Commodities Report: December 12, 2011

European markets traded lower as Moody’s Investors Service stated that it will review debt ratings for the European nations for the first quarter of 2012. It also stated that the summit in the last week did not produce crucial initiatives in order to control the sovereign debt crisis. This led to rise in risk aversion in the global markets today.

Spot gold prices declined around 1.7 percent today, mainly on the back of dollar strength, as a stronger makes dollar-denominated commodities expensive for the holders of other currencies. The yellow metal touched an intra-day low of $1676/oz and was trading at $1681/oz till 4.30 pm IST today. On the MCX, Gold February contract dropped almost 1 percent as further decline was cushioned on account of Rupee depreciation.

Taking cues from fall in gold prices and downside in base metals, spot silver declined sharply by more than 2.5 percent till 4.30 pm IST today.

Additionally, a stronger dollar also acted as a negative factor for prices. The white metal touched an intra-day low of 31.20/oz and was hovering around $31.37/oz till 4.30 pm IST. MCX Silver March contract, slipped around 1.1 percent and was trading at Rs.56,322/kg till 4.30 pm IST today. Depreciation in the Indian Rupee resisted further fall on the domestic bourses.

Rising concerns over Euro Zone debt worries coupled with strength in the US dollar exerted downside pressure on the base metals complex today. However, depreciation in the Rupee cushioned sharp decline on the Indian platform. Nickel was the worst performer of the day, as the metal declined by 2.7 percent on the LME and around 1.3 percent on the MCX till 4.30 pm IST today.

LME Aluminium inventories increased sharply by 2.8 percent to 4,715,700 tonnes today. This will act as a negative factor for the aluminium prices.

Nymex crude oil prices declined by 1.3 percent today, on the back of deepening tensions over Euro Zone debt crisis coupled with a stronger dollar. Oil Prices are trading around $98.16/bbl and have touched an intra-day low of $97.91/bbl till 4:30pm IST. However, on the MCX, prices increased by 0.7 percent due to Rupee depreciation and touched an intra-day high of Rs.5207/bbl till 4:30pm IST today.

Outlook

Gold and silver are expected to trade lower today on account of a stronger dollar. Silver will also take cues from fall in gold prices and downside in base metals.

We expect base metals and crude oil prices to trade with a negative bias today, on the back of escalating tensions over Europe’s debt crisis along with a stronger dollar.

Courtesy: Angel Commodities



Mixed trend in base metals on global economic concerns

On a weekly basis, the base metals pack delivered a mixed performance on the LME with copper, aluminium and zinc ending in the red while nickel and lead managed to close in the green. Worries with respect to Euro Zone debt crisis created demand concerns for the metals which affected prices.

Additionally, mixed sentiments in the global markets also acted as a negative factor for base metals. However, Rupee depreciation cushioned further losses on the domestic bourses last week.

Nickel

Nickel was the top gainer in the last week, as the metal surged 5.7 percent on the LME and more than 7 percent on the MCX. Increased demand from alloy-makers for nickel acted as a positive factor for the metal. Additionally, a weaker dollar also provided further support for prices. On the MCX, depreciation in the Rupee led to further rise on the Indian platform last week. MCX Nickel December contract hit a high of Rs.972.50/kg and closed at Rs.970.30/kg on Friday.

Lead

Lead prices witnessed gains of around 2.1 percent on the LME and by more than 3 percent on the MCX in the last week. Lead gained mainly on the back of rise in demand for lead-acid batteries from colder regions. Lead-acid batteries are used in cars and other vehicles and are more susceptible to get damaged very fast in extreme cold temperature. Around 80 percent of the total world consumption of lead is towards lead batteries. On the MCX, lead touched a high of Rs112.20/kg and closed at Rs111.35/kg last week.

Courtesy: Angel Commodities



Crude oil edges higher on rising inventories

On a weekly basis, Nymex crude oil dropped by 1.5 percent which is the biggest weekly decline since September. Prices came under pressure due to unexpected rise in US crude oil inventories and above normal temperature. Additionally, increasing production from Saudi Arabia offset the supply concerns from Iran which acted as a negative factor for oil prices last week.

Prices touched a low of $97.36/bbl during the week and closed at $99.41/bbl on Friday. On the MCX, prices declined around 0.2 percent as sharp fall was cushioned on account of Rupee depreciation and closed at Rs.5139/bbl on Friday, after touching a low of Rs.5101/bbl last week.

Natural Gas

Nymex natural gas prices declined almost 7 percent last week, on the back of expected moderate weather forecasts. Prices touched a low of $3.243/mmBtu during the week and closed at $3.336/mmBtu on Friday. On the MCX, gas prices decreased by more than 5 percent and closed at Rs.174.9/mmBtu on Friday.

Courtesy: Angel Commodities


Precious metals decline on weak global demand

On a weekly basis, spot gold prices declined around 2 percent as fall in crude oil prices affected the inflation-led demand for gold. However, weakness in the US dollar resisted further decline in the yellow metal.

On the MCX, Gold February contract rose almost 1 percent due to depreciation in the Indian Rupee which led to rise on the domestic bourses and hit an all-time high of Rs29,433 last week.

Holdings in the SPDR Gold Trust, world's largest gold-backed exchangetraded- fund (ETF), declined by 0.2 percent to 1,295.40 tonnes on 9th December 2011 from the previous 1,297.93 tonnes on 2nd December 2011.

Silver

Spot silver prices declined by more than 1 percent last week, taking  cues from fall in gold prices coupled with downside in base metals.

However, weakness in the US dollar resisted further decline in the white metal prices. On the MCX, Silver March contract rose sharply by 3.5 percent last week, as a weaker Rupee supported upside in silver on the Indian platform and touched a high of Rs57,834/kg.

Holdings in the iShares Silver Trust, the world's largest silver-backed exchange-traded fund, increased around 0.7 percent to 9,769.12 tonnes by 9th December from the previous 9702.56 tonnes on 2nd December 2011.

Courtesy: Angel Commodities



NCDEX guar seed edges higher on fresh buying

Guar seed and gum futures closed positive on Saturday as the demand for guar seed kept prices positive.

Bleak pipelines are filled by millers and crushers which led to buying of guar seed and gum which had positive impact on prices.

Stockists are also accumulating in anticipation of export demand to revive which kept prices higher.

Courtesy: Karvy Commtrade Ltd.



India soy complex slumps tracking weak global cues

Soybean prices declined substantially on Saturday following weaker closing on Friday at the CBOT as prices world supply demand reported higher stock piles with drop of demand from china which resulted in broad based sell off in the commodities.

Reflection of CBOT price movement was seen in Indian markets despite buying in India remaining strong.

Soy oil prices tumbled in line with CBOT soy oil prices which was a result of broad based sell off in commodities.

Drop in chinese demand due their weak economic conditions and narrowed trade deficit. Domestic crushing season of soybean also had negative impact on prices as demand is not reported to be sufficient enough.

Mustard seed prices declined in line with soy oil as the acreage numbers have come in marginally higher. Recovering cold weather conditions might had negative impact on prices as lower temperatures help good crop growth in mustard.

Courtesy: Karvy Commtrade Ltd.


NCDEX turmeric settles higher on extended buying

Spot prices of Turmeric and Futures remained supported and settled 3.10% and 8.07% higher respectively w-w on account of buying by the local stockists.

Production, Arrivals and Exports

Arrivals in Nizamabad and Erode mandi stood at 10000 bags and 800 bags respectively on Friday.

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 jeera rises on poor sowing

Jeera Futures after trading weak in the last few trading sessions bounced back from the support levels and settled 3-71% up w-w.

Reports that weather in the chief growing area is not favourable for the sown jeera crop are likely to support prices. Temperatures in the Gujarat are warm which is drying the soil moisture thereby stopping proper germination of the seed.

According to Gujarat farm ministry, area sown under jeera till December 05, 2011 stood at 1.92 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 steady arrivals of 2,000 bags amidst offtakes of 4,000 bags on Saturday.

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 pepper gains on rising spot demand

Demand from the local buyers led Spot prices and Futures to settle and 1.45% higher w-w. However, demand from the overseas buyers has reduced owing to Christmas and New Year vacation.

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 $7,325-7,450(c&f) a tonne and remained competitive while Vietnam 550 gl was quoting its pepper at $7,250 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 Saturday stood at 8 tonnes as compared to 11 tonnes on Friday. Offtakes on the other hand stood at 15 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 weakens on profit taking

NCDEX December soybean futures ended lower at weekend on account of profit taking after continuous rise in the last 4-5 days. Weak overseas market as bearish figure of USDA’s monthly supply and demand report which is released on Friday evening also added bearish market sentiments.

However, from medium to long term prices are expected to firm as improved demand from solvent extractors and stockists coupled with declining arrivals as farmers are holding their stocks in anticipation of higher prices. Total arrivals of soy bean in Madhya Pradesh was 2 lakh bags and in Maharashtra was 1.50 lakh bags on Friday (Bag=100 Kg). Soybean plant delivery prices were Rs 2260- 2300/qtl (excluding VAT) on Friday.

As per WASDE (USDA) monthly supply and demand report which is released on December 09, 2011 shows that the total U.S. oilseed production for 2011/12 is projected at 91.0 million tons, down slightly due to a small reduction in cottonseed.

Soybean exports are reduced 25 million bushels to 1.3 billion reflecting the slow pace of shipments and outstanding sales through November, and strong export competition from South America.


Projected soybean crush is reduced 10 million bushels to 1.625 billion due to reduced domestic soybean meal consumption and a higher meal extraction rate. Soybean ending stocks for 2011/12 are projected at 230 million bushels, up 35 million from last month.

Global oilseed production for 2011/12 is projected at 457.6 million tons, up 2.8 million tons from last month.

Global soybean production is projected at 259.2 million tons, up 0.3 million. Increased production for Canada and India is only partly offset by a lower projection for China. Global rapeseed production is projected higher this month mainly due to gains for Canada.

Global oilseed ending stocks are projected at 75.5 million tons, up 1.6 million from last month mainly reflecting increased soybean stocks in the United States and increased rapeseed stocks in Canada.

Mustard Seed

NCDEX December RM Seed futures ended in red on weakness in other oilseeds and vegetable oil. Rape/mustard seed accounts for about 70% of India's winter-season oilseed output.

According to Directorate of Economics and statistics as on December 07, 2011, sowing acreage of Mustard Seed increased to 59.60 lakh hectare (up by 2.53%) as compared to 58.13 lakh hectare last year till date.

As per WASDE (USDA) monthly supply and demand report which is released on December 09, 2011 shows that the Canada rapeseed production is raised 1.3 million tons to 14.2 million based on the latest survey results from Statistics Canada. Higher yields account for most of the change.

Rapeseed production for China is reduced 0.3 million tons due to lower yields in line with the latest indications from the China National Grain and Oils Information Center.

Refine Soy Oil

NCDEX December refined soy oil futures traded lower due to weak overseas market as bearish figures of USDA’s monthly supply and demand report pressurized prices.

Courtesy: Angel Commodities


NCDEX sugar declines on ample supply

Sugar futures settled range bound on Saturday on lack of fresh fundamentals to trigger the prices, while spot declined marginally by 0.89% due to huge supplies amidst higher monthly quota.

The government has notified the export of one million tonnes of sugar in the 2011-12 seasons. 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 raw.

After gaining sharply on Thursday, Liffe and Raw Sugar settled 2.92% and 3.03% on sufficient supplies amidst higher output in Thailand and India.

Pessimistic comments from EU paymaster Germany and new figures exposing growing stress among Europe's banks took the shine off financial market hopes of a turning point in the euro zone debt crisis at a summit this week.(source: Reuters)

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. 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 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 today lowered its global 2011-12 sugar surplus estimate by 940,000 tn to 8.22 mln tn, due to higher projection for consumption than earlier estimated.

Courtesy: Angel Commodities


NCDEX chana settles higher on fresh spot demand

Chana spot settled 0.9% higher on Saturday on emergence of fresh demand at lower levels. Futures also gained initially on removal of special margin and lower level demand, however profit booking led futures to settle in negative territory towards the end of the session.

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.

According to the latest report by Ministry of Agriculture, pulses have been sown in 12.06 million hectares as on 8th December 2011, up 1.17% as compared to 11.92million hectares in the same period last year.

However, area sown under Chana in India till 8th December 2011 was 7.94 million hectares down 0.37% as compared to 7.97 million hectares 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 15.21 lakh ha against 14.47 lakh ha sown in the same period last year (December 07, 2011).

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 edges higher on removal of additional margin

Mixed sentiments prevailed across Guar complex on Friday after the regulator imposed 10% special margin on Guar seed and Guar gum. Futures declined in the early part of the session, however, settled 0.21% and 0.81% higher towards the end on Saturday.

According to the exchange circular issue on Friday, the National Commodity and Derivatives Exchange has imposed 10% special margin on all long positions in guar seed and guar gum contracts, the half of which must be paid in cash with effect from 13th December, 2011.

Currently, total margin on Guar seed and Guar gum stands around 8.5% and 9.5%, i.e. around Rs 48700 and Rs 88800 per contract. After the imposition the total margin for trading in Guar seed and Guar gum would be 18.5% and 19.5% i.e. around Rs 103000 and Rs 177000 respectively.

Although long term fundamentals remain supportive for the prices, current market conditions do not support the upside rally as arrival season is ongoing in the domestic markets.

Arrivals of late sown Guar crop has started across Churu, Bikaner and other growing areas of Rajasthan and thus arrivals have increased in this week (since 5th December 2011) 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. However, no decision on same has been taken yet.

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.

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

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