Commodity Futures: Monthly Update

Alex K. Mathews, Research Head, Geojit Financial Services

MCX and the Institute of Public Enterprise have joined hands and signed a MoU to spread awareness on commodities among the youth and to increase participation on the trading platforms provided by national-level exchanges.

According to Forward Market Commission Chairman B.C.Khatua, the ban on eight commodities on exchanges will go in November. The Apex commodities market regulator is studying the situation and will recommend suspension of the ban on all commodities.

A unit of Reliance Capital has bought a 15 percent stake in Hong Kong Mercantile Exchange for an undisclosed sum to become the second largest shareholder in the commodity exchange.

Rice procurement by Government agencies has picked up following the Centre’s announcement of a bonus Rs 50 per quintal over and above the minimum support price (MSP) for the current 2008-09 marketing season.

The government plans to lift the tariff on wheat and flour imports to lower the prices of pan de sal, loaf bread, noodles and pasta, according to a source privy to the Tariff and Related Matters (TRM) Technical Committee.

The Solvent Extractors Association of India has urged the Centre to impose at least 30 percent duty on crude palm oil, 37.5 percent on RBD palmolein and 20 percent on crude soyabean oil as against the current level of zero duty on crude oils and 7.5 percent on refined oils.

GOLD

The outlook for gold remains subdued in the medium term due to weak crude and fear of recession across the globe. The commodity price has resistance at $ 755 and is having support at $ 680. The latest reports from the Bombay Bullion Association indicated lower gold consumption by Indians during the month of October. India imported nearly 44 tonnes of gold in October, which is down by 27 percent for the same month a year ago. Demand across the globe is also falling due to recession fears. In India, rupee has reversed its direction and started appreciating against dollar, which will have a negative impact on gold. A major uptrend can be seen only if gold breaks above $ 755.

CRUDE

Crude prices have started showing consolidation and have tested a low of $ 61.6, trading in a narrow range of $ 72 – $ 62. If crude breaks above 

or below these crucial levels for more than two days, it will give a firm direction. OPEC, which has decided to cut 1.5 million barrels of crude, will not have much impact on crude because of lower demand across the globe and fear of an impending recession.

PEPPER

Pepper prices will remain subdued for coming days due to fresh arrivals, which will start from December. The country has shipped 12,750 tonnes of pepper in April-September, a fall of 33 percent, due to the higher Indian price when compared with Vietnam and Indonesia. Pepper price has support at 10,490. If it moves down, further downtrend is expected. Resistance is seen at 11,805.

CHILLI

Chilli prices are looking slightly firmer due to bargain buying and export enquiries from Bangladesh and Sri Lanka. Higher domestic consumption coupled with lower supply positions in Andhra Pradesh market will have a positive impact on Chilli prices. Chilli price may remain stable in the coming days and it will have firm support at Rs 5108 and resistance at Rs 5543.

TURMERIC

Due to huge short covering in the futures market, Turmeric has started appreciating. Futures oversold situations have supported the commodity prices, having low fundamental support for the uptrend. The commodity prices may fall further after the technical rebound due to poor fundamentals in the short run. In the medium term, prices may remain stable due to lower Turmeric carry-over stocks for 2009 that are likely to be 500,000 bags, 58 percent lower from last year’s 1.2 million bags due to lower output in 2007-08.

CARDAMOM

Indian cardamom production is likely to rise 20 percent in 2008-09 on good weather and more area under cultivation. The workers’ strike was called off last week, which will also have a positive impact on production. Production figures for last year are supporting the short-term price rise. Production in 2007-08 was about 7,700 tonnes, down from 11,300 tonnes the earlier year due to a dry spell in early 2007. The arrival of winter in the European countries in early December will also have a positive impact on prices.