Commodity Online
India's inflation rate declined for a second straight week to 12.34 percent. However, it would take still further measures to bring down inflation to Reserve Bank of India's target of seven percent set for 2008-09. The extension of ban on rubber, chana, potato and soyoil has dampened the enthusiasm in agri-commodity futures which were expecting a revival of the suspended items. No reasons were given by Forward Markets Commission for extending the ban. Rising dollar led to fall in gold futures and crude oil. Base metals also witnessed sharp falls during the week. Pepper markets were weak on low inventories and subdued demand, festival demand has not picked up for many commodities.

Gold
In the last week, Gold futures closed lower on account of rising US dollar and falling crude oil prices. During the last week, prices fell from a high of $835.60 per ounce, down by more than 4%. In currency market, USD extended its gain against Euro. Euro has tumbled to its lowest levels for this year, after ECB President Jean-Claude Trichet said that the euro-zone is in "episode of weak activity". In energy market, crude oil prices ended lower on account of falling U.S. demand and rising U.S. dollar against major currencies. Gold prices may rise on account of technical buying, but underlying sentiment is looking bearish. It is expected to trade lower in the short term, as rising USD and weak oil prices can outweigh strong physical demand. With Euro zone indicators showing weakness in European economy, dollar is likely to gain further against major currencies and this can curb the upside in gold and silver. In coming week, Gold prices can test $ 770/oz on the lower side. On the International front, if Spot Gold prices close above $825, then prices could be heading towards $850 per ounce. Gold prices can have short term support at $775, closing below that can take yellow metal up to $750 per ounce.

Crude Oil
Crude Oil prices fell in the last week, after hurricane Gustav failed to damage oil production areas in the Gulf of Mexico. Oil prices have closed below 200 day moving average. The oil market shrugged off bullish weekly inventory report, as rally in U.S. dollar and growing concern over falling demand for oil products weighed on oil prices. U.S. oil demand is dropped by 0.8Mbbl in the first half of 2008, the steepest volume drop in 26 years. Crude oil prices are showing weakness, as factors like strengthening USD, weakening world economies and thereby declining demand, are weighing on oil prices. In the short term, oil prices may get support on concerns over hurricanes, though underlying sentiments are looking bearish. Oil prices are likely to test $100 per barrel in coming week. OPEC, which produces 40% of the world oil, is unlikely to cut production during its meet in Vienna on September 9. Some members of the organization are thinking of production cut, if oil prices fall below $100 per barrel level. NYMEX Oil futures are expected to have support at $100/94.50 per barrel and can face resistance at $114/121 per barrel.

Base Metal
The base metals complex has declined sharply in the last week. The main reason for the decline is the strengthening of the US Dollar which is making base metals look unattractive for holders of other currencies. The base metals pack has been reacting to the currency market movements amid a seasonal slowdown in demand. In the past six weeks we have witnessed a broad-based sell-off in commodities on the back of a stronger US Dollar and weaker US macroeconomic data in the US, Europe and Asia. Though demand has slowed down and is expected to come down further, the most important factor i.e., supply will help to hold prices higher. Supply-related issues are expected to rise especially in the case of copper, aluminum and tin. This factor could help to push metals higher. Given the power shortages in key producing regions like China and southern Africa, aluminum prices will receive support. Hence, even if demand for base metals is a concern, issues from the supply front would support prices at higher levels. In the coming week, we expect base metals to trade on a volatile note.

Soybean
Soybean prices moved range bound with weak sentiments during the past week. NCDEX Oct Soybean prices fell by 3.37% on account of higher estimates of soybean amidst favorable weather in major growing areas of soybean. According to Ministry of Agriculture, Total oilseeds sowing acreage increased to 172.90 lakh hectares, up by 1.65% this year as compared to 170.10 lakh hectares last year. However, soybean sowing acreage surged to 95.20 lakh hectare in this year, up 9.17% as compared to 87.20 lakh hectare previous year on Aug 28, 2008. According to Solvent Extractors Association of India, edible oil import in first 9 months (Nov-July) of edible oil year increased by 10% to 3.63 million tonnes compared to same period last year. Sharp fall in crude oil also generated selling pressure in soy complex on bio-diesel concerned. In the coming week, NCDEX October Soybean futures are expected to move down on above mentioned fundamentals with the strong support of 2070/2005 and resistance of 2260/2300 levels.

Jeera
Spot prices of Jeera at Unjha were quoted at steady rates in the beginning of the week, but strengthened on Thursday on improved buying by the stockists. Lower stocks of Jeera with the major Jeera producing nations such as India, Syria may support the prices to remain sideways to firm. Fresh jeera sowings in India will commence in the month of October and fresh crop would be available in the month of March. In the international market, Syria is quoting Jeera at $3600/tonne (f.o.b.), Turkey at $3700/tonne and India is offering at $2900/tonne (f.o.b). Jeera Futures October contract also witnessed sideways to up movement in the previous week and made a high of 12300. Prices at the Spot market are expected to witness sideways to up movement in the coming week due to expected demand from overseas as well as domestic market. Prices for Futures contracts may find initial support at 12000 levels and thereafter at 11680 levels whereas resistance can be seen at 12310 and then at 12550 levels.Rubber
The week saw surprisingly low stocks of rubber despite the impending Onam celebrations in Kerala. In the beginning of the week, market was weak and prices had initially moved down to Rs 140-141 on buyer resistance. However, after a weak trend, physical rubber prices improved on Saturday covering purchases to fulfil the commitments kept the market firm in the weekend session. During the mid-week, prices were ruling flat at Rs 140. Supply concerns continued to put pressure on the buyers while RSS 4 firmed up to Rs 140.50 from Rs 140 a kg on Friday. Major consuming industries were active on sheet rubber up to Rs 140 a kg during the week. In the international scene, the September contract for RSS 3 which opened at ¥343.5 on Monday last slipped to ¥333.6 (Rs 140.17) a kg at TOCOM. In the domestic market, sheet rubber RSS 4 lost 50 paise per kg during the week. The trading volumes were low.

Major manufacturers were buyers on the grade up to the quoted levels and sheet rubber RSS 4 finished flat at Rs 140 a kg as on Thursday.

In international futures, RSS 3 declined at its September contract to ¥333.6 (Rs 140.17) from ¥340.7, October to ¥323.6 (330.4), November to ¥320 (327), December to ¥313 (320.3), January to ¥310 (317.1) and February to ¥308.6 (316.5) a kg.

Sugar
Sugar prices saw a firm to steady trend throughout the week. However, in the weekend sugar prices plunged in the domestic market amidst higher supplies with the government issuing an ultimatum to millers to clear their buffer stocks by September 30. Besides, bulk buyers stood aside expecting a further decline in prices, traders said. Millers have been holding stocks of around 9 lakh tonnes, hoping for prices to increase when the new crop year begins in October. Traders said,the supplies are increasing in September after the government ordered millers to clear buffer stocks before the end of the month. Otherwise, the government would buy the unsold stocks at lower state-set prices. Therefore, sugar supplies are expected to rise to 2-2.1 MMt in the open market in September to meet the festive demand. However, with a series of major festivals beginning soon traders expect even greater volumes given the likely spurt in demand from food and drinks makers in near future. Besides, forecast of sharply lower production in next crop year in a key growing region will provide underlying support to the market.

Palm Oil
Palm oil witnessed a mixed trend with a tone of weakness in the domestic bourses while recovery was visible in BMP CPO futures. Continued imports by PSU firms weighed on market sentiments. Amidst rising supplies, local oil seeds production may be hit by a dry spell affecting output for season beginning November 2008.

Arrivals of the new crop are picking up and stockists are releasing the old crop in the market. As a result of dry weather in certain peanut, sunflower seed and sesame seed growing regions, oil availability is likely to decline in the coming oil year starting Nov '08. Therefore, edible oil imports are expected to rise by 500,000 tonnes from 5.1 million tons in the current crop year ending October 31. Crude palm oil futures on Bursa Malaysian Derivatives closed higher negating the losses in soy oil and crude oil futures. According to indications, prices looks to have bottomed and managed to close above the psychological resistance of MYR 2500 levels. Good buying from the investors was witnessed. Moreover the huge discount of palm oil over soy oil also added to the firm tone of the market. However the gains will be short –lived if recovery is not noticed in soy oil at CBOT and crude oil futures. BMD launched dollar –denominated CPO futures on Friday. Prices are expected to remain subdued in the short run.

Pepper
After a week of subdued interest, pepper saw buyer interest in small quantities. This week overseas buyer interest was sluggish. Low inventory and lack of seller interest anticipating higher prices were visible. However, the activity at the upcountry market was steady. The prices for the garbled varieties remained unchanged at Rs.14200/qtl. Sellers in the market stayed away in anticipation of fetching better prices and are unwilling to sell at the prevailing prices amidst low inventory levels. Traders and grinders are seen buying in small quantities as the prices have stabilized and also bottomed down. Dollar is seen strengthening against Rupee making Indian parity most competitive in the world market at $3350/qtl. Internationally the market remained steady and Vietnamese 500 gl is offered at $2750/tonne while ASTA is offered at 3250/tonne f.o.b. Brazil and Indonesia are offering at $2900 and $3400/tonne respectively. The overseas buying interest continued to remain sluggish. Under the prevailing conditions pepper is likely to trade range bound with positive bias at the physical counter. The prices are moving in a tight range of 14184 and 14368 and hence a break out is necessary to establish a trend. Crop arrivals from Brazil, Indonesia may weigh on prices. Hence going long around lower levels is likely to remain ideal strategy as market is likely to witness movement both ways. In the futures, bear operators downed the pepper futures market towards weekend. September contract on NCDEX declined by Rs 356 a quintal to Rs 13,585, which is Rs 415 below the spot price for MG 1 of Rs 14,000 a quintal. Even October contract declined below the spot price by Rs 336 a quintal to Rs 13,880. November contact fell by Rs 314 to Rs 14,130. On NMCE, September contract fell by Rs 421 a quintal to Rs 13,617. The decline in other contracts was from Rs 308 to Rs 365 a quintal. Total turnover on NCDEX fell by 4,876 tonnes to 7,965 tonnes, while total open interest increased by 248 tonnes to 20,319 tonnes.

(Compiled with inputs from Angel Commodities, Mumbai)