Commodity Trends: Steadies on rains, import news

News was prepared under the information support of Online Daily Newspaper on Hellenic and international Shipping "Hellenic Shipping News".

31 Aug 2009

The rising food grains market has been kept under check by imposition of stock limits for pulses and announcement of imports of key commodities that may face shortage in the coming months. With rainfall gaining strength in the coming weeks, drought prospects in many regions have lessened. India has unveiled a foreign trade policy that takes a realistic view of the global trade in a recessionary mode and has added 26 additional markets in Africa, South America and CIS under Focus Marketing Scheme to beat the slowdown in developed markets.
The recent equity rally witnessed skidding on Friday as downbeat consumer sentiment overshadowed solid corporate news.But employment has been among the weakest parts of the U.S. economy, keeping investors on edge about the sustainability of an economic recovery.
The Reserve Bank of India (RBI) has finalised the framework for trading in interest rate futures in consultation with the market regulator, and said the directions were effective immediately.The RBI said commercial banks would be allowed to take trading positions in interest rate futures but would not be allowed to trade on behalf of their clients. The National Stock Exchange has said it would launch interest rates futures from August 3.
Spice exports fell 14 per cent in volume terms and 10 per cent in value during the April-July period of the current financial year.A total of 164,215 tonnes spices worth Rs 1,690.81 crore ($347.07 million) have been exported in the period, as against 189,870 tonnes worth Rs 1,880.88 crore ($448.30 million) in the corresponding period a year ago.
Inflation based on Wholesale Price Index, measured on the basis of a basket of select commodities and their price variation, is likely to turn positive after October this year, the Reserve Bank said in its Annual Report.
Since June, year-on-year WPI inflation has remained negative, primarily reflecting the high base effect of the previous year that resulted from significant increases in the prices of food and international commodities in the first-half of 2008-09."The base effect could be expected to fade gradually and then disappear by October 2009, after which the positive WPI inflation will become visible," the Reserve Bank said
Base Metals
In the near-term base metal prices could witness downside pressure on the back of signs of a significant slowdown in demand from China. Since China is the driver of base metals demand any negative report indicating capacity curb or slowdown in demand is bearish for base metals. China has entered into heavy restocking in the first-half of the year and further government stockpiling may be unlikely, considering high prices. Latest reports indicate that China’s Jan-July industrial profits declined 17.3%. This news could have a bearish impact on prices. The downside in copper could be limited as Xstrata said that it is suspending its copper operations at its Kidd Metallurgical site. The smelter and refinery will remain closed for seven to ten weeks on the back of shortage of third-party concentrate. Copper prices are trading around 315 levels with resistance seen at 325 levels whereas support is seen at 295 levels.
Precious Metals
Last week gold moved in a narrow range from $940-960 this week thanks to oil prices which has raised concerns about inflation making gold investments attractive. Market exhibited weakness on Monday but climbed up thereafter and held steady above $940 on Tuesday. Gold prices rose to $950 in Tokyo, $960 an ounce in Europe on Friday on strong oil prices and weak dollar. At India’s Multi Commodity Exchange, gold December Futures gained 0.19% to record Rs 15,063 per ten gram on close of trading on Friday as speculators indulged in creating fresh positions influenced by firming global trend.
MCX October contract edged by 0.17% to rS 15,052 per ten gram.
Market has gained on hopes of demand picking as festival season has started. However, higher quotes have hurt demand. Weak monsoon will curb rural demand for gold in the coming weeks.
In Kolkatta, the yellow metal rose by Rs 50 to Rs 15,340 per 10 gram while Mumbai prices gained by Rs 45 each for standard and pure gold at Rs 15,100 and Rs 15,10 per 10 gram respectively. In New York spot gold hit a high of $961 an ounce.
India’s gold imports slumped by 65% to 7.8 tonne in July when compared with the same period last year. For the period from January to July, India imported about 71.6 tonne, which is 56% lower than the same period last year.
Gold typically moves in a close inverse relationship with the dollar, as it becomes cheaper for holders of other currencies as the US unit softens. Gold was also being bought as an alternative asset to the falling dollar. Silver, also used as an industrial metal, rose to $14.47 an ounce from $14.24. With Central banks keen to hold gold rather than sell, supply tightness would lead to firm gold prices for the rest of 2009. Spot Gold could remain in $930-980 range awaiting more US economic data and likelihood of global recovery.
Energy
Crude oil prices could come under pressure in the near-term as there are concerns over China’s next move. The country is planning to cut back on industrial investment and this could slow demand for fuels in the world’s second-largest energy user. Chinese government also indicated that it will increase guidance over coal, glass and power sectors. Natural gas prices could continue to witness downside risk as latest inventory data showed a rise of 1.5% last week. However, if the dollar continues to weaken then prices will have cushion to the downside. Nymex crude has support around $68 levels whereas resistance is seen at $76.
Wheat
Wheat Futures ended steady on Friday as government is expected to offload procured grains in the open market and lower rice output led to September Futures contract at NCDEX to gain 0.85% at Rs 1,167 per 100 kg. In the beginning of the week, the contract was trading at Rs 1,163 levels.With government announcing that imports are likely for food grains that witness shortfall has capped further gains. Government reportedly is planning to release 3 million tonnes of wheat in the open market which will stabilize prices. India has procured 25.13 million tonnes of wheat in 2009/10 marketing year that began in April, up from 22.6 million tonnes in the previous year.Prices of the grain have been moving up in the last few days on hopes of higher demand driven by a drop in rice sowing due to deficient monsoon rains. India’s rice output is expected to drop 15-20% in 2009/10. Wheat prices are likely to remain stable in the coming days.
Meanwhile US Wheat Futures continue to remain bearish on ample world supplies and lacklustre demand. Deliveries on Monday are expected to be heavy at around 2000-5000 contracts at CBOT.U.S. Commodity funds sold an estimated 2,000 contracts at the CBOT in the weekend. CBOT December wheat closed down 7 3/4 cents at $4.95 1/4 a bushel, on Friday.

Source: Commodity Online