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Guar weakness only temporary
Guar: Weakness only temporary
Although European Union (EU) has made pentachlorophenyl
test mandatory for guar gum shipments from India, exporters
said this test to check presence of toxic substances will have
little impact on exports or prices. Of the total guar gum
shipped from India, only 10-15% is used by the EU in the
food industry. As such, it would not largely affect exports.
Traders are expecting a rise in export demand by the month-
end as worldwide demand for guar gum and its by-products
have been increasing significantly.
Chana: Demand absent in spot
Chana futures on National Commodity and Derivatives
Exchange (NCDEX) ended down on higher arrivals coupled
with subdued demand in spot market. Arrivals in Delhi have
gone up to 35 trucks (18-20 tonne each), mostly from Madhya
Pradesh, compared with 25 trucks a day last week. Very low
off-take of chana dal has kept millers and traders away from
the market, which is reflected in 1% fall in price amid subdued
trade. Bikaner chana opened firm but declined subsequently
by 1% to close at 2,660 rupees per 100 kg on lack of enquiries
from north India. Katawala chana at Indore was down by 60
rupees at Rs2,580-2,590 on rise in arrivals and expectation
of a further increase in arrivals. The counter is likely to see
some more selling at higher levels.
Soy oil: Global sell off
The edible oil complex ended down on NCDEX amid higher
imports and weak closing in Malaysian palm oil prices. India's
higher edible oil imports during the first four months of the
current oil year kept the market sentiment down. Domestic
edible oil prices reflected the weak sentiments in Malaysian
palm prices where funds went for short positions taking cues
from THE weakness in soy oil prices in the 24-hour online
trade on Chicago Board of Trade (CBOT). This morning too
both CBOT soy oil and Malaysian palm oil were trading in
deep red. Local prices should remain subdued today too.
Jeera: Buying opportunity expected at dips
Jeera is likely to trade range-bound with weak undertone in
short term on the back of increasing arrivals of fresh crop in
the market yards amid higher production outlook. Higher
yield and good acreage in Gujarat is likely to yield around
2.11 lakh tonne in 2008 against 1.67 lakh tonne last year.
Arrivals are reported at 18,000-20,000 bags of 70 kg as
against 7,000-10,000 bags a fortnight ago. Buyers are
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waiting for further decline in prices. Therefore, expected
increase in domestic as well export demand is expected to
support the market at lower levels and would resist against
major falls. Jeera export in April-January period is lower by
10% as against that of the last year.
Turmeric: Prices unlikely to dip sharply
Turmeric prices are unlikely to sustain at further lower side
on lower production amid good demand at lower price level.
Turmeric output during the current season is expected to
decline around 7.5 lakh tonne, against 8.9 lakh tonne last
year. However, daily inflows of turmeric in the physical
market at Nizamabad mandi are around 15,000 bags (1
bag=70kg) as against 7,000 bags last week and are still
resisting the uptrend. Stockists are keeping themselves at
sidelines at higher price level. However, price is not
expected to see major dips, as the output is lower this year
amid good global demand. Further, buying support by AP
Markfed at Rs3,000 per quintal from local market is likely
to support the market. Turmeric export in the period of
April-January is still lower by 6% as against that of the last
year.
Chilli: Tone still weak on increasing arrivals
Chilli prices are extending its southwards journey owing to
weak fundamental. Increasing arrivals of good quality crop
combined with good carry over stock are underpinning the
market tone. Increasing arrival of fresh crop are weighing
the prices. Guntur spot market has seen arrival of around
1,00,000 bags (1 bag=40-45kg) for last couple of days as
compared with the daily average arrivals of 70,000-80,000
bags during the last week. Chilli sanam spot prices also
quoted almost steady at Rs3,200-3,400 per quintal. Chilli
production this year is expected to be higher around 13
lakh tonne as against 11.5 lakh tonne last year. Carry over
stock from previous year is estimated around 1.5 lakh tonne.
In this scenario, farmers and stockiest are offloading their
existing stocks. With the absence of firm fundamental in
short term, most of the buyers in the spot markets are
keeping themselves at sidelines on the speculation of further
decline in prices. However, good export opportunity may
support the market from dips, as the green chilli crop in
Pakistan was hit by severe cold that affected the supply.
Karachi wholesale market green chilli price has shot up to a
record Rs180 [US $3] per kg.
sharekhan
Pepper: Prices unlikely to sustain at lower side
Pepper prices are not expected to stay at lower side for
longer time due to tight demand-supply scenario in domestic
as well as global markets. Indian parity of pepper is
competitive at present and declined further to $3,900-3,950
a tonne (c&f) as against the earlier quotation of $4,000 a
tonne (c&f). Brazil and Indonesia is reportedly offering the
commodity above the Indian levels. Asta grade pepper in
Vietnam is reportedly quoted higher around $4,100 a tonne
(fob). Around 30-40% of the crop is already harvested in
Vietnam. However, export performance is still weak in the
country, the total export volume in entire February
reportedly declined by 39% to 2,560 tonne as against that
of the corresponding period last year. Pepper export till
January has already achieved 98% of the target (30,000
tonne) set in the year and the export data is expected to
rise further. The dip in the Indian parity has provided some
further export opportunity. Meanwhile weakening of the
Rupee against the Dollar is likely to widen the scope of
further export. Supply position in the major pepper
producing area is poor, as the majority of the crop has
gone towards north Indian market.
Base metals: Down sharply on long liquidation trig-
gered by Bear Stearns sale
Fire sale of Bear Stearns (BS) has raised the hackles of the
traders, as the traders think that more institutions are to
follow suit.
Market is keeping a close watch on the development at
Lehman Brothers (LB) as the market suspects that LB, in
the line of Bear Stearns, is badly hurt in the ongoing credit
fiasco.
LB shares plunged by around 40%. MF Global shares were
down 80% on the speculation that the investors are fleeing
the commodities as the US economic scenario worsens with
each passing day. Thus, the sentiments got badly hurt on
the BS sale and the impact spilled over to commodities as
well.
There was a wide across-the-board sell-off in the
commodities yesterday. Crude oil plunged 7.67% in its intra-
day swing, gold lost 3.73%, copper fell 6%, nickel lost 10.36%,
natural gas fell 10.28%, silver dropped 6.89% etc. Same
intensity of sell-off was witnessed in agricultural
commodities as well.
Given the sharp gains in the commodities in the last six
weeks, the sell off is not surprising. Further losses in
commodities are quite possible, however the factors that
were instrumental in the stunning rallies are still very much
in force. More over, a lot would hinge on the FOMC rate
decision to be out tonight. Amid mounting credit troubles,
market expects a cut of 100-125 basis points, however
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extremely weak Dollar and high inflationary pressure in the
US could prompt the US Federal Reserve (Fed) to go for a
75 bps cut. A rate cut 75 bps would not be so supportive for
commodities as it could prop up the US Dollar for some
time.
China's premier has called for "forceful'' measures to meet
the inflation target of 4.8 percent this year. China's central
bank governor said that there is still room to raise interest
rates and increase reserve ratios for commercial lenders.
This development is negative for the commodities.
Copper closed with a loss of $309 at $8,051. It rose to
$8,521 in the Asian trading hours on the US Dollar weakness,
however the long liquidation by the US traders triggered a
massive slide. The red metal could finally find a support
around $8,000. A build-up of 275 tonne in the LME stockpiles
added to the liquidation pressure. Despite the sell-off LME
cash-to-3 month spread tightened by $5 to $129 (b).This is
supportive for the metal. The red metal is expected to find
some support around $8,000, however a lot would depend
on LME stocks, currencies, and equities movements. We
expect that looking at the strong demand season of China
Q2, drop in prices would be limited.
Support is seen at Rs326.50/Rs324.50/Rs316. Resistance
would come at Rs335.
Nickel closed with a steep loss of $3,150 at $29,400.
Stainless steel demand is yet to pick-up. Thus, the metal
fell sharper than its peers. LME stockpiles remain at multi-
year high level. Nickel is expected to find support around
$28,000 in case further liquidation occurs.
Support is seen at Rs1,218/Rs1,201/Rs1,188. Resistance
would come at Rs1,248/Rs1,255.
Aluminium closed with a loss of $120 at $2,968. After
falling below $3,000 the light metal could witness some
more selling, though the long-term prospects are bullish.
Support lies at Rs118.15/Rs114.90. Resistance lies at
Rs121.35.
Lead closed with a loss of $185 at $2,900. LME stockpiles
rose by 200 tonne. The metal is seen trading in line with
copper.
Support is at Rs117.40/Rs113. Resistance would come at
Rs119.80.
Zinc closed with a loss of $123 at $2,477. A drop of 950
tonne in the LME stockpiles couldn't help the metal. The
metal would take its clues from copper for its direction.
Support lies at Rs98.95/Rs97.10/Rs95.70. Resistance lies
at Rs102.
2 March 18, 2008 Home Next
 sharekhan commodities buzz

Gold: May correct slightly rose 0.4 percent last month, following a 1.3 percent
Gold hovered throughout the morning and late afternoon decrease. Utilities production slumped 3.7 percent in
trade in India in the heavenly channel of $1020-30 an ounce. February after a 2.2 percent increase in production the
However, like always, the opening of the New York market prior month.
caused a flutter and the price suddenly plunged. It hit the
low of $998.20 an ounce but the recovery was there yet In a bit of good news today, the U.S. current-account deficit
again. However by the time the New York market came to unexpectedly narrowed in the fourth quarter as foreigners
a close the price was tumbling yet again. And the price earned less on American investments.
though rose once more during the Access market, it has
Yesterday the dollar fell below 96 yen for the first time in
fallen during the Hong Kong market.
12 years. The dollar fell to as low as 95.76 yen, the weakest
The news on the dollar front was slightly bearish. Industrial since Aug. 15, 1995. Against the euro, the dollar dropped
production in the U.S. dropped more than forecast in to $1.5903, the weakest since the creation of the single
February as the economic slump deepened even before the European currency in 1999.
crisis in financial markets intensified. Production at The forecast for the day is slightly bearish. Everywhere
factories, mines and utilities fell 0.5 percent last month. there is a sentiment that the currencies are just getting
The amount of capacity in use fell to 80.9 percent, the wackier than they should be and the euro has risen far too
lowest since November 2005, from 81.5 percent in January, stronger far too sooner. The market may not see much
the Fed's production report showed. (Factories are cutting participation either, given the fact that everybody is now
back as the biggest recession in housing in a generation waiting for the Fed's FOMC meeting. The odds of a full
prompts Americans to spend less on furniture, appliances percentage-point reduction in the Fed's benchmark rate at
and automobiles.) Manufacturing, which accounts for about today's meeting almost doubled as policy makers try to
four-fifths of the industrial production report, fell 0.2 prevent a meltdown in lending that will make the economic
percent last month after no change in January. Excluding contraction even worse. Expect low volumes and range
autos, factory production also fell 0.2 percent. Mining output bound movement of the markets.

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