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July Wrap-up

posted Aug 1, 2010, 1:15 AM by Unknown user   [ updated Oct 3, 2010, 1:18 AM ]
Maize continued to remain high on good demand amid lower stocks in the physical market. At present demand for Bihar maize is a bit subdued, but inherent demand remains from Bangladesh which once picks a bit of momentum will lead to higher prices. However, there are reports that Karnataka may have bumper crop, which is the largest producer of maize. Despite an overall deficit of 8 per cent rainfall, the sowing operation shave gained momentum during second half of July. Sowing operations in Karnataka have been completed in 4.27 million hectares as against the kharif target of 7.46 million hectares, accounting for 57 per cent of the target across the state. Also the millers and starch industries have bought enough for their August month production. So these might put  a bit of a downward pressure on price, but overall the prices look bullish due to lower arrivals and sustained demand for the next couple of weeks. 

Till last month, it was the general opinion that world oilseeds market would witness further fall in prices due to comfortable supply as Brazil, Argentina and US which are the major soybean producers harvested a bumper crop this year. Prices too followed more or less weak trend till mid July. In India, June-July is the period when monsoon is active and kharif crops are sown. Initially the rain was good but till July end, country experienced deficit rain fall overall. Soybean which is a kharif crop is mainly grown in Madhya Pradesh and Maharashtra region. Baring some initial few rains, the vast part of the soybean growing area of Madhya Pradesh is still waiting for rains. The delay in monsoon brought back bulls and suddenly from the second week of July, prices started rising as market added risk premium to it, as we had reported in our previous post. Till 16th July soybean was sown at 61.1 lakh ha as compared to 60.31 lakh ha same period last year. Hot weather and less rains directly means moisture stress in the standing crop and further delay in sowing where farmers have yet not started it. All these things may finally result in possible production loss. Thus on domestic front, this is the main reason why prices suddenly rose despite the fact that large amount of carry over stock is there in the market. On international front also, US soybean new crop is standing in the fields and there are some concerns regarding long term weather. Currently there is good domestic as well as export demand of Soy DOC which is supporting the market prices. It appears that a lot will depend upon further progress of monsoon in India. If sufficient rains are seen during August, then prices may remains stable on current levels or even may witness some weakness otherwise more upside would be seen which may continue till early September. Put your hand wisely in soybean now!

Rapeseed bearing the same fundamental modalities as that of soybean, witnessed a spike from mid July onwards. Physical market arrivals in the major mandis of Rajasthan and Madhya Pradesh declined significantly during July month amidst increased demand. Major decline in arrivals was seen in the Rajasthan where arrivals reduced more than 50 % during July. Apart from the bad weather in domestic market, In the international market as well, drought in the Russia, weather concerns in the Canada and US added to the bullish undertone of the soybean and
canola prices. Further India government also reduced rapeseed production estimates during its forth advanced estimates. It pegged rapeseed production for the year 2009 10 at 6.41 MMT as compared to the 7.20 MMT during 2008 09. 
There is a strong stockist demand in the spot market and this lower production is supporting the prices for now.We expect that this positive note in prices will continue for rapeseed.

For Turmeric, good export and rising domestic demand along with reports of lower stocks support the prices. Export demand from the Gulf countries continued to be there and that had some bullish impact on the prices. Export demand from modest Asian countries, EU and Japan were also there. Stockists were also reportedly holding back stocks in anticipation of a further rise in rates in the coming weeks. Latest reports from Spice Board of India indicates the exports for the period April June have fallen by 11% to 14,600 MT in 2010 from 16,440 MT in 2009. But reports indicate a pick up in exports in coming weeks and an anticipated further rise in domestic demand, both due to the approaching festive season as pointed out in our previous post, may keep rates firm for the commodity. The monsoon report remains important for the next few months. A better monsoon report in the growing areas has resulted in improved sowing of the new crop. Higher prices last year have ensured more sowing area for the crop this year by farmers. The production this year is expected to be moderately up but lower stocks have been preventing a major fall in rates for Turmeric. Arrivals also get affected during the rainy season and this leads to further flare up in rates. Thus the short term sentiments are going to be affected by the expected rise in export and domestic demand but a better crop prospect can prevent the rates from moving up a lot in the medium term. Overall more bullish tendencies. 

Chilli was one of the very few commodities that showed a fall in rate during the month of July. Higher production expectations, higher stocks, weak demand and poor quality of stocks were the factors which resulted in fall in rates for the commodity. Higher acreage and low incidence of diseases and use of high yielding hybrid varieties have resulted in possibilities of 10­15% higher production this year to 13 lakh tonnes. Better crop in Andhra Pradesh have created possibilities for that. The arrivals remained high in the mandis and poor quality of stocks ensured exports too remained weak. High amount of stocks in Guntur mandi pressurized the prices further. Traders are however expecting that the current rates are very low and with domestic demand expected to rise in coming weeks from the festive season ahead, further substantial fall in prices may not be there. Stockists are also reportedly unwilling to sell at these low levels. Exports are also expected to rise at these low levels and that could support the falling rates from a medium term point of view. Fall in production in China and Bangladesh could also be some Bullish factors for the Indian markets if the exports rise from here. As per latest reports from Spice Board of India, Chilli exports for the period April June this year rose to 68,760 MT vs 42,700 MT same period last year, thus showing a rise of 33%. We are expecting recovery in rates from these levels which are considered low for the commodity. With a bullish sentiment prevailing in other
Spices, there are expectations of Chilli rates also showing recovery in August if exports rise further. 

Rates fired up for Jeera as it neared its highest levels during the month of July. Exports shot up as arrivals fell in Unjha mandi. Reports from the International markets too were showing Bullish signs. There were apprehensions that production in Turkey and Syria – the other growing countries, were slightly on the lower side. With poorer quality stocks there and rates being firm, it affected the Indian markets also. Syrian jeera is being offered around $3,100/tonne as against Indian jeera at $3,000/tonne. The export demand shifted to this country and with domestic demand too rising from the festival season ahead, Jeera rates continued its uptrend. Firmness in Dollar vs Re rates too supported the export prospects for the 
commodity. W
ith firm International trend and exports and domestic demand rising, one can witness a significant surge in demand for Jeera in the coming weeks. Also reports of stockists holding back stocks in anticipation of a rise in price in the coming weeks have affected the arrivals and this created further support to the rising rates. Short term sentiments however continued to get affected by the weather in Gujarat. Rains there have created some bearish impact on the prices as the demand got affected. Exporters were also waiting for some fall in prices when the rates moved up significantly for making fresh purchases. Thus, based on these factors one can witness increased volatility in the month of August. Overall, it look bullish.