Commodities Report: December 14, 2011

Bears dominated trade in the base metals complex on Tuesday as rising economic risks coupled with dollar strength added pressure on prices.

Concerns over the European economic scenario heighten and this could lead to further risk aversion in the global markets.

As we approach the year-end, economic risks have widened and has dented risk appetite amongst investors.

Copper

The International Copper Study Group (ICSG) data indicated that mine capacity utilization declined steadily from over 90 percent at the start of the last decade to 80.4 percent last year. World mine supply is expected to increase by 9 percent in 2012.

Courtesy: Angel Commodities


Crude oil edges higher on global supply concerns

Nymex crude oil prices gained by 2.4 percent yesterday, taking cues from expectation that supplies from the Middle East could be disrupted after Iran held a practice drill at closing of Strait of Hormuz.

Oil prices closed above the $100/bbl after touching an intra-day high of $101.20/bbl. On the MCX, prices increased by more than 2.5 percent and closed at Rs.5342/bbl after touching an intra-day high of Rs.5380/bbl on Tuesday.

API Inventories

As per the American Petroleum Institute (API) report last night, crude oil inventories increased by 462,000 barrels to 334.6 million barrels for the week ending on 9th December 2011.

Gasoline inventories declined by 12,000 barrels to 215.3 million barrels and distillate inventories rose by 1.24 million barrels to 142.4 million barrels.

EIA Inventories Forecast

The US Energy Department (EIA) is scheduled to release it weekly inventories report today and crude oil inventories is expected to decline by 2.5 million barrels for the week ending on 9th December 2011.

Gasoline stocks are expected to rise by 1.2 million barrels whereas distillate inventories are also expected to increase by 1.0 million barrels.

Courtesy: Angel Commodities


Precious metals remain lower on dollar strength

The yellow metal continued to remain under pressure on account of dollar strength.

Spot Gold prices slipped more than 2 percent and closed the $1630/oz but prices on the MCX closed on a flat note as Rupee depreciation protected downside pressure on prices.

The World Gold Council (WGC) data showed that world’s third-quarter gold demand reached 1,054 tons ($57.7 billion), marking an all-time high in value terms.

Third-quarter world investment demand for gold increased 33 percent. Investment demand in Europe during the third quarter touched a record of 118 tons, an increase of 135 percent on the year.

Demand for gold bars and coins witnessed gains at a global level, rising by 29 percent to 391 tons during the third-quarter as against 303 tons a year ago.

Silver

The white metal also came under pressure on account of poor cues from gold and base metals. Spot Silver prices closed at $30.7/oz, falling around 2 percent but prices on the MCX gained almost 1 percent as Rupee depreciation prevented decline.

Courtesy: Angel Commodities


NCDEX jeera declines on extended selling

Jeera January futures continued the bearish trend on fresh selling on Tuesday. From opening of the session futures traded down amid higher production estimates.

However, towards the closing prices took small recovery amid steady spot market activity.

But recovery was not enough to reverse the trend and futures ended on marginally negative note.

Courtesy: Karvy Commtrade Ltd.


India soy complex settles higher on weak arrivals

Soybean prices gained largely on Tuesday as physical market arrivals declined due to farmers holding back the stocks.

Despite peak arrival season arrivals remained at 2 lakh bags which kept prices positive. In international markets soybean prices ended higher as fears of the crop from Latin American countries returned in the market.

Soy oil prices gained substantially on Tuesday as the palm oil spot prices gained by '6-7/10kg while soy oil prices gained by '2-3/10kg.

Scenario was the same with major edible oil prices on upside which helped the prices to gain largely.

Depreciation of rupee also had major impact on prices are we largely depend on imports of edible oil to meet our requirement due to deficiency of local supply. CBOT soy oil prices ended lower yesterday as higher stocks in U.S weighed on prices.

Courtesy: Karvy Commtrade Ltd.


CBOT Updates: Rice surges on short covering

CHICAGO (Commodity Online):U.S. rice ends up slightly in a modest short-covering bounce following recent losses.

Weak demand and ample world supplies have sent prices tumbling throughout the fall, but traders say that at current prices many farmers may decide to plant less rice.

Jan CBOT rice ends up 5 1/2c to $13.85. The contract is down nearly $5 from a September high.

Courtesy: CME Group


CBOT Updates: Soybean meal, soy oil ends on mixed trend

CHICAGO (Commodity Online): Soy product futures ended mixed, with soymeal rising with soybeans.

Soymeal was buoyed by traders unwinding short positions established in long soyoil/short soymeal spreads in recent weeks, analysts say.

Soyoil drifted lower on the spread action, shunning supportive influences from rallying energy prices, analysts add.

CBOT Jan soymeal end up $3.90 to $283.40/short ton; Jan soyoil finished down 0.07c at $492.50c/lb.

Courtesy: CME Group


CBOT Updates: Soybean edges higher on firm demand

CHICAGO (Commodity Online): US soybean futures end higher, continuing to recover from prior declines as traders view the market as oversold.

After dropping to 14-month lows recently, the market has found price support, with South American weather concerns, supportive influences from external financial markets encouraging traders to cover some previously established short positions, analysts say.

Ability of futures to find support despite bearish supply outlooks from USDA eased the negative momentum that built up in recent weeks, analysts add. CBOT Jan soy ended up 6 1/2c at $11.18 1/2/bushel.

Courtesy: CME Group


CBOT Updates: Wheat ends higher on fresh buying

CHICAGO (Commodity Online): US wheat futures rallied, driven by traders covering short positions in the absence of fresh bearish news.

Wheat was supported by optimistic outlooks for futures demand, as US offers for white wheat in the most recent Egyptian wheat tender were competitive, a signal that prices are near fair market value, analysts say.

Spillover support soybeans, as well as higher crude oil futures served as an incentive for wheat traders liquidate some of large short positions held in the market, analysts add.

CBOT March wheat ended up 6 1/4c at $6.00 1/2/bushel, March MGEX wheat finished up 6 1/2c at $8.30, and March KCBT wheat ended up 3 3/4c at $6.56.

Courtesy: CME Group


CBOT Updates: Corn gains on rising demand

CHICAGO (Commodity Online): US corn futures end slightly higher in a see-saw session, with a rally in crude oil providing support.

The market has little fresh supportive news to rally on, but the gains in crude, along with uncertainty about South American soy crops, provided underlying support.

Analysts add the market has not been quite so sensitive to shifting sentiment on Europe. Still, traders note that export demand is weak and unlikely to improve soon.

CBOT Dec. corn ends up 3c to $5.88 1/2, most-active March corn ends up 1/2c to $5.94 1/2.

Courtesy: CME Group


NCDEX turmeric edges lower on higher arrivals

Spot prices of Turmeric witnessed selling on account of increased arrivals and settled 0.26% lower on Tuesday. However Futures witnessed after trading weak in the early part of the trading session bounced back from the support levels and settled 1.21% higher yesterday.

Production, Arrivals and Exports

Arrivals in Nizamabad and Erode mandi stood at 10000 bags and 1,500 bags respectively on Tuesday.

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 remains lower on weak export demand

Jeera Futures extended losses of the previous day and settled 0.25% lower on Tuesday. Spot prices however remained steady and ended 0.42% slightly higher yesterday with lower arrivals and offtakes at the domestic. Unfavourable weather conditions led prices to recover in the week ended 12th December 2011.

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 3,000 bags amidst offtakes of 2500 bags on Tuesday.

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 limited stocks

Lower stocks with the domestic stockists amidst demand from local stockists led Pepper prices to continue its upward movement and settled 0.80% and 1.11% higher respectively on Tuesday. 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 Tuesday stood at 16 MT as compared to 8 tonnes on Monday while Offtakes on the other hand stood at 38 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 rises on short covering

NCDEX January soybean futures traded higher on account of short covering after yesterday’s sharp fall. Firm overseas market as dry weather concern in South America also provided support to the bulls.

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 1.75 lakh bags and in Maharashtra was 1.40 lakh bags on Friday (Bag=100 Kg).

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 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. 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 January RM Seed futures traded higher as firmness in other oilseeds and vegetable oil.

According to data from the Directorate of Oilseeds Development, mustard has been planted over 6.16 mln ha this rabi season as on December 08, 2011, up marginally from around 6.08 mln ha in the year ago period.

In Rajasthan, the largest producer of mustard in the country, acreage was slightly lower about 5.4% on year at 2.60 million ha. In Uttar Pradesh, the second largest producer, the crop has been sown across 1.03 mln ha, up almost 7% from a year ago.

The crop, the most crucial of winter oilseeds, has been sown across 97% of the usual area of 6.36 million ha. The government is aiming total mustard acreage of 7.55 mln ha this year and output at a record 8.19 million tonnes this rabi season.

 Last year, farmers had harvested 7.67 mln tn of the oilseed. 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 mln based on the latest survey results from Statistics Canada.

Refine Soy Oil

NCDEX December refined soy oil futures traded higher due to firm overseas market as declining ending stock of Malaysian Palm Oil.

According to the Malaysian Palm Oil Board, the Malaysia's palm oil output and inventories fell 15% and 1.5% on month, respectively, in November, while exports declined 10%. A Cargo surveyor SGS Malaysia's palm oil exports during December 1-10 at 436,633 tonnes, down 4.6% from a month ago.

Courtesy: Angel Commodities


NCDEX sugar weakens on subdued spot demand

Sugar December contract settled lower by 2.30% on higher monthly quota, while spot sugar remained firm on lower level demand and settled positively by 0.39%.

The government has notified the export of one million tonnes of sugar in 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.

Liffe white sugar and ICE Raw Sugar settled 0.38% and 0.68% up respectively.

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 zooms on lower acreage

After consolidating in a very narrow range in the last few sessions, Chana futures rebounded sharply to hit an upper circuit of 3% and finally settled 2.65% higher on Tuesday.

Prices gained mainly on lower acreage under Chana and concerns over unfavorable weather in AP, Maharashtra etc.

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.

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 targeted 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. Sowing of Chana began on a brisk note, however, the progress was not satisfactory in Maharashtra, Karnataka, UP, Bihar and AP where acreage is down by 16.4%, 12.4%, 10.3%, 27.5% and 5.7% respectively.

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 export demand

Despite regulator’s measures to impose special margin on long side Guar seed and Guar gum futures, prices continued to trade higher on Tuesday on export expectations amidst lower output and carry over stocks.

Another important factor that is supporting the upside is the rupee factor which has depreciated over 9.5% since November 01, 2011. Yesterday rupee depreciated 0.7% at Rs 53.23 per dollar.

According to the exchange circular issued 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.

Total margin on Guar seed and Guar gum which stood around 8.5% and 9.5%, i.e. around Rs 48700 and Rs 88800 per contract, before imposition of special margin, has now increased to 18.5% and 19.6% i.e. around Rs 107000 and Rs 186000 respectively.

Although long term fundamentals remain supportive for the prices, current market conditions do not support further 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.

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.

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