Weakness in dollar typically boosts dollar denominated commodities like Crude Oil. Prices were also supported by a statement by Saudi Oil Minister Ali al-Naimi who said, that they supplied 8.49 million barrels a day in November, less than estimated and in line with its OPEC target. In the current environment of deteriorating demand outlook, the major factor which is supporting crude oil prices is expectation of production cut by OPEC.

Oil cartel is widely expected to agree on production cut at its meeting on 17th December in Algeria. In October, the oil cartel announced a production cut of 1.5 million barrels a day but left output levels unchanged at its November meeting. if OPEC does not cut oil production significantly, then there could be downside risk to oil prices. As per International Energy Agency (IEA) report, demand for oil is likely to contract for this year for the first time since 1983. With recession in developed countries, demand for oil is not expected to rise anytime soon, putting pressure on oil prices in the medium term. Oil prices can trade in the range of $36 and $50 a barrel for this week.

Oilseed Complex
Oilseed complex surged on account of short covering during the last week. According to Solvent Extractor’s Association of India, Soy meal exports for the month of November stood at 6,48,187 metric tonnes as compared to 5,90,825 metric tonnes during the same period last year. Heavy rains occurring over several provinces in peninsular Malaysia have caused floods along rivers and low lying areas providing support to bulls. According to Intertek (a cargo surveyor) palm oil export in the first 10 days of December increased by 93% to 6,19,180 metric tonnes as compared to first 10 days of November. Major importers were India, China and US ahead of winter season demand.

Current Scenario Of Edible Oil Import By India: From November 2007 to Oct 2008, India imported 56,08,410 metric tonnes of edible oil, up by 18.95% as compared to last year (47,14,760 tonnes) during the same period. Palm oil and soybean oil account 85.64 % of total import. Market share of palm is very high owing to lower prices of palm oil on account of higher stocks of Malaysian and Indonesian palm oil. Prices of oilseeds are expected to decline on the back of higher production estimates of global oilseed and higher stocks of Malaysian palm oil.

Rubber
Rubber prices opened on a weak note, Monday being a holiday.The weak trend was visible throughout the week although there was marginal recovery in RSS4 grade from Rs 59 per kg to Rs 61 after attaining a high of 62. Absence of any positive demand from tyre sector continued to dampen the markets. In the weekend, Tokyo Commmodity Exchange benchmark futures witnessed heavy selling although initially market improved on short covering.

Rubber Board has advised growers not to hold onto stocks even as prices are on a downward trend. The present downfall has created hardship for growers and the demand for rescue measure s by State and Central governments have only increased. Among the measures suggested include providing subsidies for export and procurement of rubber at Rs 100 per kg.

Sugar
Sugar which lost close to Rs 140 per quintal during the past few weeks may gain on lower crop estimates and the UP Court ruling which turned down the appeal from millers against a 12% increase in sugar prices. Positive factors also came from the physical market on sustained buying by bulk consumers.

Delay in crushing due to dispute between farmers and millers was also supportive of a sugarrecovery. There has been a drop in production of sugar in Maharashtra, the major sugar producing region of the country. Sugar production has reached to 1.21 MMt in the current season up to December 10, down by around 17% from the same period a year ago. In addition, demand is rising in physical markets, and is expected to remain brisk in coming days due to the marriage season

Sugar prices became costlier in the physical market on sustained buying by bulk consumers as well as retailers. Reports of lower sugar production in Maharashtra, the main producing region fueled the market sentiment, traders said. Besides, consumption of confectionery and sweets typically rises during December.. A delay in sugarcane crushing in Uttar Pradesh state due to a pricing dispute between millers and farmers had its impact on the total supply. Prices are also likely to get a boost following a court ruling in Uttar Pradesh on Monday dismissed a petition by millers against a 12% increase in the cane price that they have to pay farmers, traders said. Meanwhile, the government has fixed the non levy sugar sale quota at 1.4 MMt for December and taking the availability to 1.7 MMt including PDS sugar and dismantled buffer stocks also. Therefore, the millers are clearing their old stocks.

Pepper
Weak overseas demand from Europe and USA is affected the pepper market in recent times. The Pepper Futures counter has recovered slightly on profit taking on weekend trade. Therefore, pepper at the physical counter is expected to exhibit range bound trade. Garbled variety is being sold at Rs 10500 per quintal which is down by Rs 100. Pepper January 2009 Futures had touched a high of Rs 10,450 per quintal on short selling.

Indian pepper parity in the international market though being competitive is not providing support. With no fresh fundamentals to drive up prices, analysts expect pepper to remain firm but in the medium term much would depend on demand in domestic and overseas markets apart from stocks in India and Vietnam.

Guar
Sluggish demand for guar gum in global markets due to economic slowdown has led to a weak market for spot guar as well as Futures . Both have fallen Rs 120 per quintal. Like Pepper, demand for Guar gum normally peaks during December and January. What may be supportive of prices is the short fall in production this year.In the medium to long term, trend in Guar complex would depend on overseas demand for Guar gum which is currently at a very slow pace due to overall economic slowdown. Also, we have to keep a close watch on INR movement as it will impact the exports from India. (With analytical inputs from Angel Commodities, Mumbai)

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