tonnes for 2011-12 season 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.

However, there are unconfirmed reports that Guar seed output may be lower around 10 lakh tonnes compared to the government target of 11.3 lakh tonne due to excess moisture in the soil during the sowing period.

Exports
According to Agriculture and Processed Food Products Export Development Authority, Indian Guar gum exports for the period April- March 2010-11 surged by 84% and stood at 4,03,007 tonnes as compared to 2,18,473 tonnes during the last year.

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.

Export figures clearly indicate that global crisis has not hit Guar exports as of now in the current season too. In fact rupee has increased profit margin of the exporters in the current season.

Courtesy: Angel Commodities