Commodity Online
India is still struggling to grapple with food inflation which is hovering at 17-18 levles for some time but has capitalized on the global shortage of onion and exported the commodity at a record Rs 23 per kg in the beginning of 2010. The export price is almost at par with the domestic sale price, experts say and attribute the high realisation in the overseas market to increased global demand. The nation had exported 58,360 tonnes of onions in January 2010, down nearly 49 per cent from the year-ago period but price realization is high.

Food inflation, which has eased from a decade’s high of about 20 per cent in December, stands at 17.56 per cent for the week ended January 23. In the past, export prices had touched a record Rs 22 a kg in October 1998, when domestic prices of onion were at Rs 70 a kg. But this time, there is hardly any difference between domestic and export prices as onion is currently available at Rs 20-24 a kg.

Agri-cooperative Nafed announced the launch of retail sale of nearly 17 day-to-day items like rice, dal, sugar, cooking oils at cheaper rates through its outlets as part of the efforts to bring down the prices of essential commodities.

Commodity markets are in for a sustained weakness for some more time following uncertainties on the Eurozone front and China move to further tighten its monetary policy to curb overheating and inflation in the economy. Stock and commodity markets have reacted to this with sharp declines towards weekend although markets were closed in India on Friday on account of Sivarathri celebrations. This is the second time China is increasing its reserve level for banks to prevent overheating of economy.
The India Budget for 2010-11 may see the phasing out of stimulus package following higher growth projections by Central Statistical Organisation. It said in its advanced estimated that the economy will grow 7.2% in 200-10 while RBI had projected 7.5% and Finance Ministry had projected 7.75 percent respectively.

With Rabi crop production estimated at 10 mn tonnes higher than last year, the 16% fall in Kharif out put may be compensated. This has forced CSO to peg agri output to be marginally lesser by 0.2%.

A global sugar shortage, which drove prices to the highest level in three decades, may peak in the third quarter this year on demand from the US, Mexico, India and Pakistan, according to UK-based Tropix Capital Management.

Germany’s multi-year reign as the world’s No. 1 exporter is officially over, with the crown formally passing to rising Asian power China after new figures showed that German exports slid by nearly a fifth in 2009, the biggest decline in 60 years.

Commodity market regulator Forward Markets Commission (FMC) said it will review the ban on trading in sugar futures in October when the new season starts.

Gold
Gold prices gained slightly in the last week after felling tremendously in the previous week amidst the strengthening dollar and rising concerns over the fiscal deficit and credit issues in Greece and other Euro-zone economies. A strengthening dollar makes the yellow metals look unattractive for holders of other currencies. Also, risk aversion in the markets had led to a sell-off in commodities across the board. Gold prices rebounded to some extent as the dollar stabilised on the back of news that Germany along with France and the European Union would help Greece and other ailing economies in the Euro-zone to overcome their deficit problems. There may be a possibility of that the European Union would try to bailout the affected economies. The European Union meeting on Thursday may decide the concrete decision regarding the bailout scheme for Greece. This has led to positive sentiments across the investor group and concerns of derailment of economic recovery have reduced. If the European Union plans to bailout the ailing nations in the Euro zone, it could boost the Euro and the dollar can weaken. Moreover, US banks have exposure to the tune of $176 billion in Euro which could further weaken the dollar. A weakening dollar may provide support to yellow metals. Spot gold have a strong support at 1030/995 levels and Resistance at 1125/1155 levels. MCX April Gold shall find a strong support at 15900/15780 levels and resistance at 16600/168000 levels for the coming week.

Base Metals
The base metals complex rebounded back in last week after falling to multi-month lows in the earlier sessions. Metal prices had suffered significantly amidst the fiscal deficit and debt problems in Greece and other Euro zone economies comprising of Spain, Portugal and Ireland. Risk appetite emerged on the back of news that the European Union would come to the rescue of Greece and other debt ridden nations in the Euro zone. There was some positive news across the globe reflecting signs of recovery. China’s inflation consumer price inflation increased by 1.5% which was lower than expected, whereas January PPI increased by 4.3%. Inflationary concerns have reduced and we may see demand coming up. China is the largest consumer of metals in the world and positive economic data would boost demand. Copper, which is the leader in the base metal complex regained back after falling to multi-month lows. However, China celebrates its Lunar New Year this week and this could exert pressure on prices as demand may weaken. Demand for commodities usually weakens during this time of the year and prices feel the pressure. MCX Feb Copper shall find a strong support at 297/290 levels and resistance at 321/330 levels for the coming week.

Steel Long: NCDEX Steel long futures fell more than 15% in the last 6 weeks on account of record high production estimates this year as compared to last year. The March contract recorded weekly high and low of Rs 28610/tonne & Rs 23990/tonne respectively. World steel output is forecasted at 1350 million tonnes in 2010 which will be an all time high. Blast furnace iron production is also predicted to reach a record level in 2010. At 994 million tonnes, it would be almost 11% above the result a year earlier. However, Steel long prices are expected to improve from these levels on account of short covering after a sharp fall in the last month and there is possibility of some fresh buying at lower levels. On the Suppliers side, they are not willing to produce and sell at further lower rates due to higher prices of raw materials and strong overseas market.

On Iron Ore negotiation front, Chinese mills are trying to settle down the negotiation with reasonable price hike. Iron Ore negotiating with Brazilian government talking about the Iron ore export tax. This move is interpreted as an attempt to raise the spot prices. On NCDEX Platform, prices have shown some signs of confidence wherein physical supplier were reluctant to supply material at the prevailing prices. Higher scrap prices & Cost of conversion is not making it feasible for the manufacturers to run their plants and sell the finished product at the given prices. Currently Mandi Gobindgarh is trading at Rs.26,200/tonne, Muzzafaranagar trading at Rs.25,800-25,900/tonne, Mumbai trading Rs.23,300/ton. Yesterday evening Gaziabad was trading at Rs.23,000/ton but sellers were absent at the current rates. In the coming week, prices are expected to move northward on account of short covering and some fresh buying may witness at lower levels. NCDEX March Contract shall find a strong support at 23990/23750 levels and resistance at 25200/25600 levels for the coming week.

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