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| You are here : Home >> Top Story >> Report | |||||||||
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| 2008-07-06 21:05:00 | |||||||||
Commodity Review: concern over weak monsoon
Commodity OnlineThe rising crude oil continued to fire up the inflationary trend in general across commodities which was further supported by rising inflation figures reported India from 11.42 percent to 11.63 percent for the week ended June 21. Maize prices plunged on announcement that exports have been banned till October 15 and the bullish trend was more because of the export demand. Movement of dollar, oil prices and progress of monsoon in major growing regions will be critical factors for both agri commodities and metals in the week ahead. Base Metal The base metals complex showed a power packed performance in the last week on the back of fund-led buying. This rally in metals was attributed to a softer dollar and weaker equity markets. However, performance in the base metals market remained highly divergent as metals like copper, aluminum and tin are backed by strong fundamentals and weakening supply side, while the other three (Lead, Zinc & Nickel) are facing soggier fundamentals. Hence, long-term view for copper, aluminum and tin remains bullish and the rest of the metals look weak. Copper prices retreated from a fresh all-time high of $8,940 on Wednesday but lead, zinc and nickel, the main victims of poor fundamentals hit 17-month, 31-month and 25-month lows respectively. The coming week is expected to be volatile as the dollar could strengthen and weigh on prices of all major commodities. Copper prices could get weak on the back of stronger dollar and calling off of the Peruvian strike. However, the downside in copper will be limited as it could receive support from falling inventories. Soybean Soybean prices surged to Rs 2785 from 2718 per quintal, up by 2.46% during the past week owing to strong export demand of soy meal. USDA Weekly Export Sales Report showed strong sales for soybeans and meal, on the other hand weak sales for oil. Net soybean sales for old crop were 4,65,900 tonnes with new crop sales at 176500 tonnes. In meal, net old crop sales were 158100 tonnes with net new crop sales of just 200 tonnes. According to GOI, Agricultural Ministry’s latest crop weather watch report, sowing of soybean rose to 24.82 lakh hectare upto July 3 from 22.07 lakh hectare in the same period last year. Total oilseed upto July 3, 2008 was 50.01lakh ha, the area that has been brought under oilseeds cultivation as compared to 49.52 ha sown in corresponding period last year. A record price for soyabeans in the global market is likely to spur farmers to plant more of the oilseeds this year. Higher estimate of sowing acreage amid favorable weather are in favour of bears from a long term term perspective. However, soybean prices are expected to trade higher in the short term on lower stock of soybean and better export demand of soy meal. In the coming weeks, Soybean futures Aug contract is likely to trade higher with strong support of 2690 and resistance of 2825. Sugar Indian Sugar markets were flooded with huge stocks and thus prices were trading lower since last 2 months. However, in the last week, prices recovered by almost Rs. 50 per qtl as the govt has released lower FSQ for the quarter July- Sept. The Centre has released 30 lt (lakh tonnes) of sugar as the Free Sale Quota (FSQ) for the quarter July-September. This is lower than the 36 lt released for the same quarter of last year. According to current estimates, the area under sugarcane cultivation has declined to 40.74 lakh hectares from 47.51 lakh hectares around the same time last year. This may support the prices in the coming days as lower acreage may revise the output further downward for the year 2008-09. In the short to medium term, we expect Indian Sugar prices to recover by 20-25% on lower crop estimates at around 23-24 million tonnes for 2008-09. The quota for July was fixed at 1.2 MMt. Despite a lower quota, overall supplies may be higher with the release of buffer stocks into the open market, traders said. Besides, Governmentt may allow the sugar industries to sell their entire produce in the open market from the new crushing season starting October. 1, 2008. Presently, the export demand is picking up due to weakness in rupee against the US dollar and bullish international market. In the world market, sugar prices are strengthening on record high crude oil prices and possible diversion of more sugarcane towards producing ethanol which is used as biofuel. Lower acreage under sugarcane crop also influenced the sugar prices as the acreage has declined to 42.8 lakh ha as of July 04, over a year-ago figure of 51.7 lakh ha. Maize Bearish sentiment prevailed in the Maize market soon after the news of export ban. After all, rising exports was the only factor which supported the prices for the bull run. Prices came down by around Rs.80/qtl in the futures market. Less activity was observed in Nizamabad and Davengere spot markets, whereas Ahmedabad market registered a sharp fall of Rs.60/ qtl from the last week’s close of Rs.1020/qtl. Government banned Maize exports with immediate effect in a bid to tame high inflation. The ban will be in effect till 15th October 2008. Maize acreage for the present kharif season stood at 8.89 lakh hectares, higher against the last year area of 6.41 lakh hectares. Maize prices are likely to trade with weak sentiment as exporters will be reluctant to make further trades as Government has banned the Maize exports. Therefore, weakening export demand might weigh down on the prices coupled with rising acreage figures as compared with last year. Continued... |
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