Refined Soybean Oil:
Refined soybean oil (NCDEX December contract) futures surged sharply and touched a high of Rs 495 per 10 Kg (up about 6%) in last week as compared to previous week on account of firm overseas market and lower domestic soybean production estimates. Higher export figures of Malaysian palm oil also added bullish market sentiments. As per SGS (Cargo Surveyor, Malaysia) Malaysia‘s palm oil exports during the November 1-20 was 954,652 tonnes, up 16% as compared to last month during the same period. As per National Oilseed Processors Association (NOPA, USA), this week's export inspections for soybeans were 59.945 million bushels which was at the high end of trade expectations. Prices surged sharply during the last week despite record import of vegetable oils during this oil marketing year (Nov 2008-Oct 2009) was 82 lakh tonnes, up 46% as compared to 56 lakh tonnes last year.
Domestic vegetable oil production was about 70 lakh tonnes and consumption 135 lakh tonnes in 2008-09, which revealed that the domestic production of vegetable oils is not sufficient to meet domestic requirement. India needs to import vegetable oil about 50% of its total annual consumption requirement. This huge gap between supply and demand is met through imported edible oil. The per capita consumption of edible oil is increasing on account of rising income among the nation's middle-class consumers as demand for fried food has increased. India's vegetable oil consumption demand is expected to rise faster than the domestic production growth. India’s population is currently estimated at 1.20 billion and it is growing @1.8% per annum. India’s per capita consumption of edible oil is 11.17 kg/annum, which is significantly lower as compared to developed countries. The world’s average per capita consumption of edible oil is 17.80 kg/annum. The developed western world’s per capita consumption is 44 to 48 kg/annum. A large gap in consumption among sections of population is witnessed in India. Top 10% of the population consumes over 20 Kg per capita and bottom 30% consume less than 5 kg per capita (it is due to lack of purchasing power). As Indian economy continues to grow at fast pace in coming years, demand for edible oil will increase. Overall trend for refined soy oil is up, but technical correction/profit taking is possible from higher levels. NCDEX December Contract shall find a strong support at 475/465 and resistance at 510/518 levels in the coming week.
Guar Seed:
Guar futures gained almost 4% during the last week on output concerns. Stockiest are stocking Guar seed even at the current high prices on expectations that the prices would rise further due to a drop in output by almost 60%. However, millers are not buying Guar seed at the current high prices as they have huge stocks of Gum and also there is a huge disparity in the prices of seed and gum. The demand from Millers will only pick up once the demand from the overseas market improves. Export demand generally peaks up during November-December. Market has already discounted the fact of output drop by surging almost 58% since June 2009. However, further price rally would depend on the overseas demand for Guar gum which is expected to pick up in December. Export demand may lead prices to gain by at least Rs. 150-200 per qtl form the current levels.
Pepper
Pepper prices continue to be volatile on confusing reports coming from overseas markets.Moreover, several factors are pulling the prices upwards and downwards in quick succession. On Friday, the November contract at National Commodity and Derivatives Exchange of India ended with a loss of Rs 291 at Rs 15014 on the week on expiry of the contract. Some of the factors pulling down prices include a weak overseas demand, the cheaper Brazilian crop, Rupee appreciation pushing up Indian parity to $3400 levels while Brazil origin is quoted at $3000 and less. India’s pepper exports have fallen from Rs 2275 tonnes in October 2008 to 1750 in October 2009, according to Spices Board. NCDEX Futures staged recoveries during the week with prices regaining 15170 for December contract after beginning the week at Rs 15183. Slow down in demand and better international crop is set to ease market sentiments as by December new crop arrivals start in India. Reports from USA suggest that major buyers have covered up their requirements until December and hence no further price appreciation can be expected. This year, the Spices Board expects crop size to be 50,000 to 53,000 tonnes. Vietnam has already exported 20,000 tonnes so far. Next week, December pepper Futures are expected to lose momentum and trade in Rs 14950-5100 range with a weak bias.
Rubber
Natural rubber prices continue its bullish trend on global demand-supply imbalance and it is reflected in India’s spot and futures prices last week. On Friday, spot prices climbed to Rs 114.50 for RSS 4 on fresh buying coupled with short covering. Manufacturers are keeping on the sidelines as prevailing higher prices are not attractive and widespread rains are reported in plantation areas. December futures at NMCE rose to Rs 118.30 while January Futures rose to Rs 120 up from Rs 118.63 in the previous session. There is not much enthusiasm visible from the consuming industries in purchasing from the spot markets. However, the supply-demand mismatch and bullish futures are providing support to physical rubber prices.
Spot rubber prices are likely to stay above Rs 115 for RSS4 while December futures at NMCE may face resistance at Rs 121 levels while it has support at 116 levels.
Chana
Chana witnessed four days of bullish rally last week but fell on Friday due to profit booking. Firm prices of kharif pulses and drop in acreage forecasted for Rajasthan are supporting prices while hopes of increased output from Rabi season is preventing the continued uptrend. The Chana November Futures closed with a marginal gain on Friday at Rs 2567 while December futures gained 1.15% at Rs 2660. The fact that Punjab Government imposed stock limits from November 20 also weighed on market sentiments. The November futures closed at Rs 2487 on Monday and December futures closed at Rs 2619 but thereafter the market witnessed up trend for continous trading sessions until Friday. Firm spot demand is keeping prices above Rs 2500 and hence December futures is well supported above Rs 2600 levels in the weeks ahead.
Wheat
CBOT Wheat futures which has risen 28% since September 30 is likely to remain subdued to ample global stocks and lower demand for US wheat in global markets. US Department of Agriculture data shows US wheat shipments falling in 2009 compared to a year ago. CBOT Futures for March delivery fell for a third day on Friday to $5.8075 a bushel after attaining 6.05 earlier in the week the highest since June 16.
Meanwhile India’s December wheat Futures at National Commodity and Derivatives Exchange of India (NCDEX) has traded in a narrow range of Rs 1394-1402 last week as rising spot demand was contained by rains in major wheat growing regions and ample stocks forcing the government not to import wheat for the time being. On Friday, December contract closed marginally lower at Rs 1394 on higher output hopes. India plans to raise its annual output to 82 mn tonnes as against 80 mn tonnes last year. Rains in Punjab, UP and Haryana have raised production hopes even as high temperature reduced overall sowing area. As on October 1, India has 28 mn tonnes of buffer stock as against the required norm of 11 mn tonnes. Wheat Futures at NCDEX is likely to remain subdued next week trading near to Rs 1395 levels although a climb towards 1400 can push the prices further by Rs 50 as firm spot demand is supportive of prices. (Prepared in association with Angel Commodities, Mumbai)
