Content
September Review and Outlook for October Chana Oilseeds Spices Sugar Cotton Wheat 2 3 5 11 16 20 24
Research Team
Vedika Narvekar - Sr. Research Analyst vedika.narveker@angelbroking.com (022) 2921 2000 Extn. 6130 Anuj Choudhary - Research Associate anuj.choudhary@angelbroking.com (022) 2921 2000 Extn. 6132 Vaishali Sheth - Research Associate Vaishalij.sheth@angelbroking.com (022) 2921 2000 Extn. 6133
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Source: Reuters and Angel Research; Performance of October Contract; *Kapas April-2013 Contract;
Entire Edible oil complex underwent huge losses in the month of September. Soybean leads the losers list with 20.9 percent losses m-o-m ahead of higher sowing and output in the domestic markets. MCX CPO and ref soy oil also declined on the back higher Malaysian palm oil stocks coupled with weak exports. Chana declined 6.6 percent month on month on prospects of better sowing due to improved monsoon in the month of August and September and expectations of higher imports. Most of the Spices declined in the month of September except for Black pepper which remained in green on account of tight supplies. Jeera posted losses to the tune of 8.4percent on weak overseas demand and higher prospects of sowing. While, Turmeric declined 7.6 percent on account of huge carry over stocks. Among the Softs, Kapas suffered the most and registered 16.7 percent losses on month taking cues from the weak international market on account of higher global surplus. Also, Global cotton harvesting in the key countries along with domestic harvesting exerted pressure on the Kapas prices. After a significant drop in the prices of most of the agricultural commodities, we expect prices to consolidate in the month of October. Although harvesting of kharif crops may put pressure on the price, no major downside will be seen as demand from the stockiest will reemerge at lower levels. Also festive season demand may support the prices at lower levels. Prices may also be determined by the Minimum Support Price, to be declared by the government and the sowing progress of Rabi crops.
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Chana
Higher sowing prospects exerted downward pressure on the chana prices in September
After touching their historical high levels in the month of July, Chana prices remained under downside pressure in September on the back of improved rains and thereby hope of higher sowing this season. Expectations of higher imports at lower international prices also supported the weak market sentiments. Month of July was a remarkable year for Chana, with their prices at historical high levels for the third straight month supported by various fundamental factors, the most important being the supply tightness. Poor monsoons leading to lower sowing of kharif pulses, weakening Indian rupee and costlier imports further added fuel to the already Source: Reuters rising chana prices. However, the August and September month witnessed a twist in all these fundamental factors with monsoon revival seen beneficial for Rabi sowing, lower international prices leading to increase imports and ease in supplies etc. At NCDEX, Chana futures declined 12.5 percent month on month and settled at Rs 42132 per qtl. While in the spot markets, prices have declined by 10.7percent from Rs 4817 to Rs 4300 per qtl levels.
Higher MSP recommendation and remunerative prices to boost Chana sowing in 2012-13 season
During the last 2 consecutive years government has made a considerable hike in the MSP of Chana as well as other pulses. From mere Rs 1760 per qtl in 2009-10 to Rs 2800 per qtl in 2011-12, governments focus is to increase the productivity of chana and other pulses. This season too, the CACP has recommended Rs 200 per qtl hike for chana. Thus, considering a hike in MSP coupled with higher returns earn in 2011-12, farmers may opt for chana this season. Area under Chana cultivation, which declined in 2011-12 amid vagaries of weather, is expected to cross record level of 93.6 lakh hectares cultivated in 2010-11. Source: Ministry of Agriculture
Farm Ministry targets 79.6 lakh tonnes Chana output in 2012-13 season
In its first Advance estimates released in September, the ministry of Agriculture targets 2012-13 Chana output at 79.6 lakh tonnes compared with 75.8 lakh tonnes in 2011-12. This is still lower compared with the record 82.2 lakh tonnes produced in 2010-11. Expectations of shift in area under cultivation, mainly in MP may increase chana thereby increasing the production of this pulse crop.
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20 percent below normal rains in the first two months adversely impacted Kharif Pulses
Kharif Pulses that account for almost 40percent share in total Indian Pulses output have witness sharp decline in the area under cultivation this kharif season due to poor rains and shift in acreage towards more remunerative crops. Tur, Urad, Moong and moth are the major kharif pulses grown in India. As per the first advance estimates, 2012-13 Kharif Pulses area is estimated at 95.2 lakh hectares, down by 16percent compared with 113.45 lakh hectares in 20111-12 Although in Maharashtra and AP, the acreage is almost at par with the previous year; it is much lower in Rajasthan that accounts for around 25percent share in Kharif Pulses Production. On account of scanty rains in west Rajasthan and shift in acreage to other remunerative and drought tolerant crops like Guar, has led to sharp decline area under pulses cultivation in Rajasthan. Kharif Pulses output is estimated to decline for the second straight year and thus India will have to import more pulses to meet the rising consumption.
Outlook
After witnessing a significant correction in the month of September, we expect Chana prices to recover in the month of September as tight supplies and festive season demand will continue to support the upward movement in the prices. November onwards, prices may take cues from the sowing progress that shall commence mid October onwards. Although, sowing is expected to increase this season, the new crop would come only in January. Accordingly, market shall remain on the higher side in the month of November and December. But, during this two months, chickpeas are imported from Australia and this may come as a risk to upside.
Technical Levels
Support 2 4080
Support 1 4250
CMP 4530
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India's Sept oil meal exports down 64 pct on year- SEA of India
Indias oil meal exports declined drastically in the month of September mainly on the back of lower soy meal exports. Scarcity of beans and lower demand from Iran led to a sharp decline in Soy meal exports in the month of September. According to Solvent Extractors Association data, India, Asia's leading supplier of soy meal, exported just 6,525 tonnes of Soymeal in September, down 97 percent from a year earlier.
Source: Sea of India India's total oil meal exports fell 64 percent to 143,990 tonnes in September from a year earlier. Exports of rapeseed meal dropped more than 21 percent to 103,707 tonnes in September. Soy meal usually forms the bulk of India's oil meal exports, but rapeseed now accounts for most of the sales, especially to South Korea and Thailand. At current domestic soybean prices of around 3,050 rupees per 100 kg ($588.12 per tonne) and additional crushing charges, export prices of $668 per tonnes are simply not attractive enough to grab the deals (Source: Reuters) Iran, which has been the leading buyer for India's soy meal since the start of the current fiscal year from April 1, bought just 554 tonnes against 31,750 tonnes a year ago. It bought 4,218 tonnes in the previous month.
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Malaysia has approved a plan to cut crude palm oil (CPO) export taxes from the current level of 23 percent per tonne. The move could boost Malaysia's crude exports and help ease stockpiles from a record of 2.48 million tonnes in September. If Malaysia more than halves CPO export taxes to 8-10 percent, government officials say firms will have an option to ship out more of the crude grade to top buyer India that wants more of the feedstock for its domestic refineries. While the tax level will be lower than Indonesia's October CPO tariff of 13.5 percent, which is set monthly.
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Mustard seed
Monthly Price Performance
Mustard seed prices remained firm in the month of August and touched a record high level on account of lower Output in the last season of 2011-12. Ongoing fears of supply tightness, deficient rains and growing demand exerted upward pressure on the prices. However, prices corrected in the month of September on account of improved rains and thereby higher sowing prospects. NCDEX Rmseed prices gained a whopping 50percent y-o-y till August (monthly average prices) and touched a record high of Rs 4538 per Quintal. However, prices corrected thereafter by almost 16 percent from the high of Rs 4538 per quintal made in August 2012 and touched a low of Rs 3810 per quintal ahead of peak harvesting period of Soybean which weighed on the overall oilseed markets.
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Outlook
Mustard seed prices are expected to consolidate in the month of October as market participants may watch the sowing progress to derive the fundamental posture of mustard seed for the next season. Due to higher returns earned this season, farmers in Rajasthan may opt for mustard seed and thus acreage is expected to be better next season. Weather may also play a major role in determining next years mustard output. Fundamentals for the short term remain supportive for the upside on the back of supply tightness of this oilseed caused by lower output in 2011-12 season, thus restricting sharp fall in the prices.
Technical Levels
NCDEX Soybean Nov NCDEX Ref Soy Oil Nov NCDEX RMSEED Nov MCX CPO Nov
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Spices
Black Pepper
Price Performance
After witnessing record high prices in August due to low stocks in the domestic markets, pepper prices started to decline and traded in a range bound manner in the month of September. Prices in the Futures market touched an all time high of Rs. 45880/qtl in the month of August, and have, since then, declined gradually due to a fall in the demand at higher levels. The end users as well as industrial users avoided buying bulk quantities and were buying only hand to mouth, as per their requirement. Since farmers were unwilling to sell their stocks at lower levels, there were very less arrivals, which supported prices at lower levels. Thus, pepper settled at Rs. 43395 per quintal in September, higher by 1.77 percent as compared to Rs. 42620 per quintal in August. Demand from the overseas buyers for Indian pepper also remains subdued due to a huge parity in the prices. However, the effect of a fall in demand from the domestic as well as international markets was absorbed by low stocks in the domestic markets. The arrivals were also reported to be very low as farmers were not interested in selling their stocks at lower prices, as they had earned better prices earlier and expected prices to recover in the coming days. NCDEX November Futures are currently trading at Rs. 43,200/qtl. In the international market, Indian pepper for New York is quoting at USD 8,500/tn (C&F). Indonesia is offering its Austa at USD 6,750/tn (FOB) while Vietnam is offering its 500 GL at USD 6,900/tn (FOB).
Prices (Rs/qtl)
35195
28931 27864 23090 19180
41973
35000 26700
18850 14148
15000
10000 5000
0
*2011 & 2012 figures taken from Spices Board of India
Global Scenario
According to International Pepper Community, global production of Pepper in 2011-2012 is estimated at 3.20 lakh tonnes, an increase of about 7.2percent vis a vis 2.98 lakh tonnes in 2010-11. However, the production estimates is expected to be revised higher on expectations that Pepper output in Vietnam may be revised upward. Also, an increase in the production in Indonesia and Malaysia is expected to boost the global production. Vietnam is the largest pepper producing country, and holds a lions share of about 34 percent of the global production. This year, Vietnams pepper production is expected to increase to around 1.35 lakh tonnes as against an earlier estimate of 1.1 lakh tonnes. Production in Brazil is reported around 35 thousand tonnes, unchanged as compared to last year, while Malaysia is expected to produce 26.5 thousand tonnes of pepper this season. The production in Indonesia is estimated around 41 thousand in 2012. Increasing export demand for Indonesian Pepper has led farmers to produce more pepper. According to market sources, farmers in Indonesia are expecting prices to increase in the coming days, and thus, are ready to hold back their stocks. The supply situation is also reported to be tight. Exporters are said to be buying aggressively as the inventories are running out.
Source: Reuters & Angel Research.
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79,000 70,000
70,000
60,000
50,000 40,000
50,000
49,550
30,000
20,000 10,000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Outlook
Low stocks coupled with low arrivals in the domestic market are expected to support pepper prices in the coming days. Demand for pepper ahead of the upcoming festive season may also play as a supportive factor. Also, any improvement in demand from the industrial users may boost the prices. However, lower export demand for the Indian variety in the international markets due to huge parity may restrict any sharp upside. Also, reports of good production from other major producing countries Vietnam, Indonesia and Malaysia among others, may keep the prices under check. Indonesia has harvested its pepper and the yield are said to be higher than market expectations. Farmers in Vietnam are holding their stocks anticipating an upward movement in the prices.
Technical Levels
Support 2 40500
Support 1 42000
CMP 43500
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Turmeric
Turmeric prices rose sharply in the months of June and July on reports of lower sowing in the major growing belts. Lower rains, followed by drought-like conditions in the turmeric growing regions further fuelled the upside movement. Gradually, as the monsoon situation improved in August and September, and sowing figures improved against the earlier expectations, prices corrected from higher levels. Intervention of Forwards Market Commission (FMC), the regulator of the commodity Futures markets also helped to keep the prices under check. The October Futures lost Rs. 446/qtl, settling at Rs. 5654/qtl, lower by 7.31percent as compared to Rs. 6100/qtl on a month on month basis.
NCDEX Turmeric Spot- Average Montly Prices
6000 5478 5640 5500 5053 4686 4677 5000 4500 4076 4000 3411 3556 3540 3500 3000 2500 2000
5400
4900 4400 3900 3400
Lower arrivals supported the prices in the spot market and we have seen the prices in the spot market consolidating at around Rs. 5000/qtl levels.
Indias Turmeric exports increased sharply from 49,250 tonnes in 2010-11, and hit a record high of 79,500 tonnes in 2011-12, a sharp increase of 61percent. According to the Spices Board of India, exports targets of Turmeric for FY 2012-13 has been set at 70,000 tonnes, out of which 7,300 tonnes have already been exported in April, 2012.
Quantity (Tn)
After a sharp rise in the prices, the regulator increased margins (in cash)on the long as well as short sides to curtail the rise in the prices in the Futures market. Thereafter, curtail volatility in the price movement in the near month th contract, the Regulator issued a circular on 7 September, 2012 whereby, it dissalowed market participants to th create any fresh positions in the near month contract from 8 September 2012. As the prices corrected sharply due to the intervention of the regulator, the special margin (cash) on the long side was reduced from 40percent to th 20percent vide cirular dt. 24 September 2012 issued by NCDEX. This was done to prevent a sharp fall in the prices.
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Outlook
Turmeric prices, which have corrected sharply due to higher carryover stocks and expectations of improvement in the yield of this year crop, may recover from lower levels as farmers are not to sell their stocks at lower levels. Also, emergence of festival demand in the coming days may be supportive for the prices. Also, emergence of export demand at lower levels may also be supportive for the prices. Any reports of damage of the turmeric crop may push up the prices while reports of an improvement in the yield may pressurize prices.
Technical Levels
Support 2 4900
Support 1 5200
CMP 5490
Jeera
Jeera prices traded on a bullish note since April on the back of a supply crunch in the global markets due to the lower production in exporting nations like Syria and Turkey as well as the political tensions in Syria. Weather concerns and reports of a possible drought situation due to low rainfall in June and July also pushed up the prices. However, as export prices rose sharply, export demand declined at higher levels, and thus, prices have wintessed a correction over the last two months. Good rains in Gujarat, the major jeera producing belt in the last two months also favored the bears, as this has improved the sowing prospects for the upcoming sowing of the jeera crop.
15615
16132
15000
14000 13000 12000
14827
11000
10000
Arrivals
50000 45000 40000 35000 30000 25000 20000 15000 10000 5000 0
Prices
17000 16000 15000 14000
13000
12000 11000
10000
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2
2 1
1
0
percent) in the total output of jeera after Rajasthan. Carryover stocks of jeera this season is also up at around 7-8 lakh bags as compared to 4-5 lakh bags in 2011.
Outlook
Despite large carryover stocks (7-8 lakh bags) as compared to last year (4-5 lakh bags), jeera prices have not witnessed a sharp decline due to supply concerns in the global markets. Also, the ongoing political tensions as well as the civil war in Syria has disrupted its exports. Due to lower output as well as policital tensions in Turkey, exports from Turkey have also not taken place. Expectations of fresh overseas enquires are expected to provide support to the prices. The upcoming festive season may also provide support at lower levels. keep the prices sideways to up in the short term. However, a sharp upside in the prices maybe capped if farmers shift towards jeera anticipating better remuneration, and the climatic conditions remain favorable for the production of jeera.
Technical Levels
15
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Support 2 13300
Support 1 13900
CMP 14450
Resistance 1 14900
Resistance 2 15600
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Sugar
Year 2011-12 ended on a positive note for Sugar
After a long consolidation phase during the first three quarters of the sugar season 2011-12, the last quarter ended with significant gains backed by deficient rains causing worries over output. The month of September witnessed third straight month of gain (on the basis of monthly average Price) on expectations of lower output in the largest sugar producing state, Maharashtra. Poor rains not only hampered cane yield in this state but, drought situation also led to diversion of cane towards fodder. Further, Prices also remain upbeat as no curb on exports has been imposed so far despite lower output next season.
Source: Reuters At NCDEX, Sugar prices remained firm during most part of September, but, witnessed correction towards the month end as government released higher quota for the month of October and November and importers signed fresh deals of raw sugar after almost two years.
A divergent performance has been witnessed in the international markets. Liffe white sugar prices remained under downside pressure during Aug-sept on the back of improved weather conditions in Brazil which helped crushing activity to gain pace during these two months.
Sugar output estimated lower despite higher area under Cane cultivation
India has covered higher area under sugarcane cultivation this season that stands around 52.88 lakh hectares, up by 4.4percent compared to previous year. However, due to poor yield amid drought like situation in some parts of Maharashtra and Karnataka may hamper output this season. According to the first advance estimates by agriculture ministry, Sugarcane output is pegged at 335.3 mn tn, down by 6.2percent compared to 357.6 mn tn last year. Also, more diversion of cane towards fodder may lower the cane availability for crushing. Thus overall output is expected to decline this season to 24 million tonnes in 2012-13 season that commenced on 1 October.
st
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Global Scenario Brazils Sugar output down 7.9 percent during April-01 October 01
ICE raw sugar futures as well as Liffe White sugar declined sharply since the end of July on the back of favorable weather conditions for cane harvesting in Brazil. According to the UNICA, Sugar output in Brazil which was down by 22percent till the first fortnight of July, is now down by only 5.7percent as on 16th September 2012 at 21.8 mn tn. However, again in the month of September, rains have impacted crushing and the south region produced 2.2 mn tn of sugar in the second half of September, 22 percent less than a year earlier. Total sugar output since the start in April till October 01, Brazilian mills produced 24 mn tn sugar, down by 7.9percent. Crushing is expected to continue till December. Unica expects the main center-south cane crop to yield 32.7 million tonnes of the sweetener in 2012-13, down 1.2 percent from the 33.1 million tonnes, forecasted in April.
However, ISO do not believe that there will be a dramatic fall of prices. The support factors are that global markets have strong demand growth again. Stock levels are still very low, only 37 percent compared to 45 a few years ago, referring to the proportion of stocks to consumption. The ISO said the stocks-consumption ratio could rise to around 40 percent in 2012-13, from 37.6 percent in 2011-12. Indonesia has announced a big breakdown of production which may support the market. Indonesia, which is Southeast Asia's largest consumer of the sweetener, has abandoned its goal of becoming self-sufficient in the production of white sugar by 2014 after being forced to slash output forecasts for the next few years.
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Outlook
Sugar prices in the month of October are expected to trade with upward bias. The fact of higher quota for the next two months has already been discounted in the prices and thus festive season demand may keep the sentiments upbeat. Also, India is considering raising import tax by 10 percent on White sugar import to avoid flooding of white sugar in the country. This move if approved may also act as a supportive factor for the upside. On the international front, prices are expected to consolidate or may even recover in the coming months, which is further supportive for the domestic markets. Cane crushing is expected to commence from mid October and thus prices may also take cues from the crushing numbers released from time to time. Revision in the domestic sugar output will also have significant impact on the prices in the coming months.
Technical Levels
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Cotton
Revival of monsoon helped contain Domestic cotton prices in September
Year 2011-12 finally ended on a positive note backed by record high domestic exports coupled with scanty rains during the first two months the monsoon season 2012. Below normal sowing amid drought like condition in the major producing state, Gujarat and thereby fears of output has exerted upward pressure on the prices. Nevertheless, with revival of monsoon in the month of August coupled with higher imports, Cotton prices witnessed a sharp fall in the domestic markets. Moreover recovery in monsoon in the month of August and September halved the fears of crop damage. In addition weak global markets were also seen pressurizing cotton prices.
MCX October cotton contract declined by almost Source: Reuters 9.4percent in the month of September from Rs 17720 per bale to close at Rs 16050 per bale. NCDEX Kapas prices plunged by almost 26percent and touched a low of Rs 878/20kgs in September 2012 from its peak of Rs 1186/20 kgs made in the month of August 2012.
Higher Global Cotton stocks exerted downside pressure in International Markets during September
In international markets, ICE cotton prices fell sharply by 9.6percent from a high of 76.56 in the early September 2012 and touched a low of 69.50 cents per pound around the end of the month. Global cotton crop harvesting season in the key cotton growing countries like US and China along with surplus global ending stocks are the key reasons that have exerted downside pressure on the international cotton prices. Also, U.S. Department of Agriculture has forecasted that cotton stocks will hit another all-time high above 76 million bales for the marketing year to July next year, on reports of good cotton crop condition this season. In addition, weak demand from China ahead of excessive stockpiling due to higher imports supported the downside.
Source: Reuters
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CAB revised Indian Cotton balance sheet- Soaring Imports led to upward revision in closing stocks
Cotton Advisory Boards latest projection shows a drastic fall in exports by almost 46percent to 7 million bales in the 2012/13 marketing year that began on Oct. 1 compared to 12.7 million bales in 2011-12 season. The reason attributed to this fall is the weak demand from China, the biggest buyer of Indian cotton. For the current season ending September 2012, India's cotton import is estimated to be higher by 140percent at 1.2 million bales compared to 0.5 million bales last year on the back of lower international prices coupled with fears of domestic supply concerns caused by higher Exports. According to CAB, Cotton production for 2012-13 seasons is estimated lower at 334 lakh bales compared with 353 lakh bales in 2011-12 due to erratic weather conditions at the time of sowing. Further, the cotton advisory board made an upward revision in the closing stock for the current cotton Source: Reuters, USDA year from 2.8 million bales estimated for August 2011-12 season to 3.46 million bales for the current season of 2012-13 due to elevating imports. However, it is lower compared to last year's closing stock of 4.5 million bales. Total demand for 2012-13 cotton season is estimated at 34 million bales compared to 38.22 million bales in 201112 season, a fall of around 11percent as China, the world's largest consumer of cotton and India's biggest client, is expected to cut imports by over 50 percent in the 2012/13 to trim down its bulging cotton stocks. Mill consumption for the current 2012-13 cotton year is estimated higher at 23 million bales compared to 21.7 million bales for 2011-12 season. Non-mill consumption for the current cotton year also showed a rise and was pegged at 2 million bales as compared to 1.41 million bales estimated for 2011-12 season.
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USDAs latest release showed a 13 percent rise in US cotton production along with Record Global Surplus
USDA in its latest September demand supply report, raised its estimate for the global cotton surplus by next July to a record of 76.5 million 480-pound bales, nearly a two-million bale increase from its prior estimates. Projected world stocks include 35.5 million bales for China. USDA estimated US Cotton planting for the season 2012-13 at 12.64 mln acres as compared to 14.74 mln acres last season (2011-12). Despite of the fall in acreage, production estimates this season showed a rise of 9.9percent and was pegged at 17.12 mln bales as compared to 15.57 mln bales in 2010-11 season on the back of good crop condition. Henceforth huge surplus in US cotton ending stocks is estimated at 5.3 mln bales (480 pounds/bales) as compared to 3.3 mln bales last season. Exports of 12.1 mln bales were pegged as compared to 11.71 mln bales last season. USDA also estimated Chinas cotton Ending stocks for 2012-13 season at 34.18 mn bales as compared to 29.28 mn bales last season a rise of 16.73 percent ahead of heavy stockpiling amid lower international prices. China's cotton imports in August rose 48 percent on the year to 305,600 tonnes. Total imports in the first eight months of the year were 3.77 mn tn, up 123percent from the same period last year, according to the report by the China National Cotton Reserves Corp. China's 2012 cotton output is pegged at 6.97 mn tn, down 4.2 percent from last year. (Source:
Reuter, USDA)
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Outlook
Cotton Prices have declined considerably in past one month and are nearing its MSP. Thus, no major downside is expected in the near term as farmers wont sell their produce below these levels. However sharp upside may also be capped as arrivals may increase across India in the coming months. In addition, harvesting has begun globally in the key countries like US and China with hopes of increase in output, which might provide resistance to the prices in medium term. Going forward, prices may take cues from the government policies with respect to domestic cotton trade (Exports and Imports). If government considers any curb on cotton exports prices may consolidate around current levels.
Technical Levels
Support 2 830 1250 15900 1250 Support 1 870 1320 15450 1320 CMP 934 1422 15990 1442 Resistance 1 970 1450 16600 1450 Resistance 2 1030 1550 16800 1580
NCDEX Kapas April NCDEX Cotton seed Oilcake Dec MCX Cotton November MCX Kapas Khali Dec
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Wheat
Prices peaked ahead of Export demand
After a year long consolidation phase in 2011-12 season on the back of overflowing stocks, Wheat prices finally rebounded from late June on account robust demand for Indian wheat in the international markets coupled with scanty rains during the first two months of the monsoon season. The competitive Indian prices compared to other origins made Indian wheat more attractive to the overseas buyers. Also, soaring international prices on the back of output cut in other major producing nations added fuel to the domestic wheat prices. At NCDEX, Wheat prices recovered from its low of 1116 in mid June and touched Rs 1628 per qtl in mid September, an incredible rise of around 45.8 percent. However, a correction of around 12.8 percent was seen from the record high levels thereafter as government released additional wheat under open market scheme to ease supplies and check the rise in the prices. Nonetheless, prices are again seen gaining on expectations of rise in export demand. In the international markets, CBOT wheat futures witnessed sharp downside in June and July 2012 as global wheat harvesting season in the key exporting countries like US and Russia led to downside pressure on the prices. Also, slowdown in China and ongoing Euro dept problems weakened export demand. Source: Reuters, USDA However, later in early July prices started recovering and gained almost 31percent in July (monthly average comparison between June and July). Prices continued to remain firm thereafter till September. The rise was on the back of fall in global wheat output amid severe drought in US, the key Exporter of wheat, which raised fears of drop in yield. Also, Russia, the third largest exporter, slashed its grain yields by almost 25 percent due to persistent dry weather. In addition, there were worries that Russia might put curbs on Wheat exports if its domestic prices keep climbing. Australia, the second largest exporter of Wheat has also cut down its output forecast for 2012-13 season, due to erratic weather conditions.
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Outlook
After witnessing some correction in the month of September, wheat prices are expected to again recover in the month of October. Vigorous export demand ahead of cheaper Indian wheat compared to international markets might support the upside in the short term. October onwards prices may also take cues form the sowing figures, which would determine next years output. Wheat is an essential commodity and thus if prices of the same rise sharply, government may put quantitative curb on exports to check the rising prices. Thus, this may cap sharp gains in the domestic wheat prices.
Technical Levels
Resistance 2 1720
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