Published on March 5, 2014
05 March 2014 Monthly Report On OTHER COMMODITIES (March) Presented by: Subhranil Dey Sr. Research Analyst
® Snapshot of price movements in futures and spot markets (February 2014) Price movement of other commodities on NCDEX 15.00 % Change 9.20 10.00 5.66 5.00 0.06 0.00 -5.00 -10.00 -8.48 -7.36 -9.84 -15.00 Kapas Guar gum Guar seed Wheat Sugar Chana Source: SMC Research Price movement of other commodities on spot markets 12.00 10.08 10.00 8.00 6.00 4.00 2.00 0.63 0.00 -0.69 -2.00 -2.15 -4.00 -6.00 -8.00 -5.75 -6.86 Guar gum (Jodhpur) Guar seed (Jodhpur) Cotton 29mm (Rajkot) Wheat (Delhi) Sugar M (Kolkata) Chana (Delhi) Source: SMC Research 1
® MARKET MOVEMENT AHEAD Commodity: CHANA Trend: Positive Range: 3080-3350 (April) Domestic Fundamentals Chana futures (Apr) is likely to trade higher towards 3330-3350 levels, breaching the resistance of 3230 levels. to come, the counter is expected to take support above 3080 levels. In days According to trade estimate at the Pulses Conclave 2014, chana output this Rabi season is expected to be lower at 6.5 million tonnes (mt). government has estimated a bumper chana output at 9.8 mt this year against 8.88 mt harvested in the same period last year. The rainfall and hailstorm in Madhya Pradesh and Rajasthan, major chana producing states has favoured the strong bullish Recent sentiments in the counter. Moreover, lower arrivals and the expectation of government agencies buying at MSP also supported the rally. Agriculture ministry had also sought to the commerce department for lifting of the ban on pulse export. Export of all variety of The pulses, except kabuli chana, was banned in 2006. It has been extended from time-to-time up to March. At JNPT port, 10 containers of yellow peas, 55 containers of urad, 117 containers of lentil, 66 containers of tur and 64 containers of green moong arrived on March 3,2014. At JNPT port, 12 containers of moong, 35 containers of tur (whole), 10 containers of urad and 25 containers of masoor arrived on Feburary 28, 2014. International Fundamentals In Mexico, commencement of new chana crop in market will be starting in a couple of weeks. According to the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES), chana production in Australia is expected to fall by 23% to 629,100 tonne during 2013-14 against the previous year. Calendar spread of Chana futures Apr May Jun Apr - - - Jul - May -42.00 - - - Jun -98.00 -56.00 - - Jul -157.00 -115.00 -59.00 - As per closing on 3rd March 2014 Source: SMC Research 2
® Chana futures Seasonal Index V/s Monthly close price 2014 1.15 3300.00 1.10 3200.00 3169.00 3156.00 1.05 3100.00 1.00 3000.00 0.95 2900.00 2892.00 0.90 2800.00 0.85 0.80 2700.00 Jan Feb Mar Apr May Jun Seasonal Index Jul Aug Sep Oct Nov Dec Monthly close price 2014 Source: SMC Research Forward curve of Chana futures 3,350.00 3,326.00 3,300.00 3,250.00 3,267.00 3,200.00 3,150.00 3,211.00 3,169.00 3,100.00 3,050.00 April As per closing on 3rd March 2014 May June July Source: SMC Research 3
® Commodity: KAPAS Sentiment: Range bound Range: 850-930 (April) Domestic fundamentals Kapas futures (Apr) is likely to consolidate in the range of 850-930 levels. The upside may remain capped due to lack of any fresh cues of demand & bearish fundamentals of international markets. crop estimates for the current season (2013-14) have been pegged at 375 lakh bales (170 kg a bale) compared to 365 lakh Cotton bales last season, an increase of 2.73%, the Indian Cotton Federation (ICF) said. daily average seed cotton arrivals were around 2 lakh bales. The Cotton Corporation of India (CCI) reported an arrival of 151.41 lakh bales in the current season as of 26th Jan 2014 as compared The to 182.23 lakh bales in the same time last season. north zone of Punjab, Haryana and Rajasthan, the daily average arrivals are around 15,000 bales. Cotton lint prices remained In the steady with no major variations. In Gujarat, arrivals were less due to severe cold wave conditions, coupled with farmers' reluctance to sell kapas, anticipating better rates. In Maharashtra, there is steady arrival of 50,000-55,000 bales daily. quality of the arrival has been not to the required level in terms of fineness and uniformity etc since there was mixing up of 1st The and 2nd pickings. daily average seed cotton arrivals were around 2 lakh bales. The of cotton in India has been increased by 12.87% on Y-oY basis to 24.55 million bales of 170 kgs each till 28 February 2014. Arrival During the corresponding period last year the same stood 21.75 million bales. Weather has improved in most of the cotton growing region, leading to harvesting and so the arrivals. Reason for the same is the cultivation of BT cotton majorly. Acreage of cotton is likely to increase by around 7-8% next year as farmers are getting good value of their produce this year compared to the previous. International fundamentals state cotton stockpiler bought 132,480 tonnes of fibre last week, its lowest weekly volume since the buying season began, China's suggesting that total purchases are close to finishing at around 6 million tonnes, official statistics showed. buying for state reserves, now in its third year, drives import demand as it leaves little available for domestic sale and pushes China's up local prices. Sixty-six percent of the purchases to date for state cotton reserves has been from Xinjiang, which produces China's highest quality fibre. total amount of cotton stockpiled in the current season is close to the 6.22 million tonnes reached this time in 2013. The plans to end its stockpiling programme this year and test a system of direct subsidies for cotton growers in Xinjiang, the Beijing country's top cotton-growing region. is the world's top importer of raw cotton and the world's biggest market for the fibre, with any changes to its domestic policy China closely watched by exporters such as the United States. reserves are currently offering fibre at 18,000 yuan per tonne but demand has been tepid with only 36 percent of volumes The offered - almost 600,000 tonnes - being bought up since sales started in November. Textile firms complain of poor quality and high prices. 4
® Kapas futures Seasonal Index V/s Monthly close price 2013 1.10 960.00 945.00 940.00 1.05 920.00 1.00 901.50 900.00 0.95 880.00 860.00 0.90 863.00 840.00 0.85 820.00 0.80 800.00 Jan Feb Mar Apr May Jun Seasonal Index Jul Aug Sep Oct Nov Dec Monthly close price 2014 Source: SMC Research Commodity: WHEAT Trend: Range Bound Domestic fundamentals Wheat futures (Apr) is expected to consolidate in the range of 1510-1605 levels. Range: 1510-1605(April) government has raised the minimum support price The (MSP) for wheat by Rs 50 to Rs 1,400 per quintal to encourage farmers to cover more area under the crop in the ongoing Rabi season. widespread untimely showers may hurt the overall yield The Timely harvest of the preceding kharif (winter harvested) of the wheat crop in the region, including in Punjab and Haryana crops coupled with good late season (September-October) monsoon rainfall provided favorable soil moisture conditions for wheat planting in most growing areas. According to the second advance estimate of foodgrain production released by the agriculture ministry on Friday, India's wheat production in the 2013-14 Rabi season (July to June) will stand at an all-time of 96 million tonnes, 2.23% more than last year. Adequate soil moisture and relatively low temperatures during November/December provided optimal conditions for emergence and tillering Government is targeting to procure 31 million tonnes (MT) of India's wheat production has exceeded trend in the last four years on higher planting and productivity due to the government's policy of steady increase in the MSP and generally favorable weather conditions. wheat during 2014-15 marketing year – 22% higher than the current year. Food Corporation of India (FCI), the nodal agency for 5
® procurement and distribution of foodgrains, had procured 25.4 MT of wheat in 2013-14 marketing year. International fundamentals Wheat crops in Western Europe appear in generally good Government-held wheat stocks on February 1, 2013, were estimated at 24.2 MMT compared to 30.8 MMT at the same time last year, but still significantly higher than the government's desired peak stock of 20.1 MMT (on July 1). According to USDA, MY 2013/14 wheat exports are estimated at 6 million tons as Indian wheat has not been very price competitive in the international market. condition. the EU's second largest wheat producer Germany, both In wheat and other winter grain plants are developing well. Australian wheat production for 2013/14 is forecast to increase by 17% to around 26.2 million metric tonnes. wheat futures surged 4.6%, the biggest one-day U.S. percentage gain in more than 17 months, as market participants fretted that Ukraine's escalating crisis will slow grain exports from the eastern European country. According to USDA, wheat exports are forecast to halve to 3 million tonnes in 2014-15, most of which will be private exports and some spillover of government wheat from the existing current 2 million tonnes quota announced in August 2013. Wheat prices on the international market jumped after Russia's military appeared to tighten its control of Ukraine's Black Sea region of Crimea. Together with Russia, Ukraine forms the northern coast of the Black Sea, a major shipping route for energy, agricultural products and metals. 2014/15 ending stocks are forecast to increase to 20.5 MY MMT on expected higher procurement and lower offtake of government wheat for exports. Nevertheless, these stocks are more than three times the government's desired stocks of 7 million tons (4 million tons buffer and 3 million tons of strategic reserve). Calendar spread of Wheat (Delhi) futures Apr May Jun Apr - - - Jul - May 10.00 - - - Jun 2.00 -8.00 - - Jul -6.00 -16.00 -8.00 - As per closing on 3rd March 2014 Source: SMC Research Wheat futures Seasonal Index V/s Monthly close price 2014 1.10 1639.00 1638.00 1638.00 1.05 1637.00 1636.00 1.00 1636.00 1635.00 0.95 1634.00 1633.00 0.90 1633.00 1632.00 0.85 1631.00 0.80 1630.00 Jan Feb Mar Apr May Jun Seasonal Index Jul Aug Sep Oct Monthly close price 2014 Nov Dec Source: SMC Research 6
® Forward curve of Wheat futures 1,575.00 1,570.00 1,571.00 1,565.00 1,565.00 1,563.00 1,560.00 1,555.00 1,555.00 1,550.00 1,545.00 April May June As per closing on 3rd March 2014 Commodity: SUGAR July Source: SMC Research Trend: Positive Range: 2800-2950 (April) Domestic fundamentals Sugar futures (Apr) is likely to remain stable taking support above 2800 levels. sweetener on the national bourse is expected to test 2950 The levels on the upside, surpassing 2880 levels. Domestic sugar production has reported a decline in the current sugar year. This decline was driven mainly by a weak and delayed monsoon in several key growing regions, thus resulting in the increased attractiveness of alternative crops. reason for decline in domestic sugar production is lower The sugar production in U.P on account of excessive rains and diversion of crop to alternate sweeteners while sugar production in Maharashtra is likely to get affected by the previous year's drought. In addition to this, lower rainfall in Tamil Nadu is likely to impact sugar production. Further, with the domestic sugar prices being on the lower side and huge debt and high cane arrears, there has been a delay in the commencement of crushing due to a delay in the fixing of the cane prices with mills from UP starting crushing only from December 2013. 28th Feb, 2014, 168.6 lakh tons of sugar has been Till produced, which was 188.4 lakh tons during same period last year. The gap has narrowed down further from 13% to 11% over last fortnight. 460 mills are still crushing sugarcane, which is 23 more than last year. Maharashtra has crushed 515 lakh tons of sugarcane to produce 57.1 lakh tons of sugar with 11.1% of recovery. However, at the same time, last year sugar mills in the State had crushed 590 lakh tons of sugarcane to produce 65.7 lakh tons of sugar with 11.15% of recovery. Till date, 25 mills have closed their operations for the SS 2013-14, while last year 36 mills had stopped crushing by 28th Feb. In Ahmednagar zone - 7, Pune- 6, Aurangabad -6, Nanded-6 have closed. It is expected that sugar recovery in Maharashtra will be slightly better in SS 2013-14 as compared to last year's over all recovery of 11.41%. Pradesh has produced 42.75 lakh tons of sugar from 475 Uttar lakh tons of sugarcane crush with 8.99% recovery. Last year during same corresponding period, UP sugar mills had 7
® crushed 560 lakh tons of sugarcane to produce about 50.09 lakh tons of sugar with 8.94% recovery. All 119 mills are still under operation against 118 during same period last year. Karnataka has produced 31.50 lakh tons of sugar which is about 3% higher than last year. On 28th Feb, 2014, 56 mills were crushing which is higher than the 36 of last year during same corresponding period. Gujarat has produced 8.60 lakh tons of sugar with 10.80% recovery, as against 8.89 lakh tons of sugar with 10.50% recovery last year. Nadu produced 5.70 lakh tons against 9.92 lakh tons of Tamil sugar last year same period, which is due to lower recoveries and late starting of sugar crushing season. Till 28th Feb,2014, 12 lakh tons of sugar has been shipped out of country, out of which about 5 lakh tons has gone as Raw sugar. Over and above this, 1 lakh tons of sugar has also been exported against Advance Authorization Scheme. Till 31st Jan, 2014 about 8.5 lakh tons of Raw sugar has been produced. level sugarcane price remaining unpaid in Uttar Pradesh State as on 28th February, 2014, is about Rs. 10,000 crore. Another Rs. 4000 crore would be the amount of cane price unpaid in the rest of the country as on 28th February, 2014. closing sugar stocks are forecast to be 9.8 million Indian tonnes at the end of September 2014, up from 9.3 million tonnes as of Oct. 1, 2013 as per by ISMA. El Nino weather pattern that can trigger drought in some The parts of the world while causing flooding in others is increasingly likely to return this year, hitting production of key foods such as rice, wheat and sugar. Vashi market is carrying more than 110-115 truckloads The inventory. Bombay Sugar Merchants Association's spot rates were: Sgrade Rs.2,736-2,842 (Rs.2,732-2,826) and M-grade was Rs.2,856-2,980 (Rs.2,872-2,977). Naka delivery rates were: Sgrade Rs.2,765-2,850 (Rs.2,700-2,820) and M-grade Rs.2,800-2,950 (Rs.2,810-2,930). Export Scenario (India) Government approved a Rs.3,333/tonne subsidy to boost The raw sugar exports. This move should help cut oversupply of refined sugar, which has piled up with mills after four straight years of surplus production. Government notified an incentive of Rs. 3,300 per tonnes for production of raw sugar for exports as the world's second biggest producer of the sweetener tries to bring down its stockpile by promoting exports. incentive of Rs. 3,300 will be applicable for exports in The February and March. From April onwards, the incentive will be recalculated after every two months depending on the rupee-dollar exchange rate. the notification, sugar mills should utilise the incentive As per amount to make payment of cane dues of farmers within three months of receipt of the subsidy amount. Mills are required to submit a utilisation certificate to this effect within a month. incentive will be reviewed before the commencement of The the next sugar marketing year, the notification added. would be, however, a quantitative limit of 4 million There tonnes for subsidy. Raw sugar produced and exported during 2013-14 and 2014-15 marketing years (October-September) are eligible for subsidy. has exported about 8.5 lakh tonne of sugar, including 4.5 India lakh tonne of raw sugar, till January 31, 2014. country is expected to produce another 10 lakh tonne of The raw sugar in the remaining months of current season, said industry body Indian Sugar Mills Association (ISMA). white sugar, which competes with the Thai sweetener, Indian edged up to $450 a tonne from $445 last week, but the gain reflected thin trade as demand remained poor. Indian raws stood at $420 a tonne. International fundamentals sugar production could fall for the first time in five Global years, as cited by the International Sugar Organization (ISO). ISO's prediction came on the heels of an estimate by The Unica, the Brazilian sugar and ethanol group, that drought in the country's main cane-growing region would reduce the 2014 harvest by at least 36 million metric tons, leaving production on par with the previous season. ISO lowered its forecast for a supply surplus by 11% to 4.2 The million metric tons. World sugar consumption is likely to grow 2.3% to 177.1 million tons this season, in line with the 10-year average. ICE Futures U.S. raised initial margin requirements for trading in raw sugar effective with the opening of business on Feb. 26. exchange operator raised Sugar #11 margins by 21.4% to The $850 per contract from $700 earlier. Speculators sharply reduced their net short position in raw sugar contracts on ICE Futures U.S. in the week ended Feb. 25 8
® Sugar futures Seasonal Index V/s Monthly close price 2014 1.06 2850.00 1.04 2780.00 2800.00 1.02 2790.00 2750.00 1.00 0.98 2700.00 0.96 2650.00 2633.00 0.94 2600.00 0.92 0.90 2550.00 Jan Feb Mar Apr May Jun Seasonal Index Jul Aug Sep Oct Nov Dec Monthly close price 2014 Source: SMC Research Forward curve of Sugar futures Calendar spread of Sugar futures 3,100.00 Mar 3,000.00 2,966.00 2,950.00 2,911.00 Jun Jul Aug - - - - - - -69.00 - - - - - - May 3,046.00 May - Apr 3,027.00 3,008.00 Apr Mar -128.00 -59.00 Jun 3,050.00 Sep -183.00 -114.00 - - - - - -55.00 - - - - Jul 2,852.00 2,850.00 -225.00 -156.00 -97.00 -42.00 - - - Aug -244.00 -175.00 -116.00 -61.00 -19.00 - - Sep 2,900.00 -263.00 -194.00 -135.00 -80.00 -38.00 -19.00 - As per closing on 3rd March 2014 Source: SMC Research 2,800.00 2,750.00 2,783.00 2,700.00 2,650.00 March April As per closing on 3rd March 2014 May June July August September Source: SMC Research 9
® Commodity: GUAR Sentiment: Rangebound Range: Guar seed 4500-5000 (Apr) Guar gum 12500-13700 (Apr) Fundamentals seed futures (Apr) is likely to trade in the range of 4500-5000 levels. Guar gum futures (Apr) is expected to consolidate in the range of 12500-13700 levels. Guar was scattered rain in North India in recent days but now the intensity of winter is diminishing. There stockists were not very active in the spot markets. The carry over stock from last year and higher guar production scenario for current season representing huge surplus of guar Higher stocks in the markets. It is estimated that carry forward stock from last season is likely to be around 6 million bags. Arrivals are coming from irrigated areas of Haryana and Ganganagar was approximately 40,000 bags on daily basis. demand for splits coming from Haryana and Ganganagar. Some of quality coming from other areas is also an issue and affecting quality. Mixing Presently, export demand from US and China remained consistent but not going to increase by huge volume as US has already huge stocks in Houston as reported. last week of February 2014, average crush margin stood at Rs. -373.5/Quintal which was Rs. -537 per quintal in the third week In the of the previous month. State wise,Variety wise Wholesale Prices Monthly Analysis for Gwar in Febraury, 2014 (Prices in Rs/Quintal) Variety Haryana Gwar Other NCT of Delhi Gwar Rajasthan Gwar Other Gujarat Gwar Other Andhra Pradesh Other Maharashtra Other MadhyaPradesh Gwar Other Punjab Gwar Other Average Prices Febraury, 2014 Prices January, 2014 Prices Febraury, 2013 % Change % Change (Over Previous Month) (Over Previous Year) 4574 5011.1 4769.08 4619.33 10204.34 -4.09 8.48 -50.89 4178.06 4375.05 6737.66 -4.5 -37.99 4563.69 4472.21 4824.99 4713.96 10242.45 10118.53 -5.42 -5.13 -55.44 -55.8 3999.13 4167.3 3835.27 4223.89 9858.13 9806.79 4.27 -1.34 -59.43 -57.51 4165.82 - - - - 2872.76 2142.93 2240.89 34.06 28.2 3961.02 4145.52 1992.59 9501.42 -4.45 -58.31 4598.28 2450.75 4939.06 4712.58 4300.15 7855.87 -6.9 - - As per the data reported by APMCs 10
® Forward cruve of Guar seed futures Forward cruve of Guar gum futures 4,950.00 13,800.00 4,900.00 4,900.00 4,850.00 13,620.00 13,600.00 13,400.00 4,850.00 13,430.00 4,800.00 13,200.00 13,240.00 4,775.00 4,750.00 13,000.00 4,700.00 4,710.00 12,800.00 13,050.00 12,870.00 4,650.00 12,600.00 4,600.00 March April May 12,400.00 June As per closing on 3rd March 2014 March Source: SMC Research Calendar spread of Guar seed futures Apr May Jun - - - - Apr -65.00 - - - May -140.00 -75.00 - - Jun -190.00 -125.00 -50.00 - As per closing on 3rd March 2014 May June July Source: SMC Research Calendar spread of Guar gum futures Mar Mar April As per closing on 3rd March 2014 Source: SMC Research Mar Apr May Jun Jul Mar -180.00 -370.00 -560.00 -750.00 Apr -190.00 -380.00 -570.00 As per closing on 3rd March 2014 May -190.00 -380.00 Jun -190.00 Jul - Source: SMC Research For further any queries, please contact Subhranil Dey Sr. Research Analyst email@example.com Ph.: 011-30111000 Extn.: 674 SMC Global Securities Limited is proposing, subject to receipt of requisite approvals, market conditions and other considerations, a further public issue of its equity shares and has filed a Draft Red Herring Prospectus (DRHP) with the Securities and Exchange Board of India (SEBI). The DRHP is available on the website of the SEBI at www.sebi.gov.in and the website of the Book Running Lead Managers i.e. Tata Securities Limited at www.tatacapital.com and IL&FS Capital Advisors Limited at www.ilfscapital.com. Investors should note that investment in equity shares involves a high degree of risk. For details please refer to the DRHP and particularly the section titled Risk Factors in the Draft Red Herring Prospectus. Disclaimer: This report is for the personal information of the authorized recipient and doesn’t construe to be any investment, legal or taxation advice to you. It is only for private circulation and use .The report is based upon information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied upon as such. No action is solicited on the basis of the contents of the report. The report should not be reproduced or redistributed to any other person(s)in any form without prior written permission of the SMC. The contents of this material are general and are neither comprehensive nor inclusive. Neither SMC nor any of its affiliates, associates, representatives, directors or employees shall be responsible for any loss or damage that may arise to any person due to any action taken on the basis of this report. It does not constitute personal recommendations or take into account the particular investment objectives, financial situations or needs of an individual client or a corporate/s or any entity/s. All investments involve risk and past performance doesn’t guarantee future results. The value of, and income from investments may vary because of the changes in the macro and micro factors given at a certain period of time. The person should use his/her own judgment while taking investment decisions. Please note that we and our affiliates, officers, directors, and employees, including persons involved in the preparation or issuance if this material;(a) from time to time, may have long or short positions in, and buy or sell the commodities thereof, mentioned here in or (b) be engaged in any other transaction involving such commodities and earn brokerage or other compensation or act as a market maker in the commodities discussed herein (c) may have any other potential conflict of interest with respect to any recommendation and related information and opinions. All disputes shall be subject to the exclusive jurisdiction of Delhi High court. 11
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