Commodity Trends:India for higher farm output

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Commodity Online
A Sub-committee on agriculture, appointed by the Prime Minister's Council on Trade and Industry, met for the first time and decided to come up with a plan to achieve higher growth in the agriculture sector through public sector involvement.

The country's average farm growth in the first three years of the 11th Five-Year Plan period (2007-12) has been only 2.2 per cent, against the target of 4 per cent for the entire period. The mid-term appraisal has estimated the average growth in the sector to be around 3 per cent.

POINTERS
SEBI approves exchange traded currency options
The Securities and Exchange Board of India (Sebi) has approved the launch of exchange-traded currency options on the rupee-dollar spot rate. The move is expected to boost the turnover of the exchange-traded currency derivatives segment, where only futures trading is currently available. Options would also provide market participants an additional tool to hedge against currency volatility.

According to a circular, exchanges have been allowed to introduce 'premium-styled European call and put options'. A European option is one that can be squared off only on the day of expiry (maturity). This is in sharp contrast to an American option that can be squared off before expiry. Stock options offered by Indian exchanges till now are American options.

India's BSE underperforms emerging markets
The Bombay Stock Exchange's ( BSE ) benchmark index, the Sensex, rose for the second straight month in July after ending 0.7% lower on Friday, but underperformed emerging market peers in the month, as RBI's key rate hike and mixed earnings limited gains.

India's benchmark index, Sensex rose 0.9% in July, but underperformed China's Shanghai Composite Index, Brazil's Bovespa and Russia's RTS Index, which gained between 9.9 and 10.6% so far this month. "For this month, we really had nothing much to cheer about," said Prakash Diwan, head of institutional business at Networth Stock Broking.

India's coffee output up 3.6%
India's 2010-11 (October-September) coffee output is seen up 3.6 per cent on year with rains improving significantly over growing regions in July and planters using fertilisers on time, planters and agronomists said.

"Rains right now are good and there are no signs of any pest attacks as well. If all goes well, we are expected to produce close to the Coffee Board's estimate of 308,000 tonnes," said Anil Savur, secretary, Karnataka Planters Association.

Agronomists at the Coffee Board also confirmed there had hardly been any adverse reports from growers that this year.

FMC disallows sub-brokers
The Forward Markets Commission ( FMC ) has directed commodity exchanges to disallow sub-brokers by whatever names they currently operate. Instead, it has allowed the exchanges to appoint "authorised persons", either an individual or an entity, to deal with clients on members' behalf.

FMC on Thursday issued new guidelines for regulating these authorised persons. The members of the exchanges will be responsible for all the deeds of such people. These authorised persons will represent brokers/members of the exchanges to clients and all risk management and issue of contract notes, etc; will be done by the members.

"It is an important step towards client protection and will bring discipline in the market," said FMC Chairman B C Khatua

Food inflation eases to 9.67%
Food inflation eased to single digits, rising to an annual 9.67 per cent during the week ended July 17, compared with the previous week's year-on-year surge of 12.47 per cent.

Data released by the Government on Thursday showed the rise in food inflation, based on the Wholesale Price Index, was stemmed largely with prices of cereals, rice and vegetables falling during the week. The fuel price index rose 14.29 per cent in the period, against a 14.27 per cent in the previous week.

The government had raised prices of fuels in late June. According to the data, the Primary Articles group index surged by 0.4 per cent on a sequential basis as the index for the 'Food Articles' group rose by 0.6 per cent due to higher prices of fish-marine (three per cent), gram and milk (two per cent each) and mutton, urad, wheat, tea and maize (one per cent each).

Copra prices up on rains
Coconut oil prices opened on a positive note this week and the undertones are expected to be firm for the remaining part of the week. The demand on account of Onam has begun to manifest in the markets and prices have begun to move up, Mr Prakash B. Rao, President of the Cochin Oil merchants Association, said.

Copra prices also moved up in tandem as arrivals from the local markets dropped on account of rains, and arrivals from Kangeyam in Tamil Nadu have tapered off as industrial demand increased sharply. The sharp increase in industrial demand from shampoo and cosmetic oil manufacturers has nurtured the price rise.

Adulterated fruits in India
After putting in a word of caution on adulterated fruits earlier, Minister of State for health, Dinesh Trivedi has now written to the Union Health Secretary about the vegetables available in the market, which according to him may be causing "nervous breakdowns, sterility and neurotic complications".

"The health benefits of consuming green vegetables as a staple diet finds a sharp contradiction in the present-day context. Farmers are using hormone shots to expedite the growth of their vegetables. The disturbing part is that these hormones may cause irreparable damage to our health, if taken through these vegetables, over a period of time. The even more shocking element is that the public/authorities may also be aware of this malpractice," Trivedi's letter states

Gold
Offlate gold prices have been showing weakness and looks vulnerable to further downfall after falling below key support levels of $1175 this week. Gold prices gained towards weekend on disappointing US economic growth data but still lost 5% in July, the biggest monthly loss as reasons for holding gold seems to be declining eroding its safe haven demand. The easing of European sovereign debt concerns and sharp drop in SPDR holdings, world's largest gold backed exchange also led to bullish sentiments in the market. In Indian bullion markets prices started tumbling down in tune with global trends.

Spot Gold rose in the weekend to $1,180 from $1,168 the previous day while silver prices rose to $18. Gold stands to gain from dollar weakness.

MCX October Gold falls sharply by Rs 408 to Rs 17979 with support levels at Rs 17850 and Resistance at Rs 18160

Base Metals
Base metals rallied last week on hopes that US manufacturing will boost growth and metals consumption with copper prices rising 12% in July. Better economic prospects for China and USA are bullish factors supportive of the red metal. New York September Copper contract rose to $3.3115 per pound while LME Copper for three month delivery rose to 7296.50 a metric tonne wile Aluminium, nicke, Zinc lead prices climbed higher, tin dropped in the weekend.

Among the supportive factors for copper were the US unemployment data which showed that US claims for unemployment benefits fell slightly more than expected last week offering a ray of hope for the anemic labour market recovery. Rising Euro was another supportive factor as the currency rose to 12 week high against dollar while falling inventories boosted the base metals pack.

MCX Aug copper rose to 338.35 levels with support at 332 and resistance at 353 levels. US copper to trade close to $3.20 while LME copper has support at $7150 levels.

Crude Oil
Crude oil has had a good time in July rising by 4.4% in the US futures market and rising 18% year to date. Last week, crude oil prices also touched a low of $76,83 as US economic growth for the second quarter at 2.4% missed the estimates. US oil inventories jumped to 7.31 mn barrels to 36.8 mn barrels thus capping the gains this week. Prices fell below the 100 day moving average of $78.25 and prices appeared to be steady last week. Crude oil September at ICE Europe closed at $78.18. MCX Aug
Crude oil fell sharply to 3654.

Soybeans
India's soy complex is witnessing a bullish trend as edible oil demand rises during monsoon months. This factor along with firm global markets have pushed key prices of soyoil, soybean and rapeseed oil prices in the futures counter. Edible oils are supported by festival demand ahead in August and September. Demand for edible oil goes up during Ramadan,beginning August 10, the Muslim fasting month. India's vegetable oil imports fell 6% in June on a year-on-year basis while there has been a slump in oil meal exports. As on July 22, the acreage under oil seeds is reported at 12.95 mn ha as against 12.39 mn hectares a year ago.Globally, the rise in US export of soyoil has been supportive of the market. Towards weekend NCDEX September Soybeanl fell to 2046 while September Soyoil fell to Rs 487.5 based on prospects of good rains in the next two months. Improved spot demand prevent downside movement of prices.

NCDEX September Soyoil has support at Rs 480 levels while September Soybean has support at 480 levels

Pepper
Pepper prices have tumbled last week after a bull run on weak global demand, higher prices quoted for Indian parity. Indian parity is being quoted at $4750 while Vietnam is quoting $4500 which weakens demand for Indian pepper. NCDEX Aug prices fell from 20591 to Rs 20131 while September fell from 20848 to Rs 20363. Profit booking at higher levels also contributed to weakness in futures counter. India's pepper exports for April- June 2010 fell to 4650 tonnes from 4900 tonnes a year ago, Spices Board said.

Overseas demand has weakened in recent days contributing to downslide. Vietnam is expected to produce 100,000 tonnes of pepper this year 5% down than earlier estimates while Vietnam's export target was reduced by 27% to 100,000 tonnes from a year ago. NCDEX futures may tumble below to Rs 19900, support is seen at 20,000 levels while resistance is seen at Rs 20,200. Lower level buying to provide support.

Chana
Chana prices have tumbled last week on higher acreage under kharif pulses and forecast of good rains the next two months in pulses growing regions. As on July 29, the kharif pulses area has risen to 8.736 mn ha as against 7.545 mn ha a year ago. Prospects for chana crop depend on goo d rains and Indan monsoon will by 107% of normal in the remaining two months of June- September monsoon period. Madhya Pradesh, Maharasthra, Rajasthan, Uttar Pradesh and Karnataka are the major producers of Chana. India contributes 60% of the world chana production. NCDEX Aug contract fell from Rs 2368 to Rs 2315 while September contract rose from Rs 2445 to Rs 2414.

Rubber
Rubber prices are expected to remain bullish on rainy season in major producing nations of Malaysia, Thailand and India which may disrupt tapping. India's spot market prices have risen to Rs 185 while TOCOM prices have rallied on hopes that China demand for tyre sector would zoom. TOCOM prices slid from 3-week high as oil prices retreated and a stronger yen hit investor sentiments.

The global prices of natural rubber will remain steady in the medium term on account of tight supplies and growing demand. Abdul Aziz, secretary general, International Rubber Research and Development Board ( IRRDB ), said the natural rubber situation is not likely to see any significant change in the medium term.

However, countries like Vietnam, China, Cambodia and Laos are increasing the area under rubber. By the second half of this decade, Vietnam could emerge as a major player surpassing both India and Malaysia, he said NMCE Aug Futures rose from Rs 180.35 to Rs 183.86 while September contract fell from Rs 171 levels to Rs 168 levels. Rubber prices will continue to be supported on supply concerns and profit booking may cap gains.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Commodities

Referenced Stocks: BSE , FMC , IRRDB

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