smc global monthly report on other commodities

05 March 2014

Monthly Report On

OTHER COMMODITIES (March)

Presented by:Subhranil Dey Sr. Research Analyst

1

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

Price movement of other commodities on NCDEX

Source: SMC Research

Price movement of other commodities on spot markets


®

-9.84-8.48

-7.36

0.06

5.66

9.20

-15.00

-10.00

-5.00

0.00

5.00

10.00

15.00

Kapas Guar gum Guar seed Wheat Sugar Chana

% Change

-6.86

-5.75

-2.15

-0.69

0.63

10.08

-8.00

-6.00

-4.00

-2.00

0.00

2.00

4.00

6.00

8.00

10.00

12.00

Guar gum (Jodhpur) Guar seed (Jodhpur) Cotton 29mm (Rajkot) Wheat (Delhi) Sugar M (Kolkata) Chana (Delhi)

2

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.

�In days to come, the counter is expected to take support above 3080 levels.

�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).

�The government has estimated a bumper chana output at 9.8 mt this year against 8.88 mt harvested in the same period last year.

�Recent rainfall and hailstorm in Madhya Pradesh and Rajasthan, major chana producing states has favoured the strong bullish

sentiments in the counter.

�Moreover, lower arrivals and the expectation of government agencies buying at MSP also supported the rally.

�The Agriculture ministry had also sought to the commerce department for lifting of the ban on pulse export. Export of all variety of

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.

®

Apr May Jun Jul

Apr - - - -

May -42.00 - - -

Jun -98.00 -56.00 - -

Jul -157.00 -115.00 -59.00 -

Calendar spread of Chana futures

As per closing on 3rd March 2014 Source: SMC Research

3

Chana futures Seasonal Index V/s Monthly close price 2014


®

Forward curve of Chana futures


2892.00

3156.003169.00

2700.00

2800.00

2900.00

3000.00

3100.00

3200.00

3300.00

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

3,169.00

3,211.00

3,267.00

3,326.00

3,050.00

3,100.00

3,150.00

3,200.00

3,250.00

3,300.00

3,350.00

April May June July

4

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.

�Cotton crop estimates for the current season (2013-14) have been pegged at 375 lakh bales (170 kg a bale) compared to 365 lakh

bales last season, an increase of 2.73%, the Indian Cotton Federation (ICF) said.

�The 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

to 182.23 lakh bales in the same time last season.

�In the north zone of Punjab, Haryana and Rajasthan, the daily average arrivals are around 15,000 bales. Cotton lint prices remained

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.

�The 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

and 2nd pickings.

�The daily average seed cotton arrivals were around 2 lakh bales.

�Arrival 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.

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

�China's state cotton stockpiler bought 132,480 tonnes of fibre last week, its lowest weekly volume since the buying season began,

suggesting that total purchases are close to finishing at around 6 million tonnes, official statistics showed.

�China's buying for state reserves, now in its third year, drives import demand as it leaves little available for domestic sale and pushes

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.

�The total amount of cotton stockpiled in the current season is close to the 6.22 million tonnes reached this time in 2013.

�Beijing plans to end its stockpiling programme this year and test a system of direct subsidies for cotton growers in Xinjiang, the

country's top cotton-growing region.

�China 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

closely watched by exporters such as the United States.

�The reserves are currently offering fibre at 18,000 yuan per tonne but demand has been tepid with only 36 percent of volumes

offered - almost 600,000 tonnes - being bought up since sales started in November. Textile firms complain of poor quality and high

prices.

®

5

Kapas futures Seasonal Index V/s Monthly close price 2013


®

945.00

863.00

901.50

800.00

820.00

840.00

860.00

880.00

900.00

920.00

940.00

960.00

0.80

0.85

0.90

0.95

1.00

1.05

1.10



�The government has raised the minimum support price

(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.

�Timely harvest of the preceding kharif (winter harvested)

crops coupled with good late season (September-October)

monsoon rainfall provided favorable soil moisture conditions

for wheat planting in most growing areas.

�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

wheat during 2014-15 marketing year – 22% higher than the

current year.

�Food Corporation of India (FCI), the nodal agency for

Commodity: WHEAT Trend: Range Bound Range: 1510-1605(April)


�Wheat futures (Apr) is expected to consolidate in the

range of 1510-1605 levels.

�The widespread untimely showers may hurt the overall yield

of the wheat crop in the region, including in Punjab and

Haryana

�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.

�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.

6

®

Calendar spread of Wheat (Delhi) futures

Apr May Jun Jul

Apr - - - -

May 10.00 - - -

Jun 2.00 -8.00 - -

Jul -6.00 -16.00 -8.00 -


procurement and distribution of foodgrains, had procured

25.4 MT of wheat in 2013-14 marketing year.

�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.

�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.

�MY 2014/15 ending stocks are forecast to increase to 20.5

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).


�Wheat crops in Western Europe appear in generally good

condition.

�In the EU's second largest wheat producer Germany, both

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.

�U.S. wheat futures surged 4.6%, the biggest one-day

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.

�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.

Wheat futures Seasonal Index V/s Monthly close price 2014


1638.00

1636.00

1633.00

1630.00

1631.00

1632.00

1633.00

1634.00

1635.00

1636.00

1637.00

1638.00

1639.00

0.80

0.85

0.90

0.95

1.00

1.05

1.10



7

Forward curve of Wheat futures


®

1,565.00

1,555.00

1,563.00

1,571.00

1,545.00

1,550.00

1,555.00

1,560.00

1,565.00

1,570.00

1,575.00

April May June July

Commodity: SUGAR Trend: Positive Range: 2800-2950 (April)


�Sugar futures (Apr) is likely to remain stable taking

support above 2800 levels.

�The sweetener on the national bourse is expected to test 2950

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.

�The reason for decline in domestic sugar production is lower

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.

�Till 28th Feb, 2014, 168.6 lakh tons of sugar has been

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%.

�Uttar Pradesh has produced 42.75 lakh tons of sugar from 475

lakh tons of sugarcane crush with 8.99% recovery. Last year

during same corresponding period, UP sugar mills had

8

®

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.

�Tamil Nadu produced 5.70 lakh tons against 9.92 lakh tons of

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.

�State level sugarcane price remaining unpaid in Uttar Pradesh

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.

�Indian closing sugar stocks are forecast to be 9.8 million

tonnes at the end of September 2014, up from 9.3 million

tonnes as of Oct. 1, 2013 as per by ISMA.

�The El Nino weather pattern that can trigger drought in some

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.

�The Vashi market is carrying more than 110-115 truckloads

inventory.

�Bombay Sugar Merchants Association's spot rates were: S-

grade 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: S-

grade 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)

�The Government approved a Rs.3,333/tonne subsidy to boost

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.

�The incentive of Rs. 3,300 will be applicable for exports in

February and March. From April onwards, the incentive will

be recalculated after every two months depending on the

rupee-dollar exchange rate.

�As per the notification, sugar mills should utilise the incentive

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.

�The incentive will be reviewed before the commencement of

the next sugar marketing year, the notification added.

�There would be, however, a quantitative limit of 4 million

tonnes for subsidy. Raw sugar produced and exported during

2013-14 and 2014-15 marketing years (October-September)

are eligible for subsidy.

�India has exported about 8.5 lakh tonne of sugar, including 4.5

lakh tonne of raw sugar, till January 31, 2014.

�The country is expected to produce another 10 lakh tonne of

raw sugar in the remaining months of current season, said

industry body Indian Sugar Mills Association (ISMA).

�Indian white sugar, which competes with the Thai sweetener,

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.


�Global sugar production could fall for the first time in five

years, as cited by the International Sugar Organization (ISO).

�The ISO's prediction came on the heels of an estimate by

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.

�The ISO lowered its forecast for a supply surplus by 11% to 4.2

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.

�The exchange operator raised Sugar #11 margins by 21.4% to

$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

9

Sugar futures Seasonal Index V/s Monthly close price 2014


®

As per closing on 3rd March 2014

Forward curve of Sugar futures


Calendar spread of Sugar futures

Mar Apr May Jun Jul Aug Sep

Mar - - - - - - -

Apr -69.00 - - - - - -

May -128.00 -59.00 - - - - -

Jun -183.00 -114.00 -55.00 - - - -

Jul -225.00 -156.00 -97.00 -42.00 - - -

Aug -244.00 -175.00 -116.00 -61.00 -19.00 - -

Sep -263.00 -194.00 -135.00 -80.00 -38.00 -19.00 -


2633.00

2780.00

2790.00

2550.00

2600.00

2650.00

2700.00

2750.00

2800.00

2850.00

0.90

0.92

0.94

0.96

0.98

1.00

1.02

1.04

1.06



2,783.00

2,852.00

2,911.00

2,966.00

3,008.00

3,027.00 3,046.00

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

March April May June July August September

10

Commodity: GUAR Sentiment: Rangebound Range: Guar seed 4500-5000 (Apr)

Guar gum 12500-13700 (Apr)

Fundamentals

�Guar 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.

�There was scattered rain in North India in recent days but now the intensity of winter is diminishing.

�The stockists were not very active in the spot markets.

�Higher carry over stock from last year and higher guar production scenario for current season representing huge surplus of guar

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.

�Some demand for splits coming from Haryana and Ganganagar.

�Mixing of quality coming from other areas is also an issue and affecting quality.

�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.

�In the last week of February 2014, average crush margin stood at Rs. -373.5/Quintal which was Rs. -537 per quintal in the third week

of the previous month.

®

State wise,Variety wise Wholesale Prices Monthly Analysis for Gwar in Febraury, 2014 (Prices in Rs/Quintal)

Variety Prices Prices Prices % Change % Change

Febraury, 2014 January, 2014 Febraury, 2013 (Over Previous Month) (Over Previous Year)

Haryana

Gwar 4574 4769.08 - -4.09 -

Other 5011.1 4619.33 10204.34 8.48 -50.89

NCT of Delhi

Gwar 4178.06 4375.05 6737.66 -4.5 -37.99

Rajasthan

Gwar 4563.69 4824.99 10242.45 -5.42 -55.44

Other 4472.21 4713.96 10118.53 -5.13 -55.8

Gujarat

Gwar 3999.13 3835.27 9858.13 4.27 -59.43

Other 4167.3 4223.89 9806.79 -1.34 -57.51

Andhra Pradesh

Other 4165.82 - - - -

Maharashtra

Other 2872.76 2142.93 2240.89 34.06 28.2

Madhya Pradesh

Gwar - - 1992.59 - -

Other 3961.02 4145.52 9501.42 -4.45 -58.31

Punjab

Gwar 4598.28 4939.06 - -6.9 -

Other - 4712.58 - - -

Average 2450.75 4300.15 7855.87

As per the data reported by APMCs

11

®


Forward cruve of Guar seed futures


Calendar spread of Guar seed futures

Mar Apr May Jun

Mar - - - -

Apr -65.00 - - -

May -140.00 -75.00 - -

Jun -190.00 -125.00 -50.00 -



Forward cruve of Guar gum futures


4,710.00

4,775.00

4,850.00

4,900.00

4,600.00

4,650.00

4,700.00

4,750.00

4,800.00

4,850.00

4,900.00

4,950.00

March April May June

12,870.00

13,050.00

13,240.00

13,430.00

13,620.00

12,400.00

12,600.00

12,800.00

13,000.00

13,200.00

13,400.00

13,600.00

13,800.00

March April May June July

Calendar spread of Guar gum futures

Mar Apr May Jun Jul

Mar - - - - -

Apr -180.00 - - - -

May -370.00 -190.00 - - -

Jun -560.00 -380.00 -190.00 - -

Jul -750.00 -570.00 -380.00 -190.00 -


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

smc global monthly report on other commodities

Economy & Finance

3rd march

smc researchforward

smc researchcalendar

domestic sugar

calendar spread

growing region

raw sugar

28th feb