By Commodity Online
India’s annual kharif foodgrain output (115 million tonnes) is unlikely to see a sharp drop despite the 27% deficiency in rains thanks to pulses and coarse cereals. Overall paddy acreage in key growing areas has come down compared to the same period last year but has improved noticeably in the last fortnight following improved rains, spurring hopes that the rise in acreage will be speedy. Paddy sowing went up by 76% in the past week.
Meanwhile, the two leading agri-commodities based exchanges in India are looking towards expansion. NCDEX is planning to boost its presence in South India with non-agricultural commodities. Goldman Sachs which owns 7% stake and US based ICE which owns 8% is reportedly planning to divest their stakes in NCDEX. NMCE is scouting for overseas investors. It plans to raise at least 500 million rupees ($10 million) selling shares to private equity investors and commodity bourses overseas.
Gems and jewellery exports, which are among the overseas shipments hit the most by the global slowdown, fell for the ninth month in a row -- in June by 11 per cent. The gems and jewellery exports aggregated to USD 1.7 billion in June this fiscal against USD 1.9 billion in the year-ago month, according to the data released by the Gems and Jewellery Export Promotion Council (GJEPC). While exports of the precious jewellery remained in the negative territory, the downslide was less steep in June than in May, when the shipments dropped by 24 per cent
Precious Metals
The bullion pack rallied sharply during last week with Spot Gold breaching the $940 mark, on the back of sharp fall in the US Dollar against other major currencies. Investment demand continues to remain tepid but fears of inflation rearing its head once again continue to be supportive for the bullion pack. The Dollar Index (the US Dollar pegged against 6 major currencies) had a negative trading session yesterday, further supporting the bullion pack. Weak physical demand from India, the world’s biggest consumer of bullion, is still pressurizing prices as jewelers demand seems to be weak with India importing just 12 tons of gold in June.
The Bullion pack, both Gold & Silver have closed above its 10-Day Moving Average indicating that the short-term trend has changed to up. But it is very essential that prices breach and trade consistently above $942/oz for any further sizeable up move to take place. ETF demand / jewellery demand over the next few weeks shall play a significant role in determining prices. Further, the US Dollar direction along with cues from Global financial markets too shall influence the bullion pack as rising global financial markets could mean investors raising their risk appetite. Spot Gold can find crucial support in the zone of $914/893 levels, whereas major resistance zone is seen between $949 and $962. MCX August Gold can face support around Rs.14560/14375 levels, whereas resistance is seen at Rs. 14880/15000 per 10 gram.
Base Metals
China is the driver of base metals demand and an improvement in China’s GDP indicates that the series of economic stimulus efforts were correct, timely and effective. China has shown a growth of 7.9% despite the recession in the Western world. This data indicated that the main driver of base metals demand continues to show a positive aide for demand for the future. Copper prices have found good support above $5,000 on the LME and weakness in the dollar could help the metal trade stronger. The red metal could end the week on a positive note as Chinese economic data indicates that the economy is on track to meet the government’s 8% growth target, thereby increasing demand for the metal. Recent releases of economic data from China point out to the fact that a recovery is underway. Hence, it is bullish for Copper.
China’s economy is the only one of the world’s 10 biggest still expanding. The nation’s foreign-exchange reserves rose to a record $2.132 trillion last quarter as investors’ abroad pumped money into stocks and property. Emerging economies, led by China, are set to regain growth momentum in the remainder of this year, helping the world economy to recover from the worst slump since World War II.
We feel that base metal prices could continue to receive support on the back of China’s growth. Also, a weaker dollar could come in an additional support factor.
Crude Oil
Crude Oil prices rose in the last week after four weeks consecutive losses, as better than expected economic data, weaker dollar and strong equity markets outweighed concerns over weak demand. Traders have followed movement in equity markets to gauge the risk sentiment in the market. Despite of this, energy demand is still weak and therefore prices failed to rally sharply. Weekly energy data from US showed fall in crude oil inventory by As per US energy department crude oil inventory declined by 2.8Mbbl to 344.5Mbbl against the expectation of 2.1Mbbl decline.
Total U.S. daily fuel demand averaged 18.7 million barrels in the past four weeks, down 5.8 percent from a year earlier. Going forward traders will keep an eye on earnings of US companies, as better than expected results are boosting market sentiments and supporting gains in risky and higher yielding assets. But energy demand is still weak and rising gasoline stocks amid ongoing US driving season is posing more demand concerns. Weakening dollar can also support oil prices. We believe that oil prices are having resistance near $64 mark in the near term and if prices close below $58 levels then can head towards $55 per barrel level. MCX August Crude Oil can get support around Rs.2930/2820 levels, whereas resistance is seen at Rs. 3125/3205 per 10 gram.
Soybean
Soybean (NCDEX Aug contract) futures moved in a range of Rs 2225 – 2323 per quintal during the last week. As per Ministry of Agriculture, till July 10, soybean was planted in 31.62 lakh hectares versus 14.16 lakh hectares in previous week. As per USDA’s monthly Supply & Demand Report, the US oilseed ending stocks for 2009-10 are projected at 8 million tonnes, up 1.1 million tonnes from last month. Oilseed production is projected at 96.30 million tonnes, up 1.18 million tonnes. Soybean production is projected at 3.26 billion bushels, up 65 million bushels due to increased harvested area. Global oilseed production for 2009-10 in increased 2 million tonnes to a record 423.4 million tonnes.
Soybean production is projected at record 243.7 million tonnes, up 2.1 million tonne mainly due to higher production estimates of US. USDA’s Weekly Export Sales figures released on Thursday, net export sales for soybean 684,700 metric tonnes. As of July 9, cumulative soybean sales stand at 100.5% of the USDA’s forecast for 2008-09 versus 5 years average of 99.5%. Net export sales of meal were 66,900 tonnes. Sales need to average 114,000 tonnes each week to reach the USDA’s forecast. Net export sales of oil were 90,100 tonnes. Cumulative soybean oil sales stand only at 77.9% of the USDA’s forecast for 2008-09 versus 5 years average of 92.8%. Sales need to average 19,000 tonnes each week to reach the USDA forecast.
As per Solvent Extractors Association of India, edible oil import during the first 8 months of current edible oil marketing year (Nov,2008 – June 2009) was 55.33 lakh tonnes, up 78.69% as compared to last year (30.97 lakh tonnes) during the same period. However, edible oil import was 7.42 lakh tonnes in June 2009, up 35% as compared to 5.5 lakh tonnes in June 2008.
In the coming week (NCDEX Aug Soybean), prices are expected to move slightly down with a support at 2220/2180 and resistance is seen at 2330/2400 levels.
