smc global monthly report on other commodities

03 June 2014

Monthly Report On

OTHER COMMODITIES June 2014

Presented by:Subhranil Dey Sr. Research Analyst

1

Snapshot of price movements in futures and spot markets (May 2014)

Price movement of other commodities on NCDEX

Source: SMC Research

Price movement of other commodities on spot markets


®

-7.33

-6.64

-2.91

-0.52

-8.00

-7.00

-6.00

-5.00

-4.00

-3.00

-2.00

-1.00

0.00

Sugar Chana Mentha Wheat

% Change

-5.32

-4.60

-3.24

-0.54

-6.00

-5.00

-4.00

-3.00

-2.00

-1.00

0.00

Mentha Chana (Delhi) Sugar M (Kolkata) Wheat (Delhi)

2

MARKET MOVEMENT AHEAD

Commodity: CHANA(JULY) Trend: Range bound Range: 2690-2960

Domestic Fundamentals

�Spot Chana prices are weak amid a thin activity in Delhi market.

�The spot rates quote at Rs 2813 per Quintal in Delhi. These are the lowest levels in nearly four months for the commodity.

�Stronger Rupee along with factors like higher arrivals, substandard quality and rising stocks is forcing prices of Chana (Chickpeas) to

fall in domestic market.

�Procurement of Chana by NAFED has been delayed in Rajasthan by couple of weeks. Reason stood for the same is poor quality and

lower arrivals. NAFED has procured around 10,000 tonnes of Chana in Rajasthan till now.

�On May 12, 2014, 5 containers of Australian Chana, 35 containers Chana of Tanzania origin, 31 containers of Canadian Masoor, 2

containers of Kenya Moong, 31 containers of Tanzania Moong, 33 containers of Tanzania Tur, 15 containers of Burmese Tur and 97

containers of Burmese Urad has arrived.

�Production of pulses in Rajasthan, one of the leading producers, is likely to dip after prediction of less rainfall this monsoon.

�According to figures released by the Rajasthan agriculture

department in the last five years, the average area sown with

pulses stood at 1.35 lakh hectare. The target for 2013-14 was

1.5 lakh hectare but till the end of Rabi sowing season, only 1.3

lakh hectare was brought under cultivation.

�In the meantime, the abrupt change in weather has already

raised the concerns of farmers in Rajasthan. In a hail storm and

irregular rains in the past month, most of the gram (Rabi crop)

has been damaged.

�Chana futures (June) is likely to trade in the range of 2690-2960 levels. The downfall might get extended breaching 2800

levels.

®

Jun Jul Aug Sep Oct

Jun - - - - -

Jul -67.00 - - - -

Aug -136.00 -69.00 - - -

Sep -207.00 -140.00 -71.00 - -

Oct -283.00 -216.00 -147.00 -76.00 -

Calendar spread of Chana futures

As per closing on 2nd June 2014 Source: SMC Research

Chana futures Seasonal Index V/s Monthly close price 2014


2892.00

3156.00

3272.00

3072.00

2700.00

2800.00

2900.00

3000.00

3100.00

3200.00

3300.00

3400.00

0.80

0.85

0.90

0.95

1.00

1.05

1.10

1.15

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Seasonal Index Monthly close price 2014

3

®

Forward curve of Chana futures

As per closing on 2nd June2014 Source: SMC Research

Commodity: SUGAR(JULY) Trend: Range bound Range: 2800-3050

Domestic fundamentals

�Sugar futures (June) is likely to trade in the range of 2800-3050 levels & trade with a downside bias.

�The supply is ample at the spot markets on the back of continuous selling by producers amid normal demand.

�Bombay Sugar Merchants Association's spot rates were (per quintal): S-grade Rs.3,076-3,172 (Rs.3,000-3,176) and M-grade

Rs.3,180-3,322 (Rs.3,172-3,350).

�Naka delivery rates were: S-grade Rs.2,980-3,050 (₹2,980-3,050) and M-grade Rs.3,080-3,190 (Rs.3,080-3,190).

�The Centre has cut the incentive for raw sugar exports by over Rs.1,000 a tonne to Rs.2,277, drawing protests from millers.

�The crushing operations by the sugar mills across the country have come to an end, except for 20 sugar mills in Tamil Nadu.

�As compared to about 247 lakh tons of sugar produced between 1st October 2012 and 15th May, 2013, in the last 2012-13 sugar

season, the Indian sugar industry has produced about 239 lakh tons of sugar in the current 2013-14 sugar season between 1st

October 2013 and 15th May, 2014.

�The sugar mills in Maharashtra have produced 77 lakh tons of sugar, followed by the sugar mills in Uttar Pradesh who have produced

about 64.5 lakh tons and then mills in Karnataka who have produced just over 41 lakh tons.

2,777.00

2,844.00

2,913.00

2,984.00

3,060.00

2,600.00

2,650.00

2,700.00

2,750.00

2,800.00

2,850.00

2,900.00

2,950.00

3,000.00

3,050.00

3,100.00

June July August September October

4

®

�As compared to the previous sugar season upto 15th May, the sugar mills in Maharashtra have produced almost similar quantity of

sugar, whereas the mills in Uttar Pradesh produced about 10 lakh tons less and mills in Karnataka have produced over 7 lakh tons

more than last year.

�However, in the case of the fourth largest sugar producing State viz. Tamil Nadu, the production is significantly lower than last year

when they had produced almost 16 lakh tons, but have produced 11.5 lakh tons in this sugar season.

�There is a special season for the sugar mills in Tamil Nadu and some of the sugar mills in South Karnataka, and they crush sugarcane

in the months of August – September 2014 also. Therefore, there would be some sugarcane which would be crushed by these sugar

mills for a few weeks, before this current sugar season ends.

�As per the cane availability for the current sugar season and the current sugar production of about 239 lakh tons produced upto 15th

May, 2014, it is estimated that the sugar production for the full sugar season of 2013-14 should be around 242 lakh tons.

�The sugar despatches made by the sugar mills during the full season 2012-13, was 228 lakh tons for domestic consumption. As

compared to this and considering the trend of sugar despatches till now, it is estimated that the sugar despatches by the sugar mills

for domestic requirement, will be higher than last year and may be around 240 lakh tons.

�The opening balance as on 1st October, 2013, for 2013-14 season was around 93 lakh tons. It is expected that around 19-20 lakh tons

of sugar will get exported out of the country in the whole season i.e. October 2013 – September 2014 and, therefore, considering the

consumption and production numbers, the closing balance as on 30th September, 2014 is expected to be around 74-75 lakh tons.

�The country will be opening the new season with almost 18-20 lakh tons less than last year, but there will be a surplus of about 15-20

lakh tons, which can be exported as and when opportunity arises.

�However, the pace of sugar exports has slowed down because of the unreasonable and unexpected reduction of the export incentive

from Rs. 3300 per to Rs. 2277 per ton by the Food Ministry, which the sugar industry and exporters feel is not as per the gazette

notification of 28th February, 2014.

�Raw Sugar Import Opportunity: Indian indicative raw sugar CIF prices from Brazil quoted at $519.80 per ton (including 15% import

duty) and Indian domestic refined sugar FOB prices quoted at $520 per ton Kolhapur based.

�In absence of upcountry or export demand and only support of need-based local demand, prices continued to decline as producers

have no choice to sell at lower rates and ease inventory burdens. Retailers demand is already less than expected.

International fundamentals

�Speculators slashed their bullish position in raw sugar contracts on ICE Futures U.S. by 31 percent in the week ended May 27, taking

it off a six-month high, U.S. Commodity Futures Trading Commission data showed on Friday.

�In raw sugar futures and options, speculators reduced their net long position by a heavy 35,437 contracts to 79,420 contracts, the

lowest in nine weeks. The drastic move took place as the futures market dropped 4 percent to a one-month low after data showed the

cane harvest in top grower Brazil had picked up pace.

�The sugarcane crush by producing units in Brazil's South Central region totaled 38.79 million tons during first-half May, surpassing

the crush of second-half April (23.93 million tons) but equating to a 4.03% reduction versus first-half May 2013 (40.42 million tons).

�From the start of the current season through mid-May, the story was similar: a crush of 79.34 million tons this year, representing a

3.41% drop from the 82.14 million tons processed during the same period last year.

Sugar futures Seasonal Index V/s Monthly close price 2014


5

®

2633.00

2780.00

3145.00

3246.00

2600.00

2700.00

2800.00

2900.00

3000.00

3100.00

3200.00

3300.00

0.90

0.92

0.94

0.96

0.98

1.00

1.02

1.04

1.06



As per closing on 2nd June2014

Forward curve of Sugar M 200 futures


Calendar spread of Sugar M200 futures

Jun Jul Aug Sep

Jun - - - -

Jul 31.00 - - -

Aug 15.00 -16.00 - -

Sep 3.00 -28.00 -12.00 -


2,994.00

2,963.00

2,979.00

2,991.00

2,945.00

2,950.00

2,955.00

2,960.00

2,965.00

2,970.00

2,975.00

2,980.00

2,985.00

2,990.00

2,995.00

3,000.00

June July August September

As per closing on 2nd June2014

Forward curve of Sugar M futures


3,099.00

3,115.00

3,155.00

3,195.00

3,195.00

3,040.00

3,060.00

3,080.00

3,100.00

3,120.00

3,140.00

3,160.00

3,180.00

3,200.00

3,220.00

Oct '14 Dec '14 Mar '15 May '15 July '15

6

®

�Pressure from new crop is expected in June.

�On a global front, mint consuming segments are shifting

towards synthetic Mentha oil, wide price fluctuations in

natural menthe have encouraged bulk consumer to reduce

their use and turn to Synthetic one as it is cheaper to natural

menthe.

�International quotes (FOB) for Mentha oil in Shanghai are in

the range of USD 1540-1550/Quintal.

Commodity: Mentha Oil (JUNE) Trend: Range bound Range: 770-850


�Mentha Oil futures (June) is likely to trade in the range of

770-850 levels. The counter is expected to take support

above 780 levels.

�Cash market trades under pressure ahead of new crop ready

to be harvested within a week or two. Overall crop condition is

good except report of pest attack in some pockets of major

growing block. However, overall crop size is lower than last

year and it may influence price in the medium and long term.

�Weak inner tone has discouraged buyers to slow down buying

and it has impacted prices negatively. Mentha oil prices have

decreased in the major cash markets like Chandausi, Sambhal,

Barabanki and Rampur.

�Ample availability of stock, expected new arrivals and

synthetic mentha remain price limiting factors. Overall tone is

bearish.

Calendar spread of Mentha Oil futures

Jun Jul Aug

Jun - - -

Jul 11.70 - -

Aug 22.80 11.10 -


Mentha Oil futures Seasonal Index V/s Monthly close price 2014


755.70

792.40

872.50

963.20

981.20

700.00

750.00

800.00

850.00

900.00

950.00

1000.00

0.70

0.75

0.80

0.85

0.90

0.95

1.00

1.05

1.10

1.15

1 2 3 4 5 6 7 8 9 10 11 12


7

®

Forward curve of Mentha Oil futures

As per closing on 02nd June2014 Source: SMC Research

812.50

823.60

835.30

800.00

805.00

810.00

815.00

820.00

825.00

830.00

835.00

840.00

June July August

Commodity: WHEAT (JULY) Trend: Down Range: 1500-1570


�Wheat futures (July) is likely to trade in the range of 1500-

1570 levels.

�The factors that might attribute to the fall in wheat prices

would possibly be the higher supplies from producing regions

after reports of increase in procurement of grain.

�The procurement of wheat during the ongoing marketing year

(April-March) has increased eight per cent to 266.68 lakh

tonnes so far on account of rise in procurement from major

producing states.

�In the absence of any major market moving factors, dara and

flour prices have been ruling firm since last week and may

continue to rule around current levels for the next few days.

�Dara wheat was sold in the physical market at Rs.1,465-70 a

quintal. Mill delivery was at Rs.1,465 while delivery at the

chakki was at Rs.1,470.

�The Centre has decided to discontinue the export of surplus

wheat from Food Corporation of India's (FCI) stocks with

immediate effect.

�Wheat procurement in Haryana has reached almost the

targeted level of 65 lakh tonnes (LT) in the ongoing Rabi

marketing season.

�HAFED has purchased highest 25.17 LT of wheat followed by

over 18 LT purchased by the Food and Supplies Department.

�Agro Industries Corporation has purchased over 5.78 LT,

Haryana Warehousing Corporation over 6.35 LT, CONFED

over 1.63 LT and Food Corporation of India had procured over

8 LT of wheat during current procurement season so far.

�At present USA Fob is at USD 255-265/tonne and Indian Fob

at USD 280-285/tonne and if the difference continue to widen

opportunity for Indian wheat in global market would turn

blemish. Besides, Indian wheat price starts firming up July

onward and it is termed as negative for Indian wheat

exporters. Black Sea Region Crop too is due in July, followed by

Australian wheat in October. All these factors denote bearish

outlook.

�Export of wheat from India may decline for the month of July

and August as FoB offered at that time is less competitive than

8

®

the Black Sea region. Russia is offering USD 290-295/tonnes

of wheat as compares with a price of $305 being quoted for

Indian wheat and around $320 to $330 a tonne offered for U.S

and Australia for the same period of time. Generally wheat

domestic market prices increase from July onwards due to

starting of the lean season.

International fundamentals

�U.S Wheat fell to the lowest level in three months, extending

the biggest monthly drop since 2011, as planting progressed

in the U.S. and Canada amid favorable weather.

�Wheat for July delivery dropped as much as 1.8 percent to

$6.1625 a bushel on the Chicago Board of Trade, the lowest

price for a most-active contract since March 3.

�Spring-wheat planting was 74 percent complete as of May 25,

up from 49 percent a week earlier, according to the U.S.

Department of Agriculture. Showers favored spring wheat

areas in the western Dakotas and western Manitoba last

week, Commodity Weather Group LLC said in a report May 30.

�Crop from Black Sea Region, Russia-Ukraine is due in July.

Recent rains in US wheat growing belt have improved the

production prospects. The droughty southern Plains (US)

received much needed rainfall before the weekend, which

could significantly boost winter wheat harvest prospects.

Discouraging export demand for US wheat signals weak

global market fundamentals.

�Russia's prices for new crop wheat declined last week after

rains improved prospects for the harvest and eased concerns

about a lack of soil moisture in some regions of the major

global grain exporter.

�Favourable weather in May has brightened the 2014 grain

harvest outlook in Russia and Ukraine, easing risks related to

the lack of financing available for sowing.

Wheat futures Seasonal Index V/s Monthly close price 2014


1638.00

1636.00

1572.00

1545.00

1480.00

1500.00

1520.00

1540.00

1560.00

1580.00

1600.00

1620.00

1640.00

1660.00

0.80

0.85

0.90

0.95

1.00

1.05

1.10



9

®

As per closing on 02nd June 2014

Forward curve of Wheat (Delhi) futures


Calendar spread of Wheat (Delhi) futures

Jun Jul Aug Sep Oct

Jun - - - - -

Jul -24.00 - - - -

Aug -49.00 -25.00 - - -

Sep -76.00 -52.00 -27.00 - -

Oct -103.00 -79.00 -54.00 -27.00 -


1,521.00

1,545.00

1,570.00

1,597.00

1,624.00

1,460.00

1,480.00

1,500.00

1,520.00

1,540.00

1,560.00

1,580.00

1,600.00

1,620.00

1,640.00

June July August September October

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.

For further any queries, please contact

Subhranil Dey Sr. Research Analyst [email protected]

Ph.: 011-30111000

Extn.: 674

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