Commodities Weekly Tracker, 1st July 2013

Commodities & Currencies
Weekly Tracker
Commodities Weekly Tracker

Monday | July 1, 2013
Contents
Returns Non Agri Commodities Currencies Agri Commodities Non-Agri Commodities Quarterly Performance Gold Silver China Enters Bear Market Phase Copper Crude Oil
Indian Economy FDI Reforms and CAD Situation

Currencies DX, Euro, INR
Agri Commodities Chana Black Pepper Turmeric Jeera Soybean Refine Soy Oil & CPO Sugar Kapas

Global Equities Performance (%)

3.50 3.00 2.50 2.00 1.50 0.87 3.38 3.31 3.08 2.66 2.22 2.21 2.18
1.00
0.50 0.00 (0.50)
0.74
(0.10)

Currencies Weekly Performance

1.5 1.0 0.5 0.0 (0.5) (1.0) (1.5) (0.4) (0.8) 1.3 1.0 0.4
(0.9)
(0.9) (1.3)

Non-Agri Commodities Weekly Performance

3.5 2.5 1.5 0.5 (0.5) (1.5) (2.5) (3.5) (4.5) (5.5) (6.5) 3.1 1.4 0.3
(1.1)
(1.2) (2.3) (2.5) (4.9) (6.3)

*Weekly Performance for July contract

Worst Quarterly Loss

Column1 2Q2013 Closing Spot Gold $ 1233.14 MCX Gold Rs 25598 Spot Silver $ 19.61 MCX Silver Rs 40461 LME Copper $ 6765 MCX Copper Rs 401.45 Nymex Crude Oil $ 96.56 MCX Crude Oil Rs 5806 1Q2013 Closing 1596.17 29443 28.32 53564 7533.25 413 97.23 5305 % Change (22.7) (13.1) (30.8) (24.5) (10.2) (2.8) (0.7) 9.4
During 2Q2013, sales of American Eagle coins by the US Mint fell 25 percent when compared to 1Q2013 According to GFMS, industrial demand for silver fell 4.5 percent last year. Although for 2013 overall demand is expected to rise slightly, it is expected to be much lower than that in 2011. The supply-side is expected to be comfortable with mine supply expected to rise in 2013.
Gold Gold closed the 2Q2013 with a loss of over 23 percent in dollar terms, marking the worst quarterly decline since 1920 Shift in investment and demand patterns affected gold prices during the second-quarter The Dow Jones Industrial Average and the S&P 500 Index jumped 2.3 percent during 2Q2013, indicating increase in demand for higher-yielding and riskier investment assets
Copper Prices on the LME slipped more than 10 percent during 2Q2013 on the back of slowdown in the Chinese economy Expected surplus scenario in 2013 due to rise in mine and refinery production amid decline in consumption growth Sharp increase in LME inventories which had peaked to a high of 10 years, thus keeping the fundamentals bearish Prices in the Indian markets received a bug respite due to a weaker Rupee and slipped only around 2.8 percent in 2Q2013% Crude Oil High US crude oil inventories kept a check on increase in prices over the 2Q2013 Increase in OPEC production amid slowing demand in the US and China weakened fundamentals Over the 2Q2013 however, the Rupee weakness supported sharp upside in prices on the MCX
Silver
Silver prices in dollar terms hit its lowest in three years, falling more than 33 percent over 2Q2013 and witnessing the worst drop since 1968 During the second-quarter, investors have sold 877 tonnes, from silver-backed exchange traded funds with the value of the same being more than half a billion dollars

Gold Weekly Price Performance
Falling to a 34-month low, Spot Gold prices slipped to a low of $1179/oz last week, correcting around 5 percent Prices on the near-month MCX futures platform fell to a low of Rs25,106/10gm, falling around 7 percent during the week Year-to-date, gold prices in dollar terms have plunged around 30 percent; entering a bear market phase since April13. In the same period, prices on the MCX have slipped only about 17 percent due to Rupee depreciation Sharp change in investor perception towards gold due to a decline in safe-haven demand has affected the appeal of the commodity Gold holdings in the SPDR Gold Trust fell further to 969.5 tonnes on 25th June13, falling to the lowest level since February 2009 Over the year, SPDR Gold Trust holdings have declined 29 percent, with further pullback in holdings expected as investors shun the yellow metal Following Reliance Capital's move to restrict sale of gold coins and bars, the All India Gems and Jewelry Trade Federation (AIGJTF) urged jewelers to stop the sales of coins and bars, thus supporting the government's measures to curb the high Current Account Deficit (CAD). This move in our opinion would secure the jewelers from further restrictions by the central bank. Proactive decision-making by the jewelers themselves would stave off any demand-reducing efforts by the government. Reliance Capital, much ahead of the decision of others decided to stop new subscriptions to its gold plan last week in order to help the government in its efforts. Government efforts to curb gold imports and demand had already impacted Indian listed companies in the jewelry manufacturing business. A sharp decline was seen in gold-related domestic equity stocks last week as concerns over slowdown in demand made investors shun these stocks.
MCX and Comex Gold Price Performance

31,000 30,000 29,000 28,000 27,000 26,000 25,000 1,800 1,700 1,600 1,500 1,400 1,300 1,200
SPDR Gold Holdings

MCX- Near Month Gold Futures - Rs/10 gms
Comex Gold Futures - $/oz
Indian Jewelers to curb gold sales
1,650
Spot Gold Vs Dollar Index

85.0 84.0 1,550 83.0 1,450 1,350 1,250 82.0
81.0
80.0
1,150
79.0
Spot Gold -$/oz
US Dollar Index

Gold
Sentiment in the domestic gold market is expected to be weak and the international gold mining sector is also under pressure as miners writedown the value of their gold assets due to a sharp correction in prices. In view of a continuous fall in gold prices, the Central Board of Excise and Customs (CBEC) cut the import tariff value of gold and silver $401 per 10 gram and $604 per kg. Tariff value is the base price on which the customs duty is determined in order to prevent under-invoicing. Doubts over the monthly investment schemes arose as the AIGJTF announced a ban on sales of gold coins and bars Use of credit cards for purchase of gold coins to be restricted The Finance Ministry also wants public-sector banks to stop sales of gold coins and bars Banks asked not to lend loans against gold coins weighing over 50gm Estimates suggest that Indian households hold around 25,000 ounces of gold and at the current price level this accounts for $1.25 trillion The gold stocks represents more than 50 percent of the Indian economy Gold miners writedown asset value Newcrest Mining to writedown the value of its mines by around $5.5 billion, marking the biggest move in gold mining history. In the decadelong price boom, gold companies spent around $195 billion on acquisitions New exploration programs of gold producers may be scaled back as lower gold prices lead to cost cutting South Africas gold mining industry hit the most Workers at gold mines in South Africa have threatened to bring mining at a standstill unless wages are increased Due to labour-intensive mining practices and increase in wage charges, South African gold miners need to pay higher for labour charges, thereby increasing their overall costs of production Output and capex costs at Barrick Gold Corp., worlds largest gold miner, stands around $919/oz, which is 26 percent lower that the current market price of Spot Gold Mining costs in South Africa at Sibanye $1134/oz, Gold Fields $2195/oz, Harmony $1487/oz Only miner in South Africa that reported costs of production below the current market price is AngloGold where cost of gold production stood around $1204/oz
Investors worried over coin sales ban
The AIGJTF represents around 90 percent of jewelers and hence the concerns are widespread on a pan-India scale
President of the Madras Jewelers and Diamond Merchants Association said that jewelers have been asked to stop the sales of coins from 1st July and if consumers have invested in gold-investment schemes then such schemes would continue and the promised amount of gold will be delivered but maybe in the form of jewelry and not coins Rural regional banks restricted to provide loans against gold jewelry, coins and gold ETFs For the rural market, gold is the main investment avenue and this move has come in as a big negative The rural segment accounts for 60 percent of domestic gold demand The RBI has asked banks to stop conversion of gold purchases made via credit cards into monthly instalments
RBI restricts rural gold buying another move to reduce CAD

RBI to curb retail gold consumption credit card use to buy gold curbed

Gold
US Commodity Futures Trading Commission Data (CFTC)
Speculators cut longs to 6-year low on bearish fundamentals

A bearish trend is expected in gold prices as consumers have not flocked the metal in last weeks price correction, indicating a shift in fundamental trends overall The latest CFTC report showed that hedge funds, traders and speculators have cut their bets on higher gold prices last week to the lowest in six years due to bearish fundamentals Although gold prices in dollar terms begun the week on a positive note, over the week, prices are expected to witness a mixed trend as fundamentals are weak and indicate slower demand during price corrections Over the week, the Rupee is expected to depreciate as efforts towards boosting the FDI norms are not expected to lead to an immediate implementation, thereby keeping the sentiments under check Rupee depreciation will help cushion sharp downside in prices on the MCX, but the overall weekly movement is expected to be bearish
Outlook
Weekly Technical Levels
Spot Gold : Support 1,202/1,155 Resistance 1,270/1,320. (CMP: $1246.20) MCX Gold : Support 25360/24665 Resistance 25960/26830. (CMP: Rs 25,748)

Silver
Weekly Price Performance
Over the week, Silver prices in dollar terms declined around 2.3 percent and the white metal touched a low of $18.19/oz last week, marking the lowest since September 2010. Silver near-month futures contract prices on the MCX declined about 6 percent, marking a weekly low of Rs38,625/kg Year-to-date, Spot Gold prices have plunged around 45 percent, marking a much sharper dropdown in prices than gold. Fall during the same period in the Indian markets has been lower than that in the international markets by around 33 percent , as a weaker Rupee cushioned sharp losses
MCX and Comex Silver Price Performance
58,500 53,500 48,500 43,500
32
30 28 26 24 22 20
ETF Performance
At the start of the week, the iShares Silver Trust witnessed a sharp decline of 2 percent in holdings, slipping to 9882 tonnes. However, during the week holdings recovered but witnessed a week-on-week fall Holdings in the iShares Silver Trust fell 0.8 percent last week to 9906 tonnes Month-to-date, iShares Silver Trust Holdings fell around 1 percent and year-to-date are down about 2 percent
38,500
18
MCX- Near Month Silver Futures - Rs/ kg
Comex Silver Futures - $/oz
Spot Silver Vs US Dollar Index

32.0 30.0 85.0 84.0 83.0 82.0 81.0 80.0
Demand slows despite sharp price correction

Gold-Silver ratio, which measures the number of silver ounces needed to buy once ounce of gold rose sharply to the highest in August 2010 to 66. Base-Rate Price cut The Central Board of Excise and Customs (CBEC) cut the import tariff value to $604 per kg.
28.0
26.0 24.0 22.0 20.0
Outlook
Silver prices are expected to trade with a negative bias during the week as demand-side fundamentals are bearish and as downside is expected to persist due to weak sentiments towards the precious metals space. In the Indian markets however, a weaker Rupee will help to cushion sharp downside in prices.
18.0
79.0
Spot Silver -$/oz
US Dollar Index
Spot Silver: Support 19.31/18.45 Resistance 20.50/21.40. (CMP:$19.78)

MCX Silver: Support 40300/39250 Resistance 42150/43460. (CMP: Rs.40,200)

China enters bear market phase

Witnesses the worst cash crunch in a decade
The Peoples Bank of China (PBOC) refrained from selling bills amid a scenario of the worst cash crunch in a decade seen in the last week On 9th May, the PBOC sold three-month bills for the first time since 2011 and has only held twice-weekly auctions of the securities
What triggered fears in the Chinese markets last week?

Concerns over the state of banking sector in China wiped out $4.5 trillion in global equity value at the start of the week The government is seeking to rein in excessive lending that could spin out of control in China Hence, the PBOC put the nations bank on notice and said that the loose money and the misuse and speculation that it created had to stop PBOC asked banks in China to step up risk controls and step-up cash management This sent short-term interest rates sharply higher as funds demand from banks increased due to mismatch between their short-term borrowing needs and long-term lending Crackdown of complicated financing deals by banks came under scanner as the Chinese banking sector is seen to hiding piles of bad debt
The rates that one bank charges to the other had increased sharply in the last week and fell later as the central banker injected funds only to selected lenders This led to a risk of a crisis arising from the cash squeeze
In the PBOCs second-quarter meeting it was indicated that the nation should appropriately fine tune its policies and that there was a reasonable amount of liquidity in the financial system due to which the banks should control risks from credit expansion. China is trying to make its policies forward-looking, targeted and flexible
PBOC eases cash crunch concerns in the later part of last week
Risk aversion in the global markets had heightened on the back of money market woes in China and to ease these concerns the Chinese central bank said that it would guide the interbank interest rates to reasonable levels Chinese officials have reiterated at the start of this week that there is ample liquidity in the financial system and we expect this factor to help maintain calm in the Chinese markets during the week
Elevated money market rates in China increased the threat that this could worsen the economic slowdown in the country
Further risks to economic growth have heightened due to slowdown in manufacturing growth in China but markets have recovered this week as the central bank has promised to ease the liquidity tightening

Copper
LME Copper prices slipped 1.2 percent last week, while prices on the MCX near-month contract fell 1.4 percent , owing to Rupee depreciation in the last week Prices hit a low of $6602/tonne on the LME and on the MCX prices slipped to a low of Rs401.5/kg last week In dollar terms, prices have declined sharply and this indicates a bearish trend in the commodity especially amid demand-side worries from China On the LME inventories jumped marginally 0.1 percent to 665,775 tonnes and on the SHFE inventories fell 3.5 percent to 182,493 tonnes respectively. Prices on the LME have seen a third consecutive quarterly loss in a row Year-to-date, copper prices have slipped around 16 percent From its all-time high in Feb11, prices are trading 34 percent lower Shift in fundamental patterns driving bearish trend in copper prices In 2013, a surplus is expected amid slowing demand especially from China. Hence, globally, investment bankers share a bearish view for the commodity With Chinese markets entering a bear market phase, the trend in base metals prices is expected to be bearish. Also, slowdown in manufacturing activity will additionally keep sentiments towards industrial metals negative for the remainder of the year
LME and MCX Copper Price Performance
8,300 8,100 7,900 7,700 7,500 7,300 7,100 6,900 6,700 455 445 435 425 415 405 395 385 375 365
Copper Inventories
Third-quarterly loss in a row

LME Copper Future ($/tonne)
MCX Near Month Copper Contract (Rs/kg)
Surplus expectations trigger price downgrades internationally

668,000 618,000 568,000 518,000 468,000 418,000 368,000 318,000
LME Copper v/s LME Inventory

8,300 8,100 7,900 7,700 7,500 7,300
Chinese markets enter a bear market phase
7,100
6,900 6,700
Net positions in Copper
A CFTC report showed on Friday that net short positions in Comex Copper rose further by 3581 contracts to 32,599, the most since early April13 Weak fundamentals, slowing Chinese economy, uncertainty over Feds move along with increase in supply for the metal during slowing demand growth has contributed to bearish sentiment towards the red metal
Copper LME Inventory (tonnes)
LME Copper Future ($/tonne)

Copper
ICSG Update Refined metal usage during the March quarter declined by 5.3 percent and excluding China, global usage has declined 1.7 percent Demand falling amid increase in production global refined metal output in the March quarter which rose by 5.2 percent Demand in China fell 10 percent and net imports fell 46 percent during March quarter
Outlook
A bearish trend is expected in copper prices during the week due to weak fundamentals. Sharp decline in prices on the MCX is expected to be cushioned due to a weaker Rupee.
LME Copper: Support 6690/6500 Resistance 6870/6970. (CMP: $6843.0) MCX Copper Support 402/392 Resistance 412/421. (CMP: Rs 407.80)
Copper Quarterly Demand declines; production rises sharply

(000 Tonnes) World Mine Production World Refined Production World Refinery Capacity World Refined Usage Refined Metal Balance Adjusted) 2012 3851 4934 6163 5246 -307 2013 4262 5189 6498 4966 231 % Change 10.7 5.2 5.4 -5.3
(Seasonally
Developments in the Base Metals Space HKEX to develop Yuan-denominated metal contracts
The HKEX (Hong Kong Exchanges & Clearing Ltd.) has expanded by its $2.2 billion takeover of the London Metal Exchange The exchange is expected to begin with cash-settled metal products denominated in Yuan and then venture into other commodities and physical settlement The takeover is aimed at entering into the commodities space and tapping the big potential of base metals in the Chinese market Hong Kong is the main offshore pool for the Yuan and the launch of Yuan-denominated commodity contracts will help support trading HKEX is utilising LME as a platform to create their base in the commodity markets Currently, the LME has a widespread network of more than 700 registered warehouses world over, except in China. This move would further the idea of setting up LME-registered warehouses in China

Crude Oil
Nymex WTI crude oil prices increased 3.1 percent last week and tested a high of $97.82/bbl on hopes that demand could remain stable due to economic recover y in the US coupled with positive economic data from Germany On the MCX prices rose around 3.4 percent over the week due to Rupee depreciation and oil touched a weekly high of Rs.5867/bbl Over the month of June13, oil prices are up 5.3 percent on the Nymex and almost 10 percent up on the MCX Year-to-date, crude oil prices have gained around 6 percent on the Nymex, with prices on the MCX up by around 15 percent as a weaker Rupee has supported Indian prices further.
Nymex and MCX Crude Oil Price Performance
5,900 5,700 5,500 5,300 5,100 4,900 4,700 98.0 96.0 94.0 92.0 90.0 88.0 86.0
Inventories
Over the week, the inventory report didnt provide a major direction as the API report showed a marginal decline of 28,000 barrels, while the EIA report showed a slight increase of 0.01 million barrels Favorable economic data from US and Euro Zone which increased the expectations of rise in demand for the fuel Statement from Fed officials that stimulus spending will not be stopped until central banks forecast for inflation and job markets are met. This factor also supported an upside in prices in first half of the week.
The latest CFTC report released last week showed that net long positions in WTI crude fell by 30,045 contracts, falling 11 percent to 232,194 contracts
Factors that supported prices in the last week
MCX crude oil (Rs/bbl)
NYMEX Crude Oil ($/bbl)
Crude Oil Inventories (mn barrels)

400
395.3 395.5 394.9 388.6 394.6 391.3
397.6
395 390 385 380 375 370 365 360

363.1 361.3 360.3 369.1
371.7
393.8 394.1 394.1
CFTC Report
388.6 384
381.4
388.9 387.6
385.9 382.7
Outlook
Crude oil prices are expected to trade lower due to poor manufacturing data from China, the high inventory scenario in the US along with a an overall bearish perspective towards the commodity. But sharp decline in prices is expected to be cushioned as a Bloomberg survey showed that OPECs production during June13 declined by 227,000 barrels to an average of 30.967 million barrels a day. The Rupee factor will be supportive for prices on the MCX. Nymex Crude Oil: Support 95.5/93.5 Resistance 98.65/100.8. (CMP: $97.13) MCX Crude Oil Support 5692/5558 Resistance 5900/6031. (CMP: Rs.5764)
376.4 377.53 372.2


Reform measures to boost FDI and Current Account Deficit (CAD) of India
During FY2012-13 FDI (Foreign Direct Investment) fell sharply, marking a decrease in more than a decade Due to the poor global economic conditions, globally, FDI declined 18 percent to $1.35 trillion in 2012 and during the same period, India witnessed a decline of 29 percent to $25.5 billion Restrictions on FDI are expected to be eased in various sectors in order to boost investments in Indian economy. This factor could help to provide respite to the Rupee which is being weighed down by worries over capital outflows Although net inflows had dropped drastically during the Jan-March quarter, they were more than adequate to finance the current account gap The UNCTAD (United Nations Conference on Trade and Development) said in its report that FDI this year in India is expected to witness a rise of 15 percent in the service and manufacturing sectors due to accommodative government policies The UNCTAD report also said that there was a shift in investment patterns of long-term investments as developing economies garnered a share of 52 percent of the global FDI flows in 2012 as compared with 44.5 percent in 2011. Amongst the developing economies, Asia received a bulk of flows for the first time to the tune of $142 billion in 2012 India is creating an encouraging investment environment opening up of multi-brand retail, boosting investment in aviation and infrastructure sector Recommendations by the Economic Affairs Secretary Arvind Mayaram include higher FDI limits in key sectors like defence, telecom, insurance and retail Announcements are awaited with respect to these suggestions around mid-July .
CAD (Current Account Deficit) for 4QFY2012-13 (Jan-Mar) stood at $18.1 billion as against $31.9 billion in the previous quarter and $21.7 billion during 4QFY2012-13 CAD (Current Account Deficit) data came on the positive side for the 4QFY2012-13 after witnessing a sharp increase in 3QFY2012-13 CAD for 4QFY2012-13 (Jan-Mar) stood at $18.1 billion as against $31.9 billion in the previous quarter and $21.7 billion during 4QFY2012-13 As percentage of GDP, CAD was 3.6 percent during 4QFY2012-13, falling from the unprecedented high of 6.7 percent of GDP. The decline in CAD was a result of slowdown in imports of non-oil and non-gold imports due to slowing economic growth This decline in the CAD as a percentage of GDP in the 4QFY2012-13 could bring relief to the sharp weakness in the Rupee, which is depreciating on account of the high level of CAD and also due to the risk of capital outflows from the country as the Fed plans to withdraw its stimulus measures For FY2012-13, CAD as percent of GDP increased to 4.8 percent from 4.2 percent in FY2011-12. This increase in CAD was backed by rise in oil and gold imports The central bank has highlighted concern over the Indian banking scenario due to increase in non-performing assets and a liquidity squeeze Imports of gold accounted for 75 percent of the CAD in FY12

Rupee Weekly Price Performance

Rupee depreciates for the eight consecutive week in a row; tested lows of 60.76 on Wednesday on the back of sudden demand of $150 million from a public sector firm. On Wednesday itself, the Rupee had weakened 1.8 percent and the July Futures contract slipped to a new low of 60.68 However, a reversal in the trend began from Thursday as data released by the RBI showed a fall in the CAD to 3.6 percent in the 4QFY2012-13. However, for FY2012-12, CAD remains at a higher level of 4.8 percent, thus posing concerns from the long-term perspective Also, inflows to the tune of $300 million with respect to Diageos stake purchase in United Spirits also added as a supportive factor for the Rupee. On Friday, Rupee appreciated further and gained 1.6 percent, touching a high of 59.21 Hence, percentage-wise losses in the Rupee over the week are only around 1 percent, as after weakening to 60.76 levels, the currency reversed its course. Since the start of May, Rupee has weakened 11.3 percent. June till date, the currency has depreciated more than 7 percent. Over the last two years, Rupee has depreciated sharply by 37 percent Capital Flows For the month of June 2013, FII outflows in the equity and debt markets stands at Rs5,028 crores ($848.17 million) and Rs24,163cr Overall foreign investment in India is Rs78,176cr ($14.5 billion)
Outlook
Although government has beefed up efforts to boost FDI, the process could take a longer route as major retailers have not given an immediate positive response. The announcement of the gas price mechanism may also come under threat given its time period for implementation along with the political impact on the same. Hence, over the week we expect the Rupee to trade with a depreciation bias. Although weakening in the Rupee is expected, sharp depreciation at the same time will be capped due to continuous efforts by the government to control the CAD and reduce the attractiveness of gold, which is a major contributor to overall Indian imports. USD/INR MCX June Support 58.80/58.20 60.30/61.30. (CMP: 59.22)
$/INR - Spot
61.0 60.0 59.0 58.0 57.0 56.0 55.0 54.0 53.0

Resistance
Factors that affected currency movement

High current account deficit, weak economic scenario and a slowing Indian economy. FII outflows; although the RBI intervened in the forex market, the impact has been muted Limited foreign exchange reserves of $290 billion, enough for just 7 months with the RBI, not suitable to prevent depreciation in the Rupee. A monthly trade deficit of $17 billion The RBI has sold over $60 billion since 2008 to stem depreciation in the Rupee but the impact has not been felt on the currency

Dollar Index and Euro Weekly Price Performance Dollar Index

The US Dollar Index (DX) appreciated around 1 percent in the last week, testing a weekly high of 83.60. The currency gained on account of hopes that the Federal Reserve will pullback its stimulus measures, thereby boosting the appeal of the Dollar Index Further, favorable economic data from the US and statement from Fed official Stein that the Federal Reserve will implement the pullback in the coming months We expect this pullback to be slow but is expected to take place eventually as the US economy is set on its way to improvement The currency touched a low of 1.2983, falling around 0.9 percent over the week, taking cues from a stronger Dollar Index Although economic data from the Euro Zone was supportive last week, the currency slipped as the Dollar Index strengthened in the later part of the week.
US Dollar Index
84.0
83.0
82.0 81.0 80.0 79.0
Weekly Price Performance Euro

Outlook - Dollar Index

Economic data from the US is expected to come on the positive side this week, especially with the unemployment rate expected to fall. Positive data releases will increase expectations that the Fed will begin its bond buying program, thus boosting the Dollar Index over the week.
1.365
1.355 1.345 1.335 1.325 1.315 1.305 1.295
Euro/$ - Spot

US Dollar Index: Support 82.50/81.80 Resistance 83.60/84.10. (CMP: 83.04)
Outlook - Euro
Taking cues from strength in the Dollar Index coupled with expectations of mixed economic data releases, we expect the Euro to trade on a negative note this week.
EURO/USD SPOT: Support 1.2945/1.2879 Resistance 1.3114/1.3217. (CMP: 1.3011)
1.285 1.275

Chana

Chana futures declined sharply last week on account comfortable supplies in the domestic markets and lack luster demand from dal millers. Further above normal rains in the major pulses growing belts and higher sowing also exerted downward pressure on the prices. Spot as well as July futures settled 3.7% & 4.8% lower respectively w-o-w.
Kharif Pulses sowing higher on year amidst early monsoon

Kharif Pulses are mainly grown in the western and southern belts of India. 3.74 lakh ha of area is covered under kharif pulses as on 21st June 2013 as against normal 1.2 lakh ha. For the country as a whole, cumulative rainfall during this years monsoon has so far upto 30 June been 32% above the LPA.
The government last week declared the MSP of Kharif crops for the season 2013-14. MSP of Tur, the largest produced kharif Pulse crop, has been fixed at Rs 4300 per qtl levels, higher by 11.69 percent. However, MSP of other Pulses like Moong is increased marginally by 2.2percent to Rs 4500 per qtl while MSP of Urad has been kept unchanged at Rs 4300 per qtl. According to the third advance estimates released last week, Chana output is pegged marginally lower to 8.49 mn tn compared with its second advance estimates of 8.57 million tonnes. Chana prices may trade range bound this week. Higher supplies and good progress of kharif pulses would cap upside in the prices. While on the other hand prices are trading around their MSP levels and thus downside would also be limited.
Higher MSP of Tur to boost acreage
Chana output estimated at record high - Third Advance Estimates
Outlook
Weekly Strategy
Sell NCDEX CHANA Aug between 3220-3240, SL -3345, Target - 3020

Turmeric

Turmeric Futures opened higher last week extending preceding weeks gains on account of good quality arrivals. Also, fresh export enquiries provided support to the prices. Rains in the turmeric growing regions have delayed the sowing. However, prices corrected from higher levels in the latter half of the week on profit taking at higher levels. Huge carryover stocks also pressurized prices at higher levels. The spot settled 2.36% higher while the futures settled 1.02% lower w-o-w. Turmeric exports in 2012-13 stood at 80,050 tn as against 79,500 tn in 2011-12. The area covered under Turmeric in A.P. as on 26/06/2013 stood at 0.06 lakh hectares. Sowing last year commenced late due to drought conditions. Normal sowing for the season is 0.68 lakh hectares.
Source: Reuters & Angel Research.
Better than expected exports
Pickup in sowing of Turmeric for the 2013-14 season
Lower production in the 2012-2013 season

Turmeric production in 2012-13 is expected around 50% lower compared to last year and is expected around 45-50 lakh bags. Production in 2011-12 is reported at historical high of 90 lakh bags/ 10.62 lakh tns. Turmeric is expected to trade on a mixed note with some negative bias as huge arrivals coupled with a pickup in the cowing may pressurize prices. However the downside is limited as good quality arrivals coupled with good overseas demand ahead of Ramadan may support prices at lower levels. The progress of monsoon needs to be tracked carefully as this may affect the acreage as well as the yield of the crop. Sell NCDEX Turmeric August between 6100 6120, SL 6400, Target 5600.
Outlook
Weekly Strategy
Source: Agriwatch & Reuters


After witnessing a sharp recovery in the preceding week, Jeera futures corrected from higher levels on account of profit taking coupled with good arrivals and a weak domestic demand. Higher production figures have also kept prices under check. Prices gained due to good overseas demand. About 25-30% of the new crop from Gujarat has already been exported to Singapore, Europe & Dubai. The spot as well as the July Futures settled 0.66% and 3.6% lower w-o-w. Indias 2013 Jeera output is estimated at 40-45 lakh bags (of 55kgs each), higher than 40 lakh bags in 2012. However, increase in the exports due to supply concerns in the global markets offset the impact of higher supplies on the prices and thus, medium term fundamentals remain supportive for the upside. Jeera exports in 2012-13 stood at 79,900 tn, as against 45,500 tn last year. The ongoing tensions in Syria and Turkey, coupled with output concerns has led to supply concerns, and thus, exports have been diverted to India.
Jeera
Second consecutive year of higher output
Global supply concerns boost Jeera exports

Source: Reuters & Angel Research.
International Scenario
According to reports, production in Turkey is reported around 8,000-10,000 tonnes while production in Syria is expected to be lower, raising supply concerns in the international markets. Currently, Indian Jeera in the international market is being offered at $2,580/tn (FOB Mumbai).
Jeera may continue to decline extending previous weeks losses on the back of good arrivals and weak domestic demand. Good progress of the monsoon may also limit the upside in the prices. However, prices may bounce back from lower levels on expectations of good overseas demand. Sell NCDEX Jeera August between 13700 13750, SL 14100, Tgt 13150/1300.
Source: Ministry of Agriculture, Gujarat.
Outlook
Weekly Levels

Soybean
Weekly price performance
Soybean futures declined 3.8% last week on account of good monsoon progress and brisk sowing which has raised hopes of higher productivity. CBOT Soybean Futures gained 4.7% last week as on concerns over supplies after USDA reported lower US stocks in its grain stocks report released on Friday. As per the Ministry of Agriculture, oilseeds sowing is completed under 60.69 lakh ha against 11.82 lakh ha sown during the same period last year. Soybean was planted on 4.29 lakh ha, against 0.63 lakh ha last year.
Oilseeds sowing up at 60.69 lakh hectares

CCEA hiked MSP of Soybean

CCEA increased MSP of Soybean and groundnut to Rs 2500 per qtl and Rs 4000 per qtl respectively for 2013-14 season. More than 13 percent increase in the MSP of the largest produced oilseed, soybean, along with higher returns earned last year may boost farmers to bring more area under this oil crop in the ensuing season.
Soybean planted area for 2013 is estimated at a 77.7 mn acres, up 1% from last year. Area for harvest, at 76.9 mn acres, is up 1% from 2012 and will be a record high, if realized. In March, USDA estimated soybean planting intentions for 2013 at 77.1 million acres. U.S. soybean stocks as of June 1 stood at 435 mn bushels, while traders expected 441 mn bushels. Price were on an upward trend since past few weeks as supplies are tight till the new crop arrives in the US and delayed planting will further delay harvesting adding to the already squeezed stocks.
USDA estimated record U.S. soybean plantings for 2013
Outlook
Soybean is expected decline this week on higher output expectations in the coming season amidst increased sowing and good monsoon. Prices may also take cues from the USDA planting report which is schedule to release on Friday. Sell NCDEX Soybean Oct between 3250 - 3270, SL - 3380, Target - 3180
Strategy

Refine Soy Oil and Crude Palm Oil

Weekly price performance
Domestic edible oil prices continued with its upward trend in the initial part of the week on account of weakness in the Indian rupee along with firm international markets. However, prices declined sharply in the second half of the week amidst broad sell off in commodities caused on concerns the U.S. Federal Reserve may phase out stimulus. CPO managed to settle higher by 1.79% last week as rupee continued to weaken. However, Ref Soy oil settled 0.5% lower taking cues from the international markets. Malaysian palm oil products Exports from June 1-20 rose 16 percent to 928,810 tons from shipped during May 1-20. Malaysia, the world's No.2 palm oil producer, will set its crude palm oil export tax for July at 4.5 percent.
Global Scenario
Domestic Scenario
As per the data released by the Solvent Extractors' Association of India Imports of vegetable oils, including non-edible oils, rose 40.2% to 917,964 tn in May, after dropping for 3 months, mainly due to surge in palm oil imports. India's refined palm oil imports hit a record high in May by jumping 47.5 percent from April. The world's top buyer of vegetable oils imported 373,837 tonnes of refined palm oil in May. Monthly soy oil imports rose 2.7% as local supplies are almost exhausted before the new planting season for soybean. Stockpiles of edible oil at ports on May 1 stood at 670,000 tn, the trade body said, off a record of 930,000 tn on March 1. Stocks were still on the higher side despite the decline in monthly imports.
Buy NCDEX Ref Soy Oil July Support 1 - 688, Support 2 680 and Resistance 1706,Resistance 2 - 712 MCX CPO July between 500 498, SL 487, Target 520/525 (CMP 505.40)
Strategy


Sugar


Sugar prices extended the losses of the previous week on account of pick up in planting amidst good monsoon. Weak demand and comfortable supplies also exerted downside pressure on the prices. Liffe Sugar recovered from lower levels and settled 1.2% higher last week as demand remained firm amidst Ramadan festival. Indian traders have signed deals to export 75,000 tonnes of white sugar in July, reversing an import trend after the rupee's depreciation and with strong demand in Gulf and African states due to the Islamic fasting month of Ramadan. (Source: Reuters dated 1st July, 2013) According to the Ministry of Agriculture, Sugarcane has been planted in 47.43 lakh ha lakh ha as compared to 49.3 lakh ha last year. Sugar production in Brazil's main cane-growing region which was up by almost 59% till May fell in first half of June because wet weather held up crushing. Since April 1 to 15 June, mills have produced 7.39 mn tn of sugar, up 51%. Mills have used 58.1% of the cane crush for ethanol since the start of the season up sharply from 54.4% at this time last year - with the rest used for sugar. In the current week , we expect sugar prices to consolidate at the current levels as weak rupee has reduced imports while the same has made exports attractive. Also, recovery in the international markets may restrict further fall in the prices. However, upside will also be capped as good monsoon is raising hopes of good yields.
India signs sugar export deals for July
Sugarcane acreage down 3.8 percent as on 28th June
Brazil's CS sugar output up 51% till mid June

Outlook
Strategy
Sell NCDEX SUGAR Aug between 3060-3070, SL -3110, Target - 2300

Kapas/Cotton
Cotton prices remained under downside pressure last week on account of higher sowing, good monsoon and weak international markets. On a weekly basis, MCX Cotton July contract declined 1.98% while NCDEX Kapas April 14 declined 2.59%. ICE Cotton futures also declined 2.8% last week as USDA planting estimates revised upward then its march 2013 estimates. Cotton planting has been reported at 55.76 lakh ha as on 28th June 2013, higher compared to 31.38 lakh ha a year ago and normal area (5 yr avg) of 27.9 lakh ha. Cotton acreage has seen a significant jump over last year in Gujarat, Maharashtra and MP. In Maharashtra, 70.5% of the normal area is covered till 28th June,2013 against 44% of the normal area sown till July 2nd last year.
Kharif Cotton Planting Progress

Cotton MSP hike by Rs 100

According to CCEA, Minimum Support Price of Medium staple cotton is increased by 2.7 percent against 28.5 percent last year. The estimate for U.S. cotton planted acreage is down 17% from 2012, but is up from March 2013 estimates which indicated cotton acreage down by 19 percent. In its June 28 Acreage report, USDA estimated acreage for 2013 at 10.3 mn acres, 17% below last year. Upland area is estimated at 10 mn acres, also down 17% from 2012. American Pima area is estimated at 2.26 lakh acres, down 5% from 2012.
Higher Cotton planting in the domestic markets along with good progress of monsoon may keep cotton prices under downside pressure in the early part of the week. However, prices may recover in the later part as demand from yearn manufacturers and export enquiries may support prices. Sell MCX Cotton July between 19400-19450, SL -19800, Target - 18900
USDA revise upward Cotton acreage estimates
Outlook
Strategy

Thank You!
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Commodities Weekly Tracker, 1st July 2013

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