Base metals
Base Metals prices could test further lows as demand is slowing and inventories are continuously rising. The US Dollar Index is expected to weaken further but this may not be able to provide support or cushion the downside as the weakness indicates worsening economic situation in the world’s largest economy.

The economic downturn is hurting financial markets across the globe. Hopes are high on the Chinese stimulus package, that it could revive the physical side market in the year FY2009. However, the current situation is bleak as the commodities market is showing a coupled performance in accordance with global equities. Also, the currency factor is playing a crucial role in determining prices. In the coming days we could continue to witness volatility in prices as markets remain susceptible to decline in equity markets. With Copper inventories gaining steadily, the metal could trade on a weaker note. Aluminum prices are expected to remain under pressure as inventories are rising sharply amid an economic slowdown that is hurting demand. Markets are expected to remain volatile as economic data suggests that the world in entering a deep and long recession that could continue throughout the next financial year. All base metals are expected to remain under pressure in the next two-three months until physical buying from China picks up.

Black Pepper
Pepper Futures showed recovery at NCDEX in the beginning of the week but on the whole lacklustre trades depressed prices at the Spot markets in Kochi. Even small arrivals can lead to pressure on prices in the coming days. To make matters worse, the slowdown has continued to affect overseas demand for spices.

Pepper January 2009 Futures after making a low of Rs.9,865/qtl on account of short coverings by the market participants. Prices may remain sideways to down in the coming days due to reports of fresh arrivals at the domestic market. Therefore, in the near-term markets would continue to be range-bound to weak. In the medium term, several other factors apart from overseas demand, domestic demand would affect market sentiment including available stock in Vietnam and India.

Crude Oil
Crude Oil prices fell in the last week, as concern about falling global oil demand amidst economic slowdown and rising inventories offset big production cut announced by OPEC. Traders have paid little heed to a production cut of 2.2 million barrels in current oil output by the Organization of the Petroleum Exporting Countries (OPEC). On Wednesday, OPEC producers agreed to cut 2.2 million barrels per day of production from January, lowering the group's supply target to 24.845 million bpd.

There are doubts among market participants about OPEC's ability to comply with these cuts, given the magnitude of the cut and their previous history. Due to global economic slowdown, energy demand has gone down in all sectors. Supply cut by OPEC is not likely to support oil prices in the short term, as current macroeconomic data is showing bleak economic outlook. We believe that Crude Oil futures in the short term are likely to fall up to $30 per barrel levels. Oil prices can trade in the range of $32 and $48 a barrel for this week.

Sugar
Sugar market looked up this weak owing to rising domestic market demand aided by drop in sugar production in leading producing states of UP and Maharasthra. Sugar production in Maharashtra is expected to be 5.6 MMt in 2008-09, down from 9.1 MMt of last year, sources said. In the beginning of the week sugar prices continued its upward march in the physical markets largely on back of increased demand during the peak season for weddings and reports of a likely drop in output this year

The delayed crushing in Uttar Pradesh owing to a pricing dispute between millers and farmers helped firm up sugar prices. However, the supplies are expected to remain underpressure in near future as full-fledged crushing has started in U.P. and Maharashtra. On the other hand, according to the exchange data, NCDEX have 27,941 metric tonnes of stocks in their warehouses as of Dec. 18 and part of that volume will come in the market with the December expiry, restricted the upward movement. Out of the total volume, 25503 Mt are in Kolhapur and 2438 Mt in Pune.

Jeera
Jeera prices at the spot markets were quoted at steady to slightly lower rates in the beginning of the month. But, it has started to strengthen towards the end of the month. There are reports of rains and unfavorable weather in the jeera growing regions of Rajasthan. This is supporting the prices to strengthen. If, the weather continues to remain unfavorable in the next 4-5 days prices may find support and strengthen. Further, there are lower stocks of jeera of around 2.5 lakh bags(1 bag= 55kgs.) with the stockists as well as with the farmers and the fresh crop would be available only by March 2009 and crop in Syria and Turkey would be available in April 2009. Thus prices are expected to find support and strengthen. Prices in the February Futures 09 contract moving northwards after touching a low of Rs.9,390/qtl. If, prices trade above Rs. 10,750/qtl, prices may touch Rs. 11,000/qtl in the coming days.

Guar Seed
Guar prices traded in a very narrow range during the last week due to sluggish trading activities across major spot markets. January contract traded in a range of Rs. 1474-1524 per qtl. The demand for Guar gum which is normally at its peak during November and December month every year is not picking up in the current crop season due to global turmoil. However, supply side is also not as strong as last year because production of Guar in the western parts of Rajasthan has declined by almost 10-15%. India export around 80% of its produce every year. Thus, prices are likely to remain steady to weak as long as the overseas demand doesn’t pick up.

Soybean
Soybean has been hit by subdued trading activity amidst lack of fresh fundamentals. As per WASDE Oilseed Report, U.S Oilseed production for 2008-09 is projected at 88.20 million tonnes. Global oilseed production for 2008-09 is projected at a record 418.3 million tonnes up 0.4 million tonnes from last month.

According to to Solvent Extractor’s Association of India, Soy meal exports for the month of November stood at 648187 metric tonnes as compared to 590825 metric tonnes during the same period last year.
Global oilseed crush for 2007-08 is reduced 0.5 million tonnes this month 348 million tonnes due to lower soybean crush for Brazil, Argentina and United States.

Soybean prices are expected to trade range bound amidst subdued trading activity.Higher production estimates, favourable weather in Argentina could put downward pricing pressure in the medium term. (With analytical inputs from Angel Commodities)

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