Commodity Online
Commodity shortages are likely next year as output of metals and agricultural products potentially rises too slowly to match revival of demand, according to a Goldman Sachs Group study. The Reuters/Jefferies CRB Index of 19 commodities has added 17 percent this year, driven by energy and metals prices. Limits on production growth and swelling demand in developing nations will keep driving prices higher and probably curb usage in industrialized countries like the U.S., Goldman Sachs said.

Meanwhile, in India scanty rains are a cause for concern in some major crop growing regions and Finance Minister Pranab Mukherjee hinted that it would be damaging for economic growth which had begun to look up due to stimulus measures.

India's exports fell for ninth month in a row. Commerce Ministry said, exports in June dipped 27.7%. Imports also dropped by 29.3%, reflecting slowdown in domestic consumption and mainly because a 51% decrease in oil import.
As fall in imports is steeper than that in exports, the trade deficit in June 2009 has contracted to $6.2 billion from $9.1 billion in the same month of the last financial year. Exports dipped to $12.8 billion in June from $17.7 billion in the same month last year

A few major developments related to commodity exchanges last week. It was announced that commodity bourses such as MCX, NCDEX and NMCE can now hold equity stake in one another as the government has allowed cross-holding in national level commodity exchanges that have completed five years. The new guidelines on equity structure issued recently by the consumer affairs ministry, the stock and commodity exchanges can hold a maximum equity of up to 15% in commodity bourses that have completed five years.
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Forward Markets Commission (FMC), India's commodity market regulator, has asked national-level commodity exchanges to ensure at least 10 percent of their stake is owned by government companies. Total stake by state firms, banks and warehouses together should be at least 26 percent, while only the original promoter of the exchange can hold upto 26 percent, it added.

The guidelines were aimed at better governance, transparency and investor confidence in the markets. Volumes in India's commodity futures, one of the fastest growing in the world, rose 29 percent in 2008/09 financial year ending March to 52.49 trillion rupees.

Precious Metals
The Bullion pack traded higher for the past week with Spot Gold trading above $935 levels. Silver prices also moved in tandem with gold prices trading higher. The sharp fall in the Dollar Index (the USD pegged against 6 major currencies) supported the rally in the bullion pack as assets traded in USD dollar terms appreciate in value terms when the Dollar weakens. A further sustained fall in the USD would lead to a sharp rally in the bullion pack. Investment/Fabrication demand shall continue to play a crucial role in coming weeks. Also, broad-based buying was also witnessed across the commodities pack is currently being witnessed as risk appetite of global investors is on the rise, which has been pressurizing the USD. Higher crude prices and overall improvement in sentiments have been supportive for the bullion pack. Spot Gold shall meet with resistance around $975 - $980 zone, and further trading above this level would lead prices towards the $1000 mark. Domestic gold prices breached the Rs.15,000 mark last week. For this week, we expect prices to trade higher with resistance seen at 15070/15220 whereas support is seen at 14750/14590.

Base Metals
The Base metals pack last week rallied sharply on the back of improving global economic sentiments & weakness in the US Dollar. In the last few days, the base metals market has been running on a very optimistic note due to a steady stock market recovery but, with only moderate seeds of consumer demand. The market also seems almost immune to any negative data. Despite slower summer physical conditions evidenced on the back of rising inventories and falling cancelled warrants, prices are witnessing an uptrend. However, we feel that base metals could come under pressure as prices are racing ahead of their fundamentals. Hence, prices may be due for a correction this week on account of profit-booking. Copper, the leader of the base metals pack, shall have crucial support around 281/273 levels whereas resistance is seen around 297/305 levels for this week.

Soybean
Soybean (NCDEX Sep contract) futures opened the week at Rs 2334 a quintal, and surged more than 5% during the last week as compared to previous week on account of short covering and strong movement of soybean futures at Chicago Board of trade (CBOT). Better demand from solvent extractors amid tight supply led to spurt in prices. Traders are resorting to hoarding, as there is a growing concern in respect with the paucity of rainfall.

Moreover, market participants are anticipating that the government may declare a drought. As per IMD report, the rainfall for the week to August 5 was 66% below normal. As per Agriculture Ministry of India, area covered under domestic kharif oilseeds is 141.79 lakh hectares till July 31, 2009, as compared with 144.66 lakh hectare during corresponding period a year ago. In this respect, area under Soybean is reported up at 90.74 lakh hectare against 87.75 lakh hectare a year ago. As per Brazil’s crop supply agency, soybean crop estimates for 2008/09 was about unchanged at 57.13 million tonnes compared to record 60.02 million tonnes in 2007/08. In the coming week, prices are expected to move higher on account of lower soybean stocks and better demand from solvent extractors. NCDEX September Soybean prices has a support at 2350/2300 and resistance is seen at 2510/2550 levels.

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