Commodities Report: November 12,2011

Guar Futures continued to decline on Saturday due to arrival pressure of the new crop and settled lower 1.12%, while spot settled marginally higher owing to emergence of fresh demand at lower price levels.

Despite of lower output estimates in the current season arrivals are much higher. This is because farmers this season are not holding back their stocks due to record high prices.

Record Average daily arrivals which are hovering around 90 thousand to 1 lakh bags compared to 55-60 thousand bags in the previous year.

There are reports that higher prices of Guar gum have made users to think for other alternative cheaper sources of gum for Oil exploration. However, no confirm reports are available as of now.

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 June of the current fiscal year 2011-12 stood at 1.45 lakh tn compared to 0.71 lakh tn during the same period last year.

Exporters believe that exports which had crossed over 4 lakh tn last year, may hit this year due on financial crisis in U.S & Europe along with shift in demand.

However the export figures clearly indicates that global crisis has not hit Guar exports as of now in the current season too.

Courtesy: Angel Commodities

NCDEX Chana Rises On Limited Stocks :

Chana futures extended the gains of the previous day amidst lower stocks at the domestic coupled with tight supplies in the global markets which is making imports costlier. Spot prices however ended 1.19% due to lower stocks at the domestic market.

According to the Ministry of Agriculture, pulses have been sown in 45.07 lakh hectares as on November 11th 2011 as compared to 36.86 lakh hectares in the last year same period.

The biggest jump has been in the area under gram in Madhya Pradesh (1.29 million hectares, up 80 per cent more than last year) and Rajasthan (833,000 hectares, up 65 per cent). Together, they account for four-fifth of the gram produced in the country. Overall, acreage of all pulses, which also includes lentil and peas apart from gram, in these two states is almost 59 per cent and 65 per cent more than last year. (Source: Business Standard)

Government announced Support price for Rabi crops on 25th October 2011. Chana MSP has been raised by Rs.700/qtl to Rs.2,800/qtl a rise of 38%. Higher base price coupled with remunerative returns earned by the farmers during the last year is likely to boost area under Chana cultivation in 2011-12 seasons.

Pulses Imports:
Imports have declined dramatically in the current FY 2011-12 with India's state-owned trading agencies having contracted imports of only 121,660 tn pulses since the beginning of the current financial year till September 12, 2011 compared with 596,700 tn during the same period last year.

Imports have been weak because domestic pulses output in 2010-11 (Jul- Jun) was at an all time high of 18.09 mln tn, up 23percent from a year ago. Also, the Centre has abolished one of the reimbursement schemes for the state-owned importing agencies.

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 Sugar Settles Higher On Domestic Demand:

Sugar futures remained firm throughout the week and settled 2.88% higher w-w on reports of delay on decision regarding cane price and exports of sugar under OGL. Sugar Futures on Saturday however settled at lower freeze of 4% as decision regarding cane price of Maharashtra was declared. Thus, farmers may now proceed for the crushing of the canes.

Sugar mills from Kolhapur, Sangli and Satara would pay a first advance of Rs. 2,050 a tonne (last year they paid Rs.2,000), while mills from underdeveloped Vidarbha, Marathwada and Khandesh would pay Rs.1,800 a tonne ( Rs 1,750). And, Rs.1,850 (Rs. 1800) a tonne is to be paid by mills in Pune, Ahmadnagar, Nashik and Solapur. (Source: Business standard) Further, reports that the Empowered Group of ministers may consider fresh Sugar exports on 16th or 17th November is likely to provide support to the prices.

Liffe White Sugar and ICE Raw Sugar futures settled 3.36% and 1.54% down respectively on lingering worries over Euro zone debt crisis.

Brazil sugar exports down 17% Y-Y in October 2011. Brazil exported 2.55 million tonnes of sugar in the month of October 2011 on account of less cane and sugar output.

Domestic Sugar updates:
Cane output in Maharashtra is expected to rise to 82.5 mn tn during 2011-12 from 80.3 mn tn last year, while sugar output is likely to increase about 2.5% to 9.3 mn tn.

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:
According to UNICA, Sugar production in Brazil's center-south in the second half of Oct dipped 23.5 percent from a year ago, as more mills ended crushing the 2011/12 cane crop. Sugar output totaled 1.47 million tonnes, down from 1.92 million tonnes a year earlier. Eighty-nine out of the 310 existing mills in the region had concluded crushing by Nov. 1.

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


India Soybean Jumps On Weak Arrivals:
 
NCDEX November soybean futures ended slightly higher on account of declining arrivals of soybean in major mandis as farmers are holding their stocks in anticipation of higher prices in coming months.

As per 49th All India Convention on Oilseeds, oils Trade and Industry which was organized by COIIT and hosted by SOPA on November 06, 2001 (Sunday). COIIT estimates, India soybean output in Kharif 2011 at 115 lakh tonnes against 95 lakh tonnes last year. Soybean futures on the Dalian Commodity Exchange fell sharply, tracking a broad decline for commodities, as concerns mounted over the deteriorating economic situation in the euro zone. China's soybean imports in October fell to a seven-month low of 3.81 million tons, down 8% from September, as many domestic crushers delayed shipments, preferring to wait for global prices to fall further amid sluggish domestic sales.

USDA’s monthly S& D report released on Wednesday (November 09, 2011) which shows slightly higher global oilseeds production estimates and higher ending stocks. Global oilseed production for 2011/12 is projected at 454.8 million tons, up 1.3 million tons from last month.

Brazil soybean production is increased 1.5 million tons to 75 million with improved yield prospects related to rapid planting progress and good early season moisture throughout the country. Total U.S. oilseed production for 2011/12 is projected at 91.2 million tons, down 0.5 million from last month due to lower soybean and cottonseed production. The soybean yield is forecast at 41.3 bushels per acre, down 0.2 bushels from last month. USDA’s weekly export sales released on Thursday (November 10, 2011) which shows that the Weekly export sales for soybeans came in at 604,000 metric tonnes for the current marketing year and 2,800 for the next marketing year for a total of 606,800. Meal sales came in at 291,400 metric tonnes for the current marketing year and 4,400 for the next marketing year for a total of 295,800. Oil sales came in at 21,700 metric tonnes as compared with 12,000 metric tonnes.

Mustard Seed:
NCDEX November RM Seed futures ended higher due to improved demand from miller in anticipation of higher prices in coming days as improved demand of edible oils and depreciation of INR against US dollar which make costly to imports of vegetable oils. Total sowing acreage of RM Seed in Rajasthan increased to 22.58 lakh hectares till November 08, 2011 as compared to 21.50 lakh hectares last year during the same period. Rajasthan is a major producing state of RM Seed in India.

Refine Soy Oil:
NCDEX November Refined Soy oil futures traded higher due to depreciation of INR against US dollar. Import of vegetable oil would be costly due to depreciation of INR against US dollar. As per Intertek Agri Services ( a cargo surveyor), Malaysia's palm oil exports during the November 1-10 fell 5.9% from a month ago to 467,600 metric tons. As per Malaysia Palm Oil Board (MPOB), Malaysia’s crude palm oil output rose 2.1% in October compared with a month earlier to 1.91 million tonnes. The Malaysian Palm Oil Board (MPOB) which released the October data showed a 2.1% increase in crude palm oil (CPO) production. Inventory levels fell 1.55% to 2.1 million tonnes from September but remained significantly higher than the five-year average of 1.7 million tonnes.

Courtesy: Angel Commodities

NCDEX Pepper Surges On Active Buying

Pepper Futures after correcting by 13 percent from the highs of Rs. 38,390/qtl, bounced back on account of improved buying at support levels and settled 4.94% higher w-w. Prices in Spot however witnessed marginal gains of 0.67% w-w. Reports that pepper crop in 2011-12 might fall below last year level of 48,000 tonnes. It expected to be in the range of 42-44 thousand tonnes.

Lower stocks with Vietnam and Indonesia, the major suppliers of pepper will also support prices.

Vietnam has reportedly sold 1.12 lakh tonnes of pepper from January to September 2011 a rise of 14% as compared to previous year. Carryover stocks of pepper with Vietnam till commencement of fresh arrivals in March are projected to be around 15,000 tonnes. (Source: Pepper Trade Board)

Indian parity in the international market was at $7,500 a tonne and remained competitive and was attracting overseas orders while Vietnam was quoting its pepper at $7,325 per tonne (f.o.b). Indonesian and Brazil Asta grade is being offered at $8,150 and $7,450/tonne respectively.

Exports from the major countries:
According to Spices Board of India, exports of pepper during April 2011- August 2011 stood at 8,750 tonnes as compared to 7,800 tonnes in 2010- 11, rise of 12%.

According to International Pepper Community (IPC) exports of black pepper during January to September 2011 export 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. Exports from Brazil, Indonesia, Malaysia and Sri Lanka have decreased, while exports from Vietnam and India increased.

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.

Production and Arrivals:
Arrivals of pepper in the domestic mandi on Saturday reduced to 10 tonnes as compared to 20 tonnes on Friday. Offtakes on the other hand stood at 10 tonnes.

Production of pepper in India in 2010-11 was 48 thousand tonnes (according to the Spices Board) as compared to 50 thousand tonnes last year. Production is estimated to fall below 45000 tonnes.

According to IPC global output of Pepper for 2011 is expected to decline by 6,500 tonnes to 3.10 lakh tonnes. Vietnam production of the spice is expected to be same as that of previous year to 1.10 lakh tonnes. Pepper production in Brazil stood around 27,000 tonnes in 2010-11 as compared to 35,000 tonnes the previous year.

Courtesy: Angel Commodities

NCDEX Jeera Weakens On Higher Sowing

Jeera prices continued trade lower for 10th consecutive week and settled 5.18% lower w-w. Spot prices also ended 3.27% lower tracking reports of better area covered under jeera this season.

Sowing of jeera in Rajasthan has gained momentum due to favorable weather condition. Sowing of Jeera has also commenced in some parts of Gujarat but it is on slow pace.

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 3,500 bags, 1000 bags more as compared to previous day against offtakes of 2,500 bags on Saturday.

Production of jeera in Gujarat and Rajasthan in 2011 was around 21 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- August 2011 stood at 9,500 tonnes as compared to 15,700 tonnes in 2010-11, decline of 39%.

Courtesy: Angel Commodities


NCDEX Turmeric Ends Higher On Short Covering

Turmeric Futures traded bearish in most part of the previous week but strengthened on Saturday and closed at the upper freeze of 4% on account of short coverings. Overall, prices settled 2.52% down w-w. Better output this season is weighing on the prices.

However, there are some reports of crop damage in A.P due to in adequate rainfall in the month of October. Crop damage would be around 10%.

Production, Arrivals and Exports:
Arrivals in Nizamabad stood at 1000 bags while Erode market witnessed arrivals of 7,000 bags on Friday.

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. Area covered under Turmeric in 2011-12 is however higher than the five year average of 0.63 lakh hectares.

According to Spices Board of India, exports of Turmeric during April 2011- August 2011 stood at 36,500 tonnes as compared to 24,000 tonnes in 2010-11, rise of 52%.

Courtesy: Angel Commodities

Precious Metals Edge Higher On Safe Haven Demand

In the last week, gold prices rallied sharply as European economic worries along with inflationary pressures supported upside in prices. Spot Gold prices gained 2 percent while prices on the MCX rose sharply by 3.5 percent, supported by Rupee depreciation.

On the MCX, gold prices hit a high of Rs29,123/10gm. Widening concerns with respect to the European nations have led to a bounce back in safe-haven demand.

Although the US Dollar Index (DX) closed in the green last week, the currency slipped from its high of 78.42 to levels below 77 as optimism over solution towards Greece and Italy emerged.

However, we feel that these positive sentiments could be short lived on account of the depth of the crisis as temporary measures may not be able to immediately target current economic risks.

In the Indian markets, weakness in the Rupee supported sharp gains as in the last week, the Spot Rupee depreciated sharply by more than 2 percent and closed at a high-point of 50.

Holdings in the SPDR Gold Trust, rose for a fifth straight day reaching the level of 1,268.666 tonnes on 11th November, the highest since late August.

Silver:
Spot Silver prices gained more than 1.5 percent in the last week, taking cues from upside in the yellow metal and dollar weakness.

Like in the case of gold, silver prices on the MCX increased sharply as compared to that in the international markets by a whopping 2.5 percent on account of Rupee depreciation.

Courtesy: Angel Commodities

Crude Oil Surges On Positive Us Economic Data

On a weekly basis, Nymex crude oil gained by 5.1 percent, marking the longest streak of weekly gains since April 2009 and closed at $98.9/bbl on Friday.

Prices increased last week, taking cues from European steps to contain debt crisis and favorable economic data from the US which increased expectations for oil demand.

On the MCX, crude oil prices gained by 6.5 percent and closed at Rs.4890/bbl after touching a weekly high of Rs.4958/bbl last week.

Natural Gas:
Nymex natural gas declined by more than 6 percent last week taking cues from mild winter weather forecasts which could affect demand for the commodity. Gas prices closed at $3.562/mmBtu on Friday which is at a nine year low.

On the MCX, gas prices declined by around 3 percent as further decline was resisted on the back of Rupee depreciation and closed at Rs.181.9/mmBtu on Friday.

Courtesy: Angel Commodities

Base Metals Settle Lower On Global Economic Concerns

Except aluminium, all other base metals traded lower on the LME in the last week. Mixed sentiments in the global markets due to worries over political tensions in Italy affected the prices.

Dollar weakness did not provide any respite to the metal prices last week.

Aluminium
On a weekly basis, aluminium prices rose around 1.7 percent on the LME and by 2.2 percent on the MCX. Aluminium production is an energy-consuming process and rise in crude oil prices led to rise in aluminium prices too.

Crude oil prices surged more than 5 percent in the same week. Additionally, a weaker dollar also provided further support.

SHFE to increase trading margins for copper and aluminium The Shanghai Futures Exchange (SHFE) will increase trading margins for copper and aluminium future contracts by one percentage each to 9 percent and 7 percent respectively.

This rise will be effective from 16th November 2011. The exchange stated that the daily upward and downward trading limit for aluminium would be widened to 5 percent from the current 4 percent.

US copper imports up 13.5 pct (y-o-y) in Jan-Sep of 2011 Copper imports in the US surged almost 99 percent to 64,327 tonnes in September as against 32,334 tonnes in August, according to the data from the United States International Trade Commission. The country’s imports increased 13.5 percent from a year ago in the first nine months on the current year.

Courtesy: Angel Commodities

Copper Prices Gain, Crude Oil Under Pressure :

European equities have come under pressure today despite a bout of risk appetite in the Asian trade on re-emergence of concerns that European economies will struggle to resolve the worsening debt crisis.

Although the formation of interim governments in Italy and Greece is a positive step ahead, long-term economic risks remain intact and this has led to cautiousness among investors.

Italy sold all 3 billion euro ($4.1bn) of five-year notes it offered at today’s auction while Mario Monti stepped in to form a new government. Some positive feel still came from statement by German Chancellor Angela Merkel that it was time to embrace a “political union” in Europe to send a message that the European policymakers will together take efforts to resolve the crisis.

Spot Gold prices came under pressure till 4.30pm IST and declined around 0.5 percent as strength in the US Dollar Index (DX) added pressure on prices. In early trade, risk appetite was seen and due to that the appeal of gold as a safe-haven came under pressures. Spot Silver prices also came under pressure, taking cues from decline in gold and the white metal slipped around 0.7 percent till 4.30pm IST.

Latest data from Japan indicated that Japan’s Prelim Gross Domestic Product (GDP) increased by 1.5 percent in third quarter (Q3) of 2011 as against a decline of 0.5 percent in last quarter. Prelim GDP Price Index declined 1.9 percent (y-o-y) in Q3 as compared to previous decline of 2.2 percent in second quarter (Q2). This has acted as a supportive factor for the base metals pack today.

Copper prices on the LME have gained more than 2 percent till 4.30pm IST and the red metal tested levels above $7900/tonne today. But prices may come under pressure in the later part of the trade as economic concerns over Europe revive.

Nymex crude oil prices came under pressure and fell around 0.3 percent, taking mixed cues from dollar strength and re-emergence of concerns on the European front. But sharp downside in prices was cushioned on account of expectations of rise in demand during the Northern hemisphere winter season.

Outlook:
Concerns over the European front have re-emerged today and this could lead to downside pressure in base metal and crude oil prices.

We expect upside in gold to continue on account of weak long-term economic prospects and as investors rush towards gold in order to cover future global economic uncertainties.

The DX could continue strengthen today as risk aversion could re-emerge with concerns over the European economic front remaining intact.