Commodities Report: December 15, 2011

The US Dollar Index (DX) weakened around 0.3 percent till 4.30pm IST as global markets stabilized following yesterday’s rout but sentiments largely remained weak as European economic prospects turn negative.

Although Asian equities traded in the red, they recovered from the day’s lows on account of positive economic data from the Euro Zone.

Despite this positive economic data, we feel that long-term prospects for the European economies remain weak as the 17-nation Euro region witnesses a systemic risk across the board.

Gold prices also bounced back today and are trading around $1586/oz levels currently. Yesterday, Spot Gold prices slipped sharply by around 3.5 percent as dollar strength weighed on prices.

Technically, gold prices in the international markets had slipped below the 200-day moving average on Wednesday and the trend continues to remain down. In the very near-term, we expect Spot Gold prices to test levels around $1530/oz.

Spot Silver prices traded lower by 0.5 percent till 4.30pm IST, but remained much below the crucial $30/oz levels. On Wednesday, prices had declined 6 percent in the international markets as heightening economic risks led to reduced demand for commodities.

The base metals complex is trading on a mixed note today as uncertainty on the global economic front coupled has made investors cautious. But weakness in the DX resisted sharp downside in metal prices today. Taking cues from a weaker dollar, copper prices on the LME recovered 0.5 percent and are trading above $7250/tone currently.

Crude oil prices recovered in today’s trade as weakness in the DX provided support. Prices on the Nymex recovered above $95/bbl but prices on the MCX declined more than 1 percent till 4.30pm IST.

The Organization of Petroleum Exporting Countries (OPEC) has agreed for the first new production limit in three years, thereby settling a 6-month old argument over production levels in Saudi Arabia’s favour. The oil cartel has agreed a new supply target of 30 million barrels daily.

But for the first-half of the next year, the agreement caps output for all 12 OPEC members, keeping supply near 3-year highs that could lead to rebuilding of inventories.

Outlook

There is a host of economic data releases from the US today and certain forecasts are on the positive side. If the data comes on the positive note then market sentiments could get some relief.

Taking cues from this, the US Dollar could weaken and help support upside in precious metals, base metals and crude oil.

Courtesy: Angel Commodities


Base metals edge lower on global economic worries

The base metals pack declined sharply on Wednesday as heightening economic worries continued to act as a negative factor on prices.

Dollar strength led to further downside pressure on base metals prices on the LME. In the domestic markets, sharp fall was protected on the back of Rupee weakness.

A spike in Italy’s borrowing costs led to further fears over the European economy, which is reeling under constant threat of further slowdown.

Also, with no immediate steps by the US Federal Reserve, the global markets witnessed further risk aversion.

Copper

Copper prices on the LME touched a low of $7176/tonne yesterday, losing 5 percent on an intra-day basis.

But prices on the MCX Futures February contract declined only around 2.6 percent as a weaker Rupee cushioned further downside. In the domestic markets, copper prices fell below the crucial Rs400/kg mark.

Courtesy: Angel Commodities


Crude oil tumbles on rising supply concerns

In yesterday’s trade, Nymex crude oil prices declined sharply by more than 5 percent, closing below the $95/bbl mark as rising concerns over the global economy coupled with increasing supplies of the commodity added downside pressure.

Another major factor that led to sharp fall in prices was sharp strengthening in the US Dollar, which rose to an 11- month high on Wednesday.

Prices remained under pressure despite a decline in crude oil inventories monitored by the Energy Information Administration.

The Organization of Petroleum Exporting Countries (OPEC) has agreed for the first new production limit in three years, thereby settling a 6-month old argument over production levels in Saudi Arabia’s favour.

The oil cartel has agreed a new supply target of 30 million barrels daily. But for the first-half of the next year, the agreement caps output for all 12 OPEC members, keeping supply near 3-year highs that could lead to rebuilding of inventories.

EIA Inventories Data

As per the US Energy Department (EIA) report last night crude oil inventories decreased by 1.9 million barrels to 334.20 million barrels for the week ending on 9th December, 2011.

Gasoline stocks rise by 3.8 million barrels and whereas distillate stockpiles also climbed by 480,000 barrels for the last week.

Courtesy: Angel Commodities


Precious metals settle lower on dollar strength

Gold, which is considered as the safest investment in times of financial uncertainty has witnessed sharp downside pressure in the last few days.

But prices in yesterday’s trade slipped sharply by around 3.5 percent as dollar strength weighed on prices of dollar-denominated commodities by making them look expensive for holders of other currencies.

In the past few weeks it has been seen that investors have preferred dollar-denominated cash over gold, thus leading to continuous selling pressure in the commodity.

Technically, gold prices in the international markets slipped below the 200-day moving average and the trend continues to remain down.

The only respite to gold prices in the domestic markets was weakness in the Indian Rupee that depreciated more than 1 percent, thus cushioning sharp decline in prices.

While Spot Gold prices fell 3.5 percent yesterday, the MCX Gold Futures February contract declined 2.4 percent, taking supporting from the fall in the Rupee.

Silver

Silver prices in the international markets have taken a beating as the commodity fell below the crucial $30/oz, losing 6 percent in intra-day trade.

Prices on the MCX however, slipped only 4 percent on account of Rupee weakness which protected further downside.

Courtesy: Angel Commodities


India soy complex settles higher on firm spot demand

Soybean prices hit upper circuit levels on Wednesday as spot market prices also steeply surged by '50-80/quintal across major spot markets.

Edible oil imports data which came in late noon drove the prices higher. Though market participants expected oil imports to be lower but soy oil imports turned to be 75% lower compared to same period last year which hurt market sentiments.

CBOT soybean prices declined substantially due to broad based sell off in commodity sector and estimations of weekly exports to china to be lower.

Soy oil prices steeply gained on Wednesday as edible oil import data showed drop in soy oil imports by around 75% compared to same period last year.

India remains as net importer of edible oil to meet day on day consumption requirements through imports which is affected by lower availability. This led to price rally in both palm and soy oil prices. Spot prices gained by '6-7/10kg across major markets.

Depreciation of rupee had major impact on prices because imports remain unprofitable with rupee making new life time lows each day.

Mustard seed prices extended gains on Thursday as spot prices surged by '50-80/quintal across major markets. Spot market arrivals were around 35000 bags with millers and crusher aggressively buying across spot markets.

Courtesy: Karvy Commtrade Ltd.


CBOT Updates: Soybean tumbles on selling pressure


CHICAGO (Commodity Online):US soybean futures succumb to pressure Wednesday from a stronger dollar and broad weakness in commodities and equities, tumbling to a 14-month low.

Worries about Europe's debt crisis and the global economy set the negative tone, traders say. The outside pressure nullified any support from worries about the South America crop, which is facing dry weather that, if it persists, could harm yields.

Soybean prices, pressured throughout the fall by weak exports, fall to lowest level since Oct. 2010. CBOT Jan. soybeans end down 18 1/2c, to 1.7%, to $11 per bushel.

March soyoil down 0.83c to 48.80 cents/lb, and March soymeal down $1.60 to $286.30.

Courtesy: CME Group


CBOT Updates: Wheat falls on poor demand

CHICAGO (Commodity Online):US wheat futures tumble as worries about Europe and poor demand weigh. March CBOT wheat ends at a contract low amid a broad commodity slump caused by Europe and a surging dollar.

"The best thing you can say about today's grain markets were they performed massively better than the gold or crude markets," says Dave Marshall, an independent broker and adviser in southern Illinois.

Traders add that weak export demand gives the market little reason to bounce back. March CBOT wheat ends down 3.3%, or 19 3/4c, to $5.80 3/4.

March KCBT wheat ends down 20 1/2c to $6.35 1/2 and March MGEX wheat closes down 14 1/4c to $8.15 3/4.

Courtesy: CME Group


CBOT Updates: Corn settles lower on subdued demand

CHICAGO (Commodity Online): US corn futures end sharply lower on pressure from a stronger US dollar, but hold above a closely watched support level.

Given sharp losses in markets ranging from crude oil to gold, agricultural commodity prices "are holding up stronger than I thought," said Frank Cholly Jr, senior commodities broker with RJO Futures. He sees upside potential for corn once the euro bottoms.

Worries about Europe's debt crisis and a broader economic downturn weighing on prices. March contract holds above support at $5.80, a nine-month low set last week.

Drop below that could prompt more liquidation, traders say. CBOT March corn ends down 2.3%, or 13 3/4c, at $5.80 3/4.

Courtesy: CME Group


NCDEX turmeric tumbles on higher arrivals

Spot prices of Turmeric traded weak on account of increased arrivals amidst lower offtakes and settled 1.51% lower on Wednesday.

However, Futures traced the Spot prices and settled 1.20% down yesterday.

Production, Arrivals and Exports

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

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- October 2011 stood at 50000 tonnes as compared to 32000 tonnes in 2010-11, rise of 56%.

Courtesy: Angel Commodities


NCDEX jeera regains on weak sowing

Jeera futures which remain in the negative territory in the last three consecutive sessions surged by 2.89% on Wednesday on account higher export figures during the period Apr- Oct 2011 and fresh enquiries from the overseas buyers. Further, unfavorable weather conditions prevailing in the major growing areas are also seen supporting prices.

According to Gujarat farm ministry, area sown under jeera till December 13, 2011 stood at 2.32 lakh hectares (lh) up 26.68% 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 2,500 bags amidst off takes of 3,000 bags on Wednesday.

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-Ocotber 2011 stood at 20500 tonnes as compared to 19,800 tonnes in 2010-11, an increase of 3.5%.

Courtesy: Angel Commodities



NCDEX pepper gains on higher export demand

Pepper futures settled up 1.61% on Wednesday on the back of higher export figures for the period Apr-Oct 2011. Lower stocks with the domestic stockists amidst demand from stockists further supported the bullish market sentiments.

Also supply disruptions were noticed on account of ongoing agitations in Kerala with regard to Mullaperiyar dam are also seen supporting prices.

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

According to Spices Board of India, exports of pepper during April 2011- October 2011 stood at 13750 tonnes as compared to 10350 tonnes in 2010-11, rise of 32.8%.

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 Wednesday stood at 21 MT as compared to 16 tonnes on Monday while Off takes on the other hand stood at 125 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 ends higher on rising domestic demand

NCDEX January soybean futures traded sharply higher on account of improved demand from solvent extractors and stockiest coupled with declining arrivals of soybean as farmers are holding back their stocks in anticipation of higher prices in coming days.

Indian rupee against US dollar hits life time low of 53.88. Depreciation of INR against US dollar would be beneficial for soy meal exporters which are also provided support to the bulls. Total arrivals of soy bean in Madhya Pradesh were 1.50 lakh bags and in Maharashtra was 1 lakh bags (Bag=100 Kg).

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 surged sharply higher due to depreciation of Indian rupee against US dollar coupled with improved domestic demand firm overseas market as declining ending stock of Malaysian Palm Oil.

As per Solvent Extractors Association of India, India imported 827,684 tonnes of vegetable oils in the first month of oil marketing year (November to October), up 27 percent from 652,262 tonnes a year ago. Marker share of palm oil imports was about 90% of total vegetable oil imports. However, soybean oil’s share was less than 1% and rest was sunflower oil.

India imports palm oil from Indonesia and Malaysia and a small quantity of soy oil from Argentina and Brazil. Increased political tensions in Iran supported the energy markets and also helped support the soybean complex.

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 trades up on lower production concerns

Mixed sentiments prevailed across Sugar complex on Wednesday with far months contract trading higher on reports of lower yield and recovery, while near Month December contract settled lower due higher quota. Spot prices remained stable on Wednesday with steady demand supply scenario.

There are reports of lower yield of Sugarcane in Maharashtra which may lower the output in the second largest cane producing state.

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 settled 1.79% and 2.73% down 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 edges higher on lower acreage

After hitting an upper limit on Tuesday, Chana futures continued to trade higher on Thursday on reports of lower acreage. However, prices settled range bound towards the end on profit booking.

Lower acreage under Chana and concerns over unfavorable weather in AP, Maharashtra etc is seen supporting Chana prices.

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 zooms on firm exports

Guar seed and Guar gum futures touched new highs and settled at an upper limit for the third consecutive session on Wednesday. Despite regulator’s measures to impose special margin on long side Guar seed and Guar gum futures, prices continued to trade higher 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.

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, down by 25% 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