Commodity Trends: Indices brighten but still weak

POINTERS Commodity Prices to rebound Commodity prices may rebound about 17 percent by the end of the year as a technical sell signal is reversed, according to Tiberius Asset Management AG, Bloomberg reported.

The Dow Jones-UBS Commodity Index Total Return of 19 raw materials will reach 300 points by the end of the year, the Zug, Switzerland-based company said in a report. The gauge, about one third weighted to energy, was at 256.63 points on May 14 and has closed below its 200-day moving average since May

MCX launches six agri-futures Multi Commodity Exchange (MCX), the country's largest commodity bourse, has aunched futures trading contracts in six agricultural commodities. The futures contracts are for wheat, maize, turmeric, soyabean, guarseed and chana, the exchange circular said. These contracts will expire between July and September, it said.

India plans to boost power generation capacity India plans to boost its power generation capacity by over 12 percent in the fiscal year that began in April, Planning Commission deputy chairman Montek Singh Ahluwalia said, even as the country yet again missed its targets for the previous year. India's rattling infrastructure is a drag on achieving a growth pace similar to peer China's double-digit expansion, and the country has consistently fallen short of building the roads, power plants and ports it had planned for.Critics blame bureaucratic red tape and difficulties in acquiring land for the shortfalls.

India to award $50 bn of road projects The government plans to award $50 billion of road projects in the fiscal year ending March 2011, and expects private investors to fund as much as 70 per cent of the amount, Road Transport Minister Kamal Nath told Reuters on Tuesday.

Nath's projections come as India has consistently missed targets for building roads, ports and power plants and private interest has been lukewarm, with bureaucratic red tape and difficulties in acquiring land holding up projects.

BSE Sensex down, lead by L&T The BSE benchmark index, the Sensex, dropped 3.2% this week, its third decline in four weeks to close 0.5% lower on Friday, on continued foreign fund outflows, as euro zone jitters reduced risk appetite, sending world stocks lower.

Top engineering conglomerate Larsen & Toubro and metal makers led the decline. The 30-share BSE index Sensex closed 0.45% or 74.07 points lower at 16,445.61. It fell as much as 2% in early trade to 16,187.03 points, its lowest since February 25. Nineteen of its components lost ground. Dealers said that bargain hunting at lower levels by domestic investors and a slight recovery in world markets prevented a big slide in domestic stocks. But the near-term outlook for the market was uncertain, they said.

Raw Jute production set to rise this year There could be a 25 per cent increase in raw jute production this fiscal due to higher prices in 2009-10, according to experts.Raw jute production in 2010-11 could be about 110 lakh bales against 90 lakh bales last year.

The ex-Kolkata TD-4 variety of raw jute prices are ruling at about Rs 3,300 a quintal and this seems to have encouraged farmers to increase its cultivation this year. The jute sowing season typically ranges between March and April while the harvesting begins in June-July. The jute industry has an opening stock of about 12 lakh bales this year and production is estimated to be 110 lakh bales. Close to three lakh bales of raw jute might be imported. The mill consumption would range at about 95 lakh bales, while the domestic consumption would be roughly nine lakh bales

Bullion Spot Gold prices suffered the sixth straight weekly loss on Friday to $1177.35/oz after touching a record high of $1248/oz in the earlier week. Risk appetite for securities and other asset classes improved leading to loss of safe haven appeal for gold last week. The yellow metal prices declined marginally on the MCX platform on the back of sharp depreciation in the Indian rupee. Overall, markets became risk averse last week as the financial services regulator of Germany announced a ban on naked short selling and naked credit-default swaps of euro-area government bonds. The German move to strengthen financial regulation has raised fresh doubts amongst the investors about the prospect for global recovery. But despite this concern demand for gold as a safe-haven did not emerge as overall strength in the dollar capped gains in the yellow metal. We expect the dollar to remain strengthened as concerns over the Euro Zone debt crisis still remain and this will lead to risk aversion in the financial markets and thereby increased demand for the low-yielding dollar. This strength in the dollar will cap gains in the gold prices. For the coming week, Spot gold has a strong support at $1155/$1130 levels and resistance at $1230/$1250 levels. MCX June Gold has a strong support at Rs.17,700/Rs.17,400 levels and resistance at Rs.18,320/Rs.18,650 levels.

Copper Base metals ended in the red last week, trading on a volatile note and taking cues from the movement in the dollar. Global markets have turned choppy over the Eurozone crisis. Germany's financial regulator's decision to ban short selling on some bonds sent the European markets tumbling down in Europe and other major economies last week. Increasing concerns in the Eurozone are getting severe day by day. This is dampening the investor sentiments towards high-yielding and riskier investments. Metal prices will continue to take cues from the movement in the dollar. The dollar is expected to remain strong which will make the commodity prices less attractive for holders of other currencies. Moreover, concern of China adopting to tighten liquidity will also weigh on the prices as the world's fastest growing economy is facing inflationary issues. MCX June Copper shall find a strong support at 305/295 levels and resistance at 322/331 levels for the coming week.

Crude oil Crude Oil prices declined on Nymex last week touching a low of $65/bbl. Crude oil prices have lost around 20% in the last two weeks retreating from a high of $87/bbl. The US energy department reported last week that U.S. crude oil stockpiles rose by 162,000 barrels to 362.7 million in the week ended May 14, 2010. Supplies were forecasted to increase by 500,000 barrels. We expect crude oil prices to trade with a negative bias as the stronger dollar will exert pressure on the commodity prices. MCX June Contract shall find a strong support at Rs. 3200/3120 levels and resistance at Rs.3400/3520 levels for the coming week. NYMEX Crude has support around $65/$62 levels whereas resistance is seen around $72.80/$75.90 levels.

Black Pepper Black Pepper production is expected to be around 45,000 tonnes same as that of previous year or even lower. Black Pepper production in Vietnam is lower in 2009-2010 at 90,000 tonnes as compared to 1,30,000 tonnes in the previous year. Exports from Vietnam in the first four months of this year were around 30,000 tonnes. (Production in Vietnam - 90,000 tonnes + carryover stocks- 15,000 tonnes). Thus, they would not aggressive sell their produce. Pepper prices in the international market of various origins are quoting around - Indian $3,725/tonne, Vietnam- $3,630/tonne, Brazil - $3,400/tonne, Indonesia - $3,600/tonne. Farmers in the domestic mandi are hoarding the stocks and are not ready to sell their produce at lower levels. Black Pepper arrivals in the domestic market are in the range of 30-40 tonnes per day. In the short term pepper prices will firm up due to expected demand from the overseas coupled with farmers hoarding the pepper stocks and not ready to sell aggressively. NCDEX June contract has strong support around Rs.16,600/16,300 whereas resistance Rs.17,150/17,700.

Jeera Better production estimates in Syria and Turkey coupled with harvesting of Syrian crop led prices to correct in the beginning of the previous week but bounced back due to improved buying at lower levels. Prices in the spot market traded in the range of Rs.12517/qtl to Rs.12,650/qtl. Demand from the overseas as well as domestic buyers continues to remain sluggish. Arrivals of jeera are around 4,000 bags per day. Prices at the futures are currently trading at Rs.12210/qtl on account of short coverings. In the short term prices will trade in sideways to down manner due to lacklustre trades at the domestic market. NCDEX June contract has strong support around Rs.11,850/11,700/qtl whereas Resistance is seen around 12,320/12,520.

Rubber India's rubber prices in spot and futures gained last week on global cues. Spot prices rose from Rs 155 per kg for RSS 4 grade to Rs 165 by weekend on speculation in domestic markets and gloal trends. There were no quantity sellers and market is expecting a short supply. In global markets, rubber advanced to the highest level in more than a week as clashes between security forces and protesters in Thailand raised concern that supply from the world's largest exporter may be disrupted. Futures in Tokyo gained for a third day on Thursday, advancing as much as 2.3 percent to the highest level since May 11, as fighting continued in Bangkok a day after the forced surrender of anti- government protesters left 16 people dead. At National Multi Commodity Exchange, speculation and global trends enabled the June contract to rise form Rs 158 to Rs 166.50, while July rose from Rs 157 to Rs 166.59.

International Rubber Consortium (IRCo), which groups the top three producing nations, plans to increase the intervention price in line with rebounding rubber prices, a senior trade ministry official said on Friday.Thailand, Indonesia and Malaysia, which account for 70 percent of world rubber output, form the International Rubber Consortium (IRCo), which uses supply-linked mechanisms to manage prices.

IRCo in a meeting in Medan at Sumatra island this week plans to increase the intervention price to $1.4 per kg, from $1.2 per kg, said Gusmardi Bustami, director general of international trade at Indonesia's trade ministry. . Rubber prices rebounded gradually in 2009 and finally surged to a record high of $4.10 per kg in April, due largely to rising demand amid a recovering world economy and tight supply in producing countries during the dry season that cut latex output. But the price has since fallen quite sharply.

The benchmark rubber contract on the Tokyo Commodity Exchange for October delivery rose 2.9 yen, to settle at 266.7 yen ($2.99) per kg on Friday. Weak crude oil prices have also weakened the prospects of rubber.The trend is likely to be bullish next week with NMCE June support at Rs 160 and July supporat at Rs 163 levels.

Chana Chana prices have gained last week as market expects chana dal demand to increase during monsoon season and ongoing marriage season. Arrivals in spot market have fallen as farmers are holding stock expecting prices to improve. The supplies of vegetables drop during monsoon and demand for chana dal and flour rises. Chana May contract at NCDEX has gained from Rs 2113 to Rs 2195 while June contract has risen from Rs 2179 to 2237.Chana stocks at NCDEX accredited warehouses have risen by 1252 tonnes at 47,772 tonnes. The bearish factors continue to operate in the market including ample stocks and expected higher output. India's chana output for 2009-10 is pegged at 7.38 mn tonnes as agains 7.05 mn last year. Chana spot prices have support at 2100 while NCDEX May has supporat at 2150 and June has support at Rs 2200.

Soybeans Soybeans futures at NCDEX has staged a smart recovery tracking firm US soybean market while an expected fall in Indian rapeeseed output provided added support to prices. News of China switching to US origin soybean on rising South American oilseeds prices. India's rapeseed harvest is expected to be down from 7.2 mn tonnes last year to 6.59 mn tonnes this year. June contract at NCDEX has climbed from Rs 1944 to Rs 1980.5 while June soyoil has risen from Rs 443 to Rs 452 while June Rapeseed contract has climbed from Rs 502 to Rs 506 levels. The bearish factor affecting soy complex is the declining oil meal exports. It has fallen 14.35 % on low domestic crushing by oil mills. The strengthening rupee has dulled the demand from Vietnam and China for oil meals and exports has fallen for the fifth straight month.

Globally, soybean market could be hurt by bearish sentiments following the bumper crop in Brazil and Argentina. This will keep pressure on domestic and international prices. On the other hand, demand for soybeans and oil at lower levels and speculation that acreage may drop in coming kharif season is giving firm support to prices.

Coming week, NCDEX Soybean June has support at 2150 levels, while June soyoil has supporat at 430 levels and June rapeseed has support at Rs 500 levels. (With analytical support from Angel Commodities, Mumbai)