We expect CPO prices to trade sideways

Source: Angel Commodities Pvt Ltd

Chana

Chana futures at NCDEX traded closed lower yesterday as the income tax department raided traders dealing in pulses, especially chana (chickpea), in Delhi and Mumbai on Tuesday. Chana Jan’16 futures closed lower by 3.33 per cent at Rs. 4,739 per quintal. The rates of chana futures touched the lower circuit on the NCDEX. As per data release by Agriculture Ministry, chana planted on 79.17 lakh hac, higher by 4 per cent compared to last year acreage of 75.82 as on Dec 18. The acreage under chana reported higher in Maharashtra (12.72 lh Vs 9.6 lh), Andhra Pradesh (3.32 lh Vs 2.67 lh) and Karnataka compared to last year’s acreage but slightly lower in Rajasthan (12.35 lh Vs 12.56 lh) and Madhya Pradesh as per data released by respective state agriculture department. India has imported 3.07 lakh tonnes (lt) of Chana until September in the current financial year. According to IBIS, import of pulses in the week (14 Dec-20 Nov) was around 2.65 lt, which is higher by 66 % than the previous week.

Outlook

We expect chana prices to trade sideways to down on expectation of more supplies from the hoarding pulses as IT department rained on pulses traders and steady physical demand at higher prices. However, imports at higher prices and lower than expected arrivals may support prices.

Sugar

Sugar Futures on NCDEX traded on positive note yesterday due to improved local demand on anticipation of lower production this year. Moreover, better export prospects and positive global clues from Brazil too helped sugar prices to trade higher. Sugar Mar futures closed 3.05% higher at Rs. 3,138 per quintal. In the recent development, Central government, under Ethanol Blending Programme (EBP), has scaled up blending targets from 5% to 10% to promote blending of ethanol with petrol and its use as alternative fuel. As per ISMA data, sugar production rose by 13.2 % to 47.86 lt till December 15 in the current marketing year compared to last year same time. Earlier, Union government plans to increase the cess on sugar by almost Rs 100 per quintal to fund its ambitious programme of paying Rs 4.50 per quintal directly into the bank accounts of growers. In the current season, mills have so far signed deals to export 6 lt of sugar and out of this nearly 3 lt have already dispatched. ISMA has forecast India’s sugar output at 27 mt this season as compared to 28.3 million tonnes last year.

Outlook

We expect sugar to trade higher on reports of good local demand and encouraging exports from the country. Bullish clues are also coming from Brazil’s as it may produce less than expected sugar.

Soybean

Soybean futures closed higher yesterday on renewed demand from the market participants on expectation of better demand for soy crushing. However, improved supplies due to record imports and subdued demand from oil mills at higher prices pressurizing the prices. Soybean Jan future contract closed 0.68% higher at Rs. 3,714 per quintal. The prices have tumbled in recent weeks due to sufficient arrivals in the domestic market coupled with lower demand for meal export. As per the data release by SEA, exports of soybean meal hit a historical low of 55,889 tonnes in the first eight months of current financial year against 2.50 lt logged in the same period last year

Outlook

We expect Soybean prices to trade sideways to lower on expectation of sufficient arrivals, lower meal export and lower demand of oilseed by oil mills at higher prices. However, expectation of demand for the soyoil by traders and stockists may support prices.

Rape/mustard Seed

Mustard seed continue its downtrend due to good sowing progress and subdued demand for meal exports. Moreover, higher veg oil imports also pressurize the prices. NCDEX Jan ’16 futures closed 2.34 % lower at Rs. 4,293 per quintal. There are reports of favorable crop condition in mustard producing States further pressurizing the price. Area coverage of RM seed this year is lower by 4.30 lakh ha compared to corresponding period of Rabi 2014-15 as per latest SEA circular. Until, 17 Dec, 59.4 lh area is sown compared to 63.7 lh last year same time. In Rajasthan, 23.7 lh has been sown as on Dec 17, compared to 24.34 lh sown last year same time. On the export front, the shipment of rapeseed meal exports plunge y/y by more than 61.4 per cent until November to 2.95 lt .

Outlook

We expect mustard seed to trade sideways to down due to weak oilseeds market. Good sowing progress and stock limit in Rajasthan is bearish for mustard. However, reports of dwindling stocks in the country and hopes for revival of export demand for meals to China may support the prices.

Refined Soy Oil

Refined soy oil futures recovered due to lower level buying and closed 1.01 per cent higher at Rs. 621.4 per 10 kg. However, reports on more than two fold increase in soyoil imports in Nov compared to last year data capped further rise. The Argentina government has removed export duty on soybean and soya oil to make their exports competitive, which results in falling in the international markets. Earlier, the Agriculture Ministry has proposed further hike in import duty of edible oils by 5 per cent in a bid to protect the interest of farmers. The Ministry has proposed increase in import duty on crude edible oils to 17.5 per cent and on refined edible oils to 25 per cent from the existing level. Import of soybean oil rose more than twofold to 2,61,338 tonnes in November from 1,21,097 tonnes in the year-ago period. According to latest SEA report, import of vegetable oils during November 2015 is reported at 1.34 mt compared to 1.19 mt for November 2014. This record import of vegoil is keeping the prices under pressure.

Outlook

Soy oil futures may trade sideways due to expectation of improved demand but there are high supplies of veg oil and weaker demand at higher price. Sufficient domestic supplies coupled Imposition of stock limit in Rajasthan is bearish for the prices.

Crude Palm Oil

CPO Jan Futures prices closed higher yesterday by 1.22% at Rs. 413.8 per 10 kg tracking international market as it is driven mainly by the Malaysian CPO prices. According to latest data released by SEA, country has set a new record for highest import of palm products in Oil year 2014-15, which has created a glut in domestic market. Import of palm products during October 2015 is the highest in any single month at 1.11 mt. Malaysian palm oil futures rose yesterday on production concerns affected due to the rainy monsoon season. The yea-rend monsoon season brings heavy rains and floods across Southeast Asia and lowers palm oil output, making it difficult to gather fresh fruit bunches and disrupting supply chains. Lower production would help reduce current stockpiles and support prices. Palm-oil stocks in Malaysia, one of the world’s largest producers of the oil, are 28% higher than a year ago. Moreover, on month on month basis, Malaysian Palm-oil stocks totaled 1.75 million tons at the end of November, up 2.6% from October. Concerns about reduced production have prompted palm oil prices to rise 27% since they reached a six-year low in August. As per trade ministry official, Indonesia, top producer, has kept export tax for crude palm oil in December at zero, unchanged from November.

Outlook

We expect CPO prices to trade sideways tracking weaker domestic market and firm international market. Moreover, higher inventory level in the country has pressurized prices in the past. However, reports of lower production in Malaysia and Indonesia in coming months may support price but higher-than-expected palm oil stockpiles could cap price rises.

Spices

Jeera

Jeera futures closed lower yesterday due to low demand and pickup in jeera sowing in Gujarat, the main growing state. Jeera Jan’16 Futures closed 0.21% lower at Rs 14,095 / quintal. Gujarat, the top cumin producing state, has planted more cumin until Dec 21, 2015 compared to last year sowing progress. In Gujarat, jeera is planted about 7.6 per cent more area at 2,68,300 hectares compared to 2,49,900 hectares last year same time. According to govt data, exports for 2015-16 shows a decline trend compared to last year until September. As per Agmarknet data, arrivals of Jeera in Gujarat markets for the calendar year 2015 till Oct is lower by 217 per cent at about 1.23 lt compared to 3.9 lt last year.

Outlook

Jeera futures may trade sideways to down due to subdued demand for lower quality cumin coupled with good progress in Gujarat. Supply concerns may keep the prices steady as new crop is expected after March next year. However, expectation of revival of export demand may surge jeera price in New Year.

Turmeric

The most active Apr’16 turmeric futures closed higher on arrival of quality turmeric and good demand from the local stockists on forecast of lower production. The Future contract for April delivery at NCDEX closed unchanged at Rs 9,984 per quintal. There is concern over production due to heavy rains during Nov-Dec in south India. Heavy rains in south peninsula during November and early December may damage turmeric crop in Tamilnadu and some parts of Karnataka.

Outlook

Turmeric prices expected to trade sideways as market participants may look to book profit at higher levels. However, concern over production due to bad weather in producing states and good upcountry demand may support prices. Farmers are expecting higher prices and want to hold it as persistent rains during November in south may damage the quality of turmeric.

Kapas

Cotton complex closed lower yesterday on profit booking however, short supply and good demand from domestic mills capped further decline. NCDEX Kapas closed 1.64 per cent down while MCX cotton closed down by 0.66 per cent. Export demand also supported prices. Recently, Gujarat government increased MSP for the state and farmers are anticipating other states to follow suit. Price are supportive and trading sideways to higher due to steady trading activity in cotton as mills is showing interest in fresh buying of fine quality cotton.

Outlook

We expect cotton prices to trade sideways as prices have already firmed up on renewed demand from ginners and exporters. The prices have firmed up following increase in cotton prices in Gujarat. Rising export demand from Pakistan and other Asian countries and report of falling output in the country to support prices.

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