Indian wheat products are finding no takers in the global market because of the high domestic prices, which has even prompted the Prime Minister to call a meeting of the state chief ministers to discuss ways to bring down prices. Food inflation reared up again, with the annual wholesale price index-based inflation in primary food products inching up to 17.40 per cent for the week ended January 16 against the previous week's annual rise of 16.81 per cent. Inflation in items such as potatoes rose as much as 58 per cent over the last year, followed by pulses, which jumped 47 per cent.
With sugar prices refusing to temper significantly in the last fortnight, Prime Minister Manmohan Singh on Wednesday endorsed the proposal to sell imported raw sugar stocks lying at the Mundra (JNPT) and the Kandla ports to boost domestic supply and temper prices.
Commodity exchanges started the year 2010 on a good note with total turnover surging by 55.24% to Rs 3,64,893 crore in the first fortnight of January. The exchanges had registered a total turnover of Rs 2,35,048 crore in the year-ago period. MCX clocked the highest turnover of Rs 2,86,953 crore (till January 15) among 23 commodity exchanges,.
China's $300 billion sovereign wealth fund is considering new investments in resource-related companies after bets on commodities producers from the U.S. to Kazakhstan paid off in 2009. China Investment Corp. increased spending on energy and minerals assets last year to profit as the global economy recovers. The Beijing-based fund avoided the worst of the credit crunch in its first full year in 2008 and may have had a return of more than 10 percent in 2009, said London-based Jan Randolph, director of sovereign risk, analysis and forecasting at IHS Global Insight.
Reserve Bank of India has hiked the cash reserve ratio by 0.75 basis points to 5.75 percent which will suck out Rs 36,000 cr of excess liquidity in the banking system but is not likely to adversely affect equities or commodities markets in the near term as lending rates will remain stable for the six months as there could be an upward movement in the sub-benchmark prime lending rates at which corporates borrow.
Gold prices moved southwards in the last week and hits an 11-week low of $1073.30/oz as the dollar's strength continued to weigh on the bullion pack, but later managed to recover some lost ground after the dollar retreated when US President Obama softened his tone on bank restrictions in his State of the Union speech, lifting appetite for risk. Global markets still continue to be concerned about the economic recovery, thereby reducing risk appetite of investors and lead to selling pressure in higher-yielding and riskier investment assets. Spot gold prices moved in a range of $1104.50 to $1073.30 /oz during the last week. On the currency front, the Dollar Index hit a recent high of 79.07 as investors continue to flock to the low-yielding dollar as risk aversion set the tone in the financial markets.
Currencies are clearly guiding the immediate direction of the precious metals, especially after fresh trouble brewing in Portugal, Italy, Greece, and Spain, which threatens to undermine the health of the common currency. In the coming week, Gold prices could trade with a negative bias as strength in the dollar could weigh on prices. Though demand for gold as a traditional safe-haven asset may re-emerge, sharp gains in the commodity could be capped on account of a stronger dollar. Spot gold have a strong support at 1065/1054 levels and Resistance at 1120/1135 levels. MCX Feb Gold shall find a strong support at 16100/16000 levels and resistance at 16500/16700 levels for the coming week.
The dollar rally, tightening of China's monetary policy to curb lending and demand concerns led to weakness in base metals complex with copper falling close to 9% this week. The greenback rose to a five-month high against a basket of major currencies after a report showed the U.S. economy expanded at the fastest pace in six years. Inventories of copper at major global exchanges are at their highest levels since 2004. On Friday, copper at New York Mercantile Exchange copper prices slid 4.55 cents to $3.0525 a pound, the biggest monthly decline since December 2008. On Friday, copper for three month delivery at London Metal Exchange fell $144 per metric tonne to $6745.50, a big fall from $7381 levels that prevailed at the beginning of the week. Aluminum, tin, zinc and lead prices also fell in London. Nickel rose.
Copper was weighed down by global economic recovery concerns and China's monetary policies that curb credit growth. China accounts for 27% of the global consumption while US is the seonc major consumer. With USA reporting a better than expected fourth quarter GDP growth of 5.7% as against 4.7% forecasted, base metals did turn bullish but was pulled down by China credit curb that may limit imports. Shanghai Copper inventories rose 4% to 101210 tonnes. However, support for the commodity comes from India, the third largest producer with consumption predicted to rise 7% on investments in infrastructure, power m automobiles and construction. Copper is set for medium term weakness with New York prices likely to fall below $ 3 per pound.
Crude Oil turned bearish last week on strong dollar, weak demand and falling equity markets. Nymex crude for March delivery fell to $72.89 from close to $75 levels in the beginning of the week, the lowest level attained since December 21 when prices fell to $71.99. Oil consumption in developed countries are set to fall due to increased fuel efficiency and and use of alternative fuel, International Energy Agency Chief economist was quoted in news reports as saying. Oil is likely to fall next week due to increased US supplies, lack of fuel demand compared to previous years and US crude oil and gasoline line inventory which is 4% above that of last year. Support is seen at $69 while resistance is seen at $75 and most likely the commodity is likely trade in a narrow range with fundamentals not supportive of a rally.
Soybean (NCDEX February contract) futures moved down by Rs 88 a quintal. The contract recorded weekly high and low of Rs 2193 to 2167.50 a quintals. Prices move southwards on account of weak overseas market and poor export demand of domestic soy meal. The Solvent Extractors' Association of India compiled the data for export of oil meals for 9 months (April to December 2009) was at 22.86 lakh tonnes against 40.70 lakh tonnes during the same period last year (down by 44%). Indian solvent extractors/millers say since oil and meal do not command good prices in the physical market and also the processing soybean is economically unviable due to negative crush margins. Stock of soybean is 22844 metric tonnes at NCDEX accredited warehouses as on January 25, 2010.
Higher production estimates of South America also added bearish market sentiments. The USDA's weekly export sales were in line with trade expectations in soybeans and meal. Net sales for soybeans came in at 673,500 tonnes for the current marketing year and 183,600 for next year for a total of 857,100 tonnes. As of January 21, cumulative soybean sales stand at 92.4% of the USDA forecast for 2009/2010 versus a 5 year average of 72.4%. Sales need to average just 90,000 tonnes each week to reach the USDA forecast. Net meal sales were 254,100 tonnes for the current marketing year and 14,100 for next year for a total of 268,200. In the coming week, prices are expected to move southwards on account of weak fundamentals. NCDEX February Contract shall find a strong support at 2045/1990 levels and resistance at 2150/2200 levels for the coming week.
Jeera prices at the spot markets are quoting at lower rates due to lacklustre trades at the domestic and overseas market. Prices at the futures after falling by 20 percent from recent high of 13827 levels (as on 11th January 2010) bounced back due to short coverings and made a high of 11,760/qtl. Jeera production for the crop year 2009-2010 is expected to be around 23 lakh bags as compared to 25 lakh bags in the year 2008-09. Jeera carryover stocks at present are around 22000 tonnes as compared to 66,000 tonnes in the same period previous year (2008-09). Jeera export sales declined by 12% during the period of April-Dec 2009 at 36,500 tonnes against 41,500 tonnes in the same period previous year. In the short term (till mid of February) prices may be determined by domestic stocks of Jeera till the fresh crop arrivals in the month of March and demand from the domestic and overseas market. Further, prices may be determined by the weather prevailing in the Jeera growing areas. Stocks of Jeera in Syria, Turkey and India and clear production estimates in the above nations may drive the prices in the medium to long term (February end onwards). NCDEX February Contract shall find a strong support at 11360/11000 levels and resistance at 12100/12400 levels for the coming week.
Rubber prices in India's spot and futures markets reflecting global trends has fallen last week from the previous high levels. The major consumer, tyre sector, was not active in the markets. Spot prices have fallen to Rs 131.50 for RSS4 grade from Rs 135 prevailing at the beginning of the week. Rubber RSS4 NMCE February futures have slided down to Rs 132 from Rs 136 while March futures fell from Rs 139.20 to Rs 135 showing overall weakness in the market.
In global markets, rubber dropped for a sixth day and posted the biggest weekly decline since December 11 on concerns about global recovery and falling equities. In the cash market, shippers in Thailand, the world's largest exporter, offered so-called RSS-3 grade rubber for March shipment at $3.10 per kilogram today, little changed from yesterday, Saito said. Offers were $3.16 on January. 25.
Futures in Tokyo fell more than 5 percent last week.and the price lost 0.6 percent this month, the first drop in four months. According to a newsletter of Association of Natural Rubber Producing Countries (ANRPC), rubber prices will tend to be bullish in 2010 on tight supplies. For the short term, rubber prices are likely to trade range bound with support at Rs 129 for NMCE Feb contract while NMCE March may fall to Rs 132 levels reflecting global trends.
Pepper futures in India continue to be bearish as improved arrivals, weak overseas demand and selling pressure in terminal and primary markets. NCDEX February contract fell from Rs 13621 per quintal on Monday to Rs 13497 on Friday with support seen at Rs 13380 and resistance at Rs 13700. On Thursday, turnover at NCDEX dropped 43% on high price volatility. News of firming up of Vietnamese pepper market, buying interest and short supply did move market upwards last week but it was not sustained. Spices Board data showed that pepper exports in December 2009 fell to 1750 tonnes from 2600 tonnes a year ago and value realization has also fallen consequently. Spot pepper prices in Kochi gained from Rs 13510 to Rs 13717 on lower than expected new crop arrivals, market sources said. Pepper outlook for medium term continues to be bearish.
Chana futures continue to show bearish trend on higher arrivals, increased acreage, sluggish demand in spot markets and government measures to curb food inflation. On Friday the benchmark February contract slid to Rs 2152, a contract low for the commodity, before settling at Rs 2197 while March contract fell from Rs 2300 at the beginning of the week to Rs 2263. Chana acreage as on January 21, 2010 was 8.68 mn hectares compared to 6.23 mn hectares a year ago. The medium term outlook for Chana continues to be bearish on ample stocks, weakness in kharif pulses. Support for Chana Feb contract is seen at Rs 2050 while resistance is seen at Rs 2250. (With analytical support from Angel Commodities, Mumbai)