By Commodity Online
India’s rice output is expected to fall sharply to 82 million tonnes in the 2009-10 against the early forecast of 88 MT, according to a recent report released by the U S Department of Agriculture.

The Reserve Bank of India (RBI) will not raise key policy rates until the economy is back on the high-growth track, RBI governor Duvvuri Subbarao said here on Tuesday. RBI has cut its benchmark interest rate six times from October 2008 through April.

The annual rate of inflation came in at 0.12% for the week ended September 5, ending the 13-week decline in the wholesale price index (WPI) as prices of food articles showed no signs of abating. Inflationary pressures are beginning to build up with retail inflation already in double digits. With the comfort of negative inflation for the most widely-watched WPI also gone, economists expect the Reserve Bank of India (RBI) to take steps to suck out excess liquidity from the system and even resort to selective credit control.

National Multi-Commodity Exchange introduced new series for futures contract in cardamom, copra, gold, guargum, rape/mustard seed, rubber, sack and pepper that will be available for trading with effect from September 16, according to a release.

The new contract in cardamom, copra, gold and guargum futures will mature on December 15, while that in rape/mustard seed, rubber and sack futures will mature on January 15, 2010 and the new contract in pepper futures will mature on March 15, 2010.

The three-day India International Coffee Festival 2009 beginning October 7 in Bangalore will focus on global trend and domestic opportunities. About 500 delegates from over 15 countries, comprising coffee growers, roasters, brewers, exporters and equipment manufacturers are expected to participate in the bi-annual event. About 40 major exhibitors will showcase their products at the Coffee Expo during the festival

Indian Commodity Exchange (ICE) will begin futures trading in gold, natural gas, soybean oil and seven other commodities next month.

The bourse will compete with the Multi Commodity Exchange, whose investors are Fidelity International and Citigroup. It will also vie against the National Commodity and Derivatives Exchange, part-owned by the Goldman Sachs Group and the local unit of Standard & Poor’s.

ICE will offer futures contracts in gold, silver, refined soybean oil, mustard seed, guar seed, turmeric, copper, zinc, natural gas and crude oil from the second week of October, he said. Copper would be a delivery-based contract, the first by any Indian bourse, he said.

Bullion
Gold witnessed a peak towards 18-month high this week after a rather weak start at the beginning of the week. Silver also lost Rs 200 per kg on Monday to close at Rs 25,900 due to ongoing ‘Shraadhh’ considered inauspicious fortnight for buying precious metals. It rose to a new high of Rs 16,220 per 10 gm on Wednesday amid frantic buying by stockists ahead of festival season. The dollar slumped to a one-year low against major currencies as a recovery in the global economy encouraged investors to look for higher-returning assets. The euro rallied to a nine-month high, a move analysts said reflected the view investors shunned the dollar as a safe haven.

Globally, gold demand is expected to slip by 15% on as jewellery fabrication business will slide, according to GFMS.
Many analysts said that gold could be building up for an assault on its previous all-time high above $1030 set in March 2008.

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Silver prices have gained steadily in the last three weeks new demand from electronic appliance makers for the metal has provided support. This rise in demand could strain global supplies. Upbeat outlook from computer and appliance makers who use silver for batteries has also helped the metal gain further. Apart from traditional use in jewelry, silver is largely used in demand for solar energy and water purification components. Silver prices have gained sharply in the last three weeks and the current week is no exception. However gains have been phenomenal in a short time span. Though there are fundamental reasons to back this rally we feel that the metal could come under pressure. Currently, silver prices are trading around $17/oz and compared to levels three weeks ago the metal has gained a whopping 21%. Hence, we could witness some technical selling in the near-term but prices will bounce back after witnessing a dip.

Base Metals
Rising inventories have led to weakness in industrial metals with copper prices taking the hardest hit this month in New York. India’s copper futures also fell towards weekend due to profit taking and stronger rupee. MCX November Copper contract fell to Rs 310 and fell further towards Rs 296 on Saturday. The contract had made gains earlier in the week on upbeat US data and US Fed Chairman’s comments that US recession is probably over.

India’s copper futures have been range-bound in the previous 15 sessions and it could trade close to Rs 305 -312 range.

Industrial metals fell on Friday, weighed down by the dollar's rebound, weaker equities and persistent worries over increasing stockpiles and thin demand. Copper inventories in Shanghai rose for the eighth week in a row on Friday, increasing another 7 percent to 104,248 tonnes, the biggest level since May 2004. LME copper stocks jumped 3,325 tonnes to 327,700 tonnes on Friday, up almost 27 percent since early July.

Base metal prices could feel pressure in the coming week as weaker Chinese demand data this week indicated that Chinese imports of all copper products fell 20% month-on-month in August at 325,098 tonnes compared to a record 406,612 tonnes in July. Markets are expecting Chinese imports to fall further in the second half of this year because stocks in China are substantial and domestic production too is ramping up. This factor could put pressure on base metal prices but the fall in prices may not be too sharp.

Energy
After an initial weakness that saw Crude prices at $69 on Tuesday, crude maintained a steady trend above $70.Pressurised by a stronger dollar, fall in refined product futures, US crude oil futures fell on Friday towards $72 per barrel. Oil fell as dealers took profits from a 5 percent rally earlier in the week and the dollar rose as investors trimmed their positions ahead of holidays in Japan and Singapore next week. Earlier, data showing fall in US crude inventories helped support prices.
U.S. crude futures inched above $69 a barrel on Tuesday, trimming some of their losses from the previous day when prices fell due to concerns over oil demand amid high levels of domestic refined product inventories.
So far this week, crude prices have gained 4.3% and the gains have been on the back of a rise in risk appetite in the financial markets that led to higher demand for commodities and equities. In the recent months oil prices have tracked the equity markets closely. Despite concerns about growing oil supplies from the OPEC oil prices have managed to rise. Though prices slipped yesterday we feel that the following factors will help the prices end the week on a positive note – 1) positive US economic data, 2) higher risk appetite and 3) optimism of economic recovery.

Soybean
Soybean (NCDEX November contract) futures opened the week at Rs 1934 a quintal and moved in a range of 1920-1995 levels amidst subdued trading activity during the last week. In the beginning of the week prices surged slightly on short covering and some fresh buying on account of sharp rise in CBOT futures owing to cold weather /frost in US, which may damage the crop. There is forecast for a second wave of cold weather near the end of the month. This is causing major concern due to the lateness of the US soybean crop which remains far behind the normal pace of development. However, higher prices could not sustain due to harvesting of new crop started in Maharashtra and some parts in Madhya Pradesh and an announcement for the extension of stock limits on oil seeds and edible oils by government of India also added bearish market sentiments. The deadline for stock limits was earlier valid until the end of September, 2009. As prices of agricultural commodities have soared sharply in the last few months followed by below-normal rains, the government imposed stock limits on traders to discourage hoarding, boost local supplies and contain price rise. USDA’s Weekly Export sales were in line with trade expectations for soybeans, meal and oil. Net sales for soybeans were704,400 tonnes. As of September 10, cumulative soybean sales stand at 50.6% of the USDA forecast for 2009/2010 which is nearly double the average the 5 year average of 25.4% for this point in the marketing year. Net meal sales were115,100 tonnes. Cumulative meal sales stand at 25.4% of the USDA forecast for the new crop 2009/2010 crop year, well ahead of the 5 year average pace of 10.3%. Net oil sales were 29,900 tonnes for 2008/09 year and -16,900 for 2009/10 for a total of 13,000. Cumulative soybean oil sales stand at 10.6% of the USDA forecast for 2009/2010 versus a 5 year average of 5.5%. In the coming week, prices are expected to move range bound on lack of fresh fundamentals. Prices have strong support at 1915/1880 and resistance is seen at 2000/2050 levels.

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