Commodity Trends: Funds flow up in commodities

Money managers have piled into commodities in recent years in search of stronger returns and protection away from the troubles of equity and bond markets during the financial crisis. But for many, the promise of diversification, hedges against inflation and any kind of correlation between rising prices and rising returns has started to ring hollow

POINTERS Synthetic rubber imports surge Imports of synthetic rubber rose by 51.6 per cent to 25,885 tonnes in April on strong demand mainly by the tyre industry, theRubber Board said. Synthetic rubber imports stood at 17,065 tonnes in the corresponding period last fiscal, the board said.

The production of synthetic rubber in the country increased marginally to 8,180 tonnes in April this year against 8,169 tonnes in April, 2009.

Decision on Sugar Import duty An Empowered Group of Ministers on Food is scheduled to meet on July 26 to consider imposing import duty on refined sugar and the sale of an additional 30 lakh tonnes of wheat and rice through ration shops.

The EGoM, headed by Finance Minister Pranab Mukherjee, will consider the Food Ministry's proposal to impose 15-20 per cent import duty on refined (white) sugar, sources said

MCX launches six agri commodities Leading commodity bourse MCX launched futures trading contracts in six agricultural commodities, which will expire between September and December. The futures contracts in wheat, maize, soyabean, guar seed, turmeric and chana dal are available for trading from today, the company circular said.

The turmeric contract will mature in September, soyabean and maize (feed) in October, guar seed and chana dal in November and wheat contract will expire in December, it said. The company also said the futures contract in non-agri item -- mild steel ingot/billet will expire in October

Asian stocks up for a third week Asian stocks rose for a third week as commodity prices gained and as U.S. companies reported or raised profit forecasts, boosting confidence in the strength of global economic growth.

BHP Billiton Ltd., the world's largest mining company, climbed 4 percent this week in Sydney. Hon Hai Precision Industry Co., the world's largest electronics contract manufacturer, gained 3.7 percent in Taipei after Microsoft Corp. reported positive earnings in the U.S. China Resources Land Ltd., a state-controlled developer, soared 6.4 percent in Hong Kong on speculation China may ease tightening measures

Pranab Mukherjee appeals for GST Finance minister Pranab Mukherjee made an impassioned appeal to India Inc to convince political parties and state governments to back the rollout of goods and services tax (GST) from April 1 next year, a day after offering a sweetened deal to states to push through the key indirect tax reform.

I seek your support. This tax is a win-win, Mr Mukherjee said at the national executive meeting of industry body Ficci. I request you to convince the states and political parties to arrive at a consensus on the constitutional amendments needed to implement this major national reform, he said. Constitutional amendments require the support of two-thirds of Parliament members present at the voting. It also needs to be ratified by at least 15 state assemblies for which support of all parties is needed.

Wal-Mart ready to open 100s of stores in India Wal-Mart, the world's top retailer, will be ready to open hundreds of stores in India if the country opens up the sector to foreign direct investment, the chief of its Indian joint venture said.

India's $450 billion retail sector is largely closed to foreign firms and favours small mom-and-pop stores, which provide livelihoods for hundreds of thousands and serve a market of more than 1 billion.

If the laws of the country change to opening of FDI in retailing, we could open hundreds of stores, Bharti Wal-Mart Managing Director and Chief Executive Raj Jain said on Thursday.

Gold Gold prices have failed to re-attain the all-time high of 1266.50 attained in June 21 although financial uncertainties in many nations have provided firm support the yellow metal. Last week, gold weakened as European regulators said that seven out of 91 banks failed a financial stress test, eroding the value of Euro against dollar thus reducing the demand for gold as an alternative against US currency. It looks likely that the relationship between gold and dollar is being re-established.

Investors were eagerly awaiting the bank stress tests even as global equities rallied last week. Spot gold traded at $1194 levels while US Aug falls to $1,187 from $1194 levels. Uncertain financial outlook continues to support gold but possibilities of sliding to $1,180 cannot be ruled out. SPDR Gold Trust holdings fell to 1302.46 from all time high of 1320.436 tonnes attained on June 29.

Spot silver has risen to $18.12 levels rising 1.8% this week on rising equities and industrial demand. MCX Aug Gold has fallen into bearish territory and closed the week at 18255.

Crude Oil Crude oil prices have fallen this week on speculation that tropical storm Brownie won't be strong enough to damage production platform in Gulf of Mexico although Oil rallied initially in the week on rising equities which signaled economic growth will accelerate. Nymex Crude September rose to $78.98 but failed to attain the $80 mark. Nymex September rose 3.4% this week while Brent Crude September at ICE Futures Europe Exchange fell towards weekend to $77.45. The tropical storm Brownie has idled 28% of crude oil production capacity in Gulf of Mexico and 10% of the natural gas output.

Going ahead crude oil could correct on hopes of climbing US inventories. US Crude oil has support at $74 while resistance is seen at $81 levels. MCX Aug Crude made handsome gains at 3721 and is well-entrenched in positive territory.

Base Metals Copper prices had a bullish trend last week and hit a 2-month high as US manufacturers were optimistic of economic growth. Copper prices rallied up 6% with Nymex Sept Copper rising to $3.1645 the highest level since May 14.

Copper prices peaked to $3.50 a pound but fell back to below $3 levels on financial uncertainties. Shrinking inventories in LME and Shanghai provided firm support to prices. LME stocks fell for 22nd week and global equities rally provided firm support. Copper has fallen 4.8% this year for a variety of reasons including cooling down of China economy, US financial crisis, Eurozone debt problems. LME Copper rose to $7029. Among other metals nickel, tin, lead climbed up while Aluminium and Zinc fell towards weekend.

MCX Aug Copper is bullish rising to 331 levels last week. China's crackdown on property deals could lead to easing of metals demand although its impact is not immediately visible on rising equities and supportive factors. 

Soybeans Globally, soybean prices rose last week as China demand rose resulting in larger export shipments from USA and Brail. US exporters sold 175,500 metric tonnes to China for delivery in September according to US Department of Agriculture. Brazil's soybean exports is expected to rise 5% this year to 30 mn tonnes as China demand increases.

In Indian markets, both soyoil and soybean turned bullish on strong demand, global cues and poor monsoon progress in Central India. In the week ahead, sowing progress resulting from rainfall availability will impact prices. Oil millers stepped up buying fearing further rise in edible oil prices, drop in edible oil imports have been supportive. Edible oil demand rises in monsoon months ahead of August and September festival season.

The country produced 24.93 million tonnes of oilseeds in 2009/10, down a tenth compared to 27.72 million tonnes harvested a year ago, Ministry of Agriculture said.

Soybean acreage as on July 19 was 4.78 mn ha from 4.9 mn ha. Madhya Pradesh sowing has fallen 3.8% on weak rains. NCDEX Aug Soybean rose form Rs 2049 levels to 2077 after hitting contract high of 2102 mid week. August soyoil rose from Rs 470 to Rs 485 levels before settling at 482.

There is strong possibility of profit taking although fundamentals continue to be supportive of soy complex. NCDEX Soybean has support at 2050 levels while Aug Soyoil has support at 475 levels in a bullish market.

Rubber India rubber prices continued to hover around Rs 180 levels on weak trends in NMCE futures while demand weakness was evident in spot markets due to higher prices. NMCE Aug futures rose from Rs 174 levels to Rs 176.99 while September contract remained stable at Rs 163.90 levels.

The rise in natural rubber (NR) price has reflected in a sharp increase in consumption of synthetic rubber (SR) in India. According to the latest trend in the consumption pattern, the current ratio of NR-SR consumption of 73:27 is likely to change to 70:30 in favour of SR by the end of the current financial year.

India rejected the industry's demand for a cut on natural rubber imports from 20% to 7.5%, said a statement of Rubber Board of India.

A panel, set up on the directives of the Delhi High Court, headed by the Rubber Board Chairman Sajen Peter, has decided to continue present import duty for natural rubber.

However, the panel, called for a mechanism to cap the customs duty burden on the consuming industries by levying the duty at a benchmark level, irrespective of global prices.

NMCE Rubber futures are expected to trade range bound with Aug contract support at Rs 172 levels while September has support at Rs 160 levels.

Pepper NCDEX pepper futures had a bullish ride last week thanks to surge in domestic, overseas demand and tight supplies. NCDEX Aug contract rose from Rs 20,775 levels to Rs 21306 but fell back on profit taking while September contract rose from Rs 20927 to 21647 as farmers awaited further price rice to hold stocks. Pepper demand rises ahead of festival season of August and September. NCDEX most active pepper contract, August Futures rose 10% last week while India pepper exports have fallen 5% at 4650 tonnes, Spices Board data showed.

Low carry over stocks and limited supplies globally continue to support pepper futures. Pepper could go for upward correction before sliding. NCDEX Aug has support at Rs 20,200 levels while September has support at Rs 20500 levels in a bullish market.

Chana Chana futures were bullish on gains in spot market demand and weaker rains in kharif pulses growing regions in the country. NCDEX Aug Pepper rose from Rs 2367 to 2410 levels before falling back to Rs 2366 on profit taking, ample stocks. Towards weekend millers kept off from buying on higher prices. India's chana production has risen to 7.35 mn tonnes in 2009-10 compared to 7.05 mn tonnes a year ago. NCDEX September contract rose from Rs 2406 to Rs 2423. NCDEX Aug Chana Futures has support at 2300 levels while September has support at Rs 2400 levels.