Crude prices steadily climbed to $73 ahead of January contract expirty on Monday aided by short covering. The supportive factors for rising crude were the dispute between Iran and Iraq and colder weather across Europe, and US. Iranian soldiers crossed into Iraqi territory and took up a position at a Southern oilfield which is under dispute over ownership. Crude prices are still far off from the $78.37 attained at the beginning of this month. The American Petroleum Institute data showed a deeper than expected drop in US distillate inventories and colder weather offset the surprise rise in crude stock piles.

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OPEC has raised its forecast for world oil demand in 2010 to an average 85.1 mn barrels per day which represents a rise of 70,000 barrels per day from its earlier forecast made in November. Recently, the stocks at Cushing, Oklahoma, the delivery point of NYMEX WTI crude swelled by 7.8 mn barrels to 33.4 mn barrels. Economic recovery hopes, weak dollar are also supportive of the crude oil above $75 in the coming week.

Soybean
Soybean (NCDEX January contract) futures opened the week at Rs 2448/quintal, initially made a high of Rs 2468/quintal, then fell sharply and touched a low of 2392/quintal and it recovered slightly on short covering and finally ended on Friday with a loss of Rs 16/quintal to close at Rs 2435/quintal. Prices moved southward during the last week on account of poor export demand of domestic soy meal and arrival pressure of fresh crop in the domestic market. Higher global production estimates of soybean and oilseeds also provided support to bears in the market. The Solvent Extractors’ Association of India, overall export of oil meals during first eight months of the financial year 2009-10 is reported at 18.90 lakh tonnes compared to 33.60 lakh tonnes for the same period of last year i.e. down by 44% due to weak export demand and lower crushing/processing due to disparity.

Prices of soybean are driven by soy meal because after crushing soybean, the ratio of soy meal and oil contents is 82:18 respectively. The USDA's supply/demand report released on December 10, 2009, i.e Thursday; Global oilseed production for 2009-10 is projected at 428.60 million tonnes, up by 8.42 % as compared to 395.30 million tonnes in 2008-09. Global soybean production of soybean for 2009-10 is projected at 250.25 million tonnes, up by 18.67 % as compared to 210.87 million tonnes in 2008-09. Global soybean ending stocks for 2009-10 are projected at 57.00 million tonnes, up 34 % from 42.41 million tonnes in 2008-09.

The USDA's weekly export sales report released on Thursday, which revealed that the net soybean sales came at 944,700 tonnes. As of December 10, cumulative soybean sales stand at 81.0% of the USDA forecast for 2009/2010 versus a 5 year average of 57.6%. Sales need to average 183,000 tonnes each week to reach the USDA forecast. Net meal sales came in at 184,400 tonnes. Cumulative soybean meal sales stand at 60.8% of the USDA forecast for 2009/2010, well above the 5 year average of 40.6%.

Sales need to average just 83,000 tonnes each week to reach the USDA forecast. Net oil sales came in at 20,700 tonnes. Cumulative oil sales stand at 50.1% of the USDA forecast for 2009/2010 versus a 5 year average of 29.3%. Sales need to average 17,000 tonnes each week to reach the USDA forecast. In the coming months, prices are expected to move southwards on above mentioned fundamentals like higher global oilseeds production and lower export demand of domestic soy meal. In the coming week, prices are expected to move slightly lower on account of poor export demand of domestic soy meal. NCDEX January Contract shall find a strong support at 2380/2350 levels and resistance at 2470/2510 levels.

Chana
Chana futures are trading in a bearish manner from the last 2 weeks (corrected 200 points) tracking the bearish fundamentals. However, demand is seen emerging at lower levels and thus prices recovered towards the weekend. Acreage under Chana as on 10th December 2009 stood at around 73.12 lakh hectares against 71.07 lakh hectares during the same period last year. Increase in acreage under Chana is mainly witnessed in Maharashtra Karnataka and Andhra Pradesh.

However, sowing is almost 25-28% lower in Rajasthan which is the 2nd largest Chana producing state in India after MP. In the short term (1-2 week), Chana futures are expected to gain 3-4% on improved demand at lower levels. Acreage and productivity concerns in Rajasthan may further provide support to bulls in the short term. Crop is progressing well in Madhya Pradesh and Maharashtra, but the conditions are not good in Rajasthan, which accounts for almost 15% share in total Chana production. NCDEX January Contract shall find a strong support at 2515/2470 levels and resistance at 2615/2670 levels.

Rubber
Rubber prices continue to trade bullish after a weakness that was visible at the beginning of last week. India has now become the third largest natural rubber consumer overtaking Japan. Rubber production in India was down at 5.38 lakh tonnes in the first eight months of the current year as against 5.76 lakh tonnes in the corresponding period last year. Butconsumption grew by 3.5 per cent to 6.15 lakh tonnes (5.94 lakh tonnes).

And going by the current trends, the demand-supply mismatch is poised to aggravate further as the year progresses. By cleverly reducing its exports and increasing imports, India has been able to build on the stock available and raise it to 2.47 lakh tonnes by November-end. With rubber prices rising above Rs 140 and poised to touch the Rs 150 mark soon, tyre sector, the leading consumers of natural rubber are a worried lot as it creates huge cost increase for raw material. The Automotive Tyre Manufacturers Association has blamed the futures trading for the speculative rise in prices at this peak season when prices are supposed to fall.

According to Rubber Board estimates, the production was pegged at 1,03,000 tonnes in November and 1,00,000 tonnes in December this year against a consumption of 80,000 tonnes each in November and December. This should add to the availability of stock with growers and traders and, if at all, should put downward pressure on prices, according to ATMA.

NMCE December Futures which opened the week on a dull note at Rs 132 levels rose to Rs 142 on Friday while spot rubber prices rose to Rs 140 from Rs 132. During mid-week, rubber prices rose 4.5% in a span of two days due to thin supplies although there were no fresh quotes from the tyre sector. With global demand and supply mismatch to continue, the medium outlook for rubber futures continues to be bullish and may aim for Rs 150 per kg for RSS4.

Pepper
Pepper futures continues to trade bullish despite bear operators gaining an upper hand on some days. Last week, low stocks which gives support to pepper prices in spot and futures market was offset by forecast of higher global output by International Pepper Community and lower export demand. The International Pepper Community has forecasted global pepper output to rise 3% in 2010 from 281974 tonnes to 290742. Although near-term medium term outlook is bullish for pepper, new crop arrivals in January will impact sentiments in India. NCDEX Dec Pepper futures which closed at Rs 14072 fell further in the following days before bouncing back to Rs 14196 on Friday.

The January futures rose from Rs 14348 to end the session on Friday at Rs 14381. There are reports that Vietnam’s output is expected to surge in the next season. Vietnam’s pepper imports have surged to 1,28,000 tonnes in the January-November 2009 period while India’s imports was only 17,500 tonnes, Vietnam Pepper Association reported. A confluence of factors is likely to pull down pepper futures prices by January which includes the domestic crop arrivals and higher global output forecast by IPC. In the near term, January pepper futures may surge to 14500 before dropping below 14000 levels. (Angel Commodities, Mumbai contributed to this analysis)

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