Commodities Report: December 07, 2011

European markets traded in the green today on the back of rising expectations that European leaders will take steps in order to tackle with the region’s debt crisis. US stocks futures are also trading higher by more than half a percent.

Spot gold prices have declined around 0.3 percent and silver decline by more than 1 percent on the back of dollar recovery during the day. But, sharp decline in gold was not witnessed on upbeat sentiments in the markets and as gold ETF reached a record high which provided support.

The base metals pack traded higher today, taking cues from upbeat sentiments in the global markets due to rising optimism over Euro Zone. However, sharp gains were capped due to dollar strength. Lead is the top performer of the day, as the metal rose more than 0.6 percent on the LME and around 0.8 percent on the MCX till 4.45 pm IST.

Nymex crude oil gained by 0.4 percent today taking cues from expectations that European leader will take steps to control the debt crisis. Additionally, expected fall in US inventories and potential supply concerns from Middle East also acted as a supportive factor.

Oil prices are trading around $101.63/bbl after touching an intraday high of $101.94/bbl till 4:45pm today. On the MCX, prices increased by 0.7 percent to Rs.5231/bbl after touching an intraday high of Rs.5244/bbl till 4:45pm today.

The US Energy Department (EIA) is scheduled to release it weekly inventories report tonight and crude oil inventories is expected to fall by 0.6 million barrels for the week ending 2nd December 2011. Gasoline stocks are expected to rise by 0.7 million barrels whereas distillate inventories are also expected to increase by 1.2 million barrels.

Outlook

Gold and silver are expected to trade higher today, on account of a weaker dollar. Silver being an industrial metal will also take cues from upside in base metals too.

We expect base metals to trade with a positive bias today, on the back of a weaker dollar coupled with rise in risk appetite in the global markets ahead of European Union Summit.

Crude oil prices are expect to trade higher today, taking cues from expected decline in US crude oil inventories coupled with potential supply worries from the Middle East. In additional to this, dollar weakness will also provide upside in oil prices.

Courtesy: Angel Commodities


Base metals settle lower on global economic concerns

The base metals pack traded on a mixed note on Tuesday with copper and aluminium ending in the red while nickel, lead and zinc ending in the green.

However, sharp decline was cushioned on account of dollar weakness.

Lead

Lead was the top gainer on Tuesday, as the metal rose around 1.3 percent on the LME and by 0.6 percent on the MCX.

Continuously declining lead inventories acted as a supportive factor for metal to rise.

On a weekly basis, LME lead inventories declined by 1.8 percent to 365,225 tonnes on 6th December 2011 from the previous level of 371,700 tonnes on 29th December.

Inventories dropped sharply by almost 5 percent in the single month of November from 387,900 tonnes on 31st October 2011.

Additionally, dollar weakness also acted as a positive factor for the metal. Prices touched an intra-day high of $2135/tonne and ended at the level of $2125/tonne. On the MCX, Lead December contract touched an intra-day high of Rs109.10/kg and closed at Rs108.7/kg on Tuesday.

Courtesy: Angel Commodities


Crude oil to trades higher on global supply concerns

Nymex crude oil gained by 0.3 percent on Tuesday, on the back of expected decline in global supplies after the European Union stated that it may ban crude oil imports from Iran.

Oil prices touched an intra-day high of $101.42/bbl and closed at $101.3/bbl yesterday. On the MCX, oil prices declined by 0.8 percent and closed at Rs.5194/bbl after touching an intra-day low of Rs.5175/bbl on Tuesday.

API Inventories Data

As per the American Petroleum Institute (API) report, crude oil inventories declined more than expected by 5.04 million barrels to 334.1 million barrels for the week ending on 2nd December 2011.

Gasoline inventories increased by 5.97 million barrels to 215.4 million barrels and distillate inventories rise by 1.68 million barrels to 141.1 million barrels.

EIA Inventories Forecast

The US Energy Department (EIA) is scheduled to release it weekly inventories report today and crude oil inventories are expected to decline by 0.6 million barrels for the week ending 2nd December 2011.

Gasoline stocks are expected to increase by 0.7 million barrels whereas distillate inventories are also expected to increase by 1.2 million barrels.

Courtesy: Angel Commodities

Precious metals edge higher on weak US dollar

Weakness in the US dollar helped gold prices to witness gains in the international markets on Tuesday. A weaker dollar makes dollar-denominated commodity cheaper for the holders of the other currencies.

Prices touched an intra-day high of $1732/oz and ended at the level of $1727/oz yesterday. MCX Gold February contract rose around 0.3 percent and touched an intra-day high Rs29,000/10gms on Tuesday.

Silver

Spot silver prices rose sharply by 2.6 percent on Tuesday on the back of rise in gold prices coupled with a weaker dollar.

Prices touched an intra-day high $32.87/oz and closed its trading session at $32.78/oz yesterday. On the MCX, Silver March contract surged around 3.6 percent and touched an intra-day high of Rs57,185/kg on Tuesday.

Holdings in the iShares Silver Trust, the world's largest silverbacked exchange-traded fund, increased around 0.7 percent to 9,696.51 tonnes by 6th December from the previous 9,627.88 tonnes on 29th November 2011.

Courtesy: Angel Commodities


India soy complex slumps on weak fundamentals

Soybean declined on Tuesday while the fall was limited as buying at spot markets supported the prices in Indian markets and the weather concerns in Brazil and Argentina supported the prices at the CBOT.

Spill over support from the corn prices also helped the CBOT soybean close higher yesterday.

Soy oil prices declined marginally in line with soybean as the crushing season of soybean is keeping the prices under pressure.

Soy oil prices at CBOT recovered marginally on Tuesday in line with soybean as the supply situation of the oilseeds is under scrutiny now with the expectations of production to be lower for the current year.

Mustard seed prices gained indifferent to the soy complex as the prices across the spot markets surged a tad in both mustard seed and mustard oil.

Lean season for the commodity and possible lower carry forward stocks is having positive impact on prices.

Courtesy: Karvy Commtrade Ltd.


NCDEX jeera tumbles on higher sowing

Jeera Spot prices and Futures witnessed profit booking at higher levels and settled 2.15% down on Tuesday. Reports that weather in the chief growing area is not favourable for the sown jeera crop are likely to support prices. Temperature in the Gujarat is too hot which is drying the soil moisture thereby stopping proper germination of the seed.

Prices in the Spot settled 0.27% down owing to lacklustre trades yesterday.

According to Gujarat farm ministry, area sown under jeera till November 30, 2011 stood at 1.55 lakh hectares (lh) up 67.5% 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 steady arrivals of 2,750 bags amidst offtakes of 5500 bags on Monday.

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- September 2011 stood at 16,000 tonnes as compared to 18,800 tonnes in 2010-11, decline of 15%.

Courtesy: Angel Commodities


NCDEX turmeric weakens on long liquidation

Turmeric Futures witnessed long liquidation by the market participants and settled 0.96% down on Tuesday. Slight recovery in demand from the local buyers is likely to support prices.

Production, Arrivals and Exports

Arrivals in Nizamabad and Erode mandi stood at 1000 bags and 7500 bags respectively on Monday.

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- September 2011 stood at 41,500 tonnes as compared to 28,500 tonnes in 2010-11, rise of 46%.

Courtesy: Angel Commodities


NCDEX pepper settles higher on weak arrivals

Benchmark spot pepper and Futures settled 0.68% and 0.66% higher respectively on Tuesday on account of demand from the local buyers amidst lower arrivals.

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 was at $7,625-650(c&f) a tone and remained competitive and was attracting overseas orders while Vietnam 550 gl was quoting its pepper at $7,450 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 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 Tuesday stood at 21 tonnes as compared to 17 tonnes on Monday. Offtakes on the other hand stood at 31 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 December soybean futures ended slightly lower on account of weak overseas market as euro debt crisis. Most of the mandis were closed on occasion of Muharram. Total arrivals of soy bean in Madhya Pradesh was 15,000-20,000 bags lakh bags only on Tuesday (Bag=100 Kg).

Soybean plant delivery prices were Rs 2240-2260/qtl (excluding VAT) on Tuesday. Weekly export inspections were disappointing for this week. Weekly export inspections came in at just 31.6 million bushels which was well below trade expectations and compares with 22.8 million necessary each week to reach the USDA projection for the year.

Cumulative shipments have reached just 32.3% of the forecast for the marketing year compared with 37.2% as the 5-year average for this time of the year. USDA’s weekly export sales released on Friday (December 01, 2011) which shows that the weekly export sales for soybeans came in at 489,600 tonnes which was below trade expectations. Meal sales were 135,500 metric tonnes, in line with expectations. Sales of 99,000 metric tonnes are needed each week to reach the USDA forecast. Oil sales were 8,900 tonnes, in line with expectations

Mustard Seed

NCDEX December RM Seed futures surged higher on second consecutive trading sessions due to lower yield concern as unfavorable weather condition (high temperature). Higher prices of other oilseeds and vegetable oils also added bullish market sentiments.

There is talk about the low yield of RM Seed in Rajasthan this year as compared to last year due to warm weather at flowering stage also provided support to the bulls.

Rape/mustard seed accounts for about 70% of India's winter-season oilseed output. As of December 02, 2011, sowing acreage of Mustard Seed increased to 56.60 lakh hectare (down by 2.5%) as compared to 58.1 lakh hectare last year till date.

Sowing acreage of RM seed declined in India mainly due to lower sowing acreage in Rajasthan. 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 slightly lower on account of profit taking after sharp gains in the last two trading sessions. Lower export figures of Malaysian palm oil as poor demand of vegetable oil from China as well as European countries also added bearish market sentiments. As per Interteck ( a cargo surveyor), Malaysia's palm oil exports in the month of November, declined to 1.53 million tons, down 9% as compared with previous month. Imported CPO price were quoted at 51,200 rupee/tonnes vs 51,400 rupee/tonnes on Monday.

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 higher on firm export demand

Sugar prices settled 0.17% up owing to positive sentiments regarding the formal notification of Sugar exports and traced firm international market.

However, sufficient availability in domestic caused by increased quota for the month of December 2011 might cap sharp gains. Also reports of October to November 2011 India Sugar output to rise by 17% to 2.16 million tonnes as compared to 1.84 mln tonnes in last year might restrict prices from rising sharply.

Extension of zero duty on Sugar till March 2012 and ongoing crushing across India also pressurized sugar prices in the last few trading session.

The government has notified the export of one million tonnes of sugar in the 2011-12 season. The ministry has given 45 days to sugar mills to apply for export release orders, which will be valid for 60 days. (Source: Economic Times)

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 raws.

Government has extended Zero duty on sugar imports till March 2012 to tame inflation.

ICE Raw Sugar LIFFE white Sugar futures settled 0.42% and 0.16% higher owing to reports that European leaders might draw some concrete plan to lead the region out of the debt crisis and reports that imports from China might increase to the tune of 19%.

The Brazilian white Sugar prices are ruling around $ 659/tonne (FOB) as on December 01, 2011 compared to $630/tonne (FOB), in the previous week. Current offer price stands at Rs 34,260/tonne in Rupee terms compared to current domestic price of Rs 31,050 /tonne (FOB).

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. Output in Maharashtra during Oct- Nov 2011 period is lower at 9.11 lakh tn as compared to 9.73 lakh tn in the 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 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 ends lower on subdued demand

Lacklustre trades at the domestic market owing to Mohurram led prices to settle down on Tuesday. Prices at the Spot and Futures ended 0.35% and 0.25% lower yesterday. However, lower stocks at the domestic till fresh arrivals are expected to support prices in the coming days.

According to the latest report by Ministry of Agriculture, pulses have been sown in 114.1 lakh hectares as on 2nd December 2011, up 2.4% as compared to 111.5 lakh hectares in the same period last year.

Area sown under Chana in India till 2nd December 2011 was 75.9 lakh hectares (lh) as compared to 73.9 lh in the same period previous year.

Area under Chana in Maharashtra till date is 8.21 lakh hectares down 16% as compared to 9.82 lakh hectares in the same period previous year.

In Rajasthan, as per the current pace of sowing and favourable weather it looks that sowing of Chana may cross the set target of state agriculture department of 17 lakh ha. So far Chana is sown in 15.08 lakh ha against 13.46 lakh ha sown in the same period last year.

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 on account of 10% decline in Kharif Pulses output.

However, Rabi Pulses output Is estimated higher on higher area and conducive weather

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 weakens on profit booking

Guar seed and Guargum Futures witnessed a very volatile session and settled 0.77% down and 0.09% up respectively on Tuesday. Prices initially touched new historical high of Rs.5,742/qtl and Rs.18,577/qtl and thereafter witnessed correction on rumors that special margin might be imposed on the complex.

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 1.50 lakh bags.

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