COMMODITY MARKET (SEM IV)

A Supplement to Overview the Facts With Accompanying Text for Financial Studies Spring 2012

By Maneesha R. Punjabi S.Y.F.M. Roll No.: 35 V.E.S. College of Arts, Science & Commerce

WHETHER TO BUY OR WHETHER TO SELL Source: Mint Paper August 13, 2008 Interpretation: BLACK PEPPER With the anticipation of the costs being hiked, black pepper cannot be a bad commodity to buy. The commodity is by and large produced in South India and in most parts of Kerala, coast of Karnataka, and Tamil Nadu. Although it faces the trouble of water logging in more or less areas of Karnataka and the risk of it being strangled, but overall black pepper seems to be satisfactory commodity to make good pounds.

GUAR SEEDS It looks like the prices of guar seeds will be left unfluctuating. The cause behind the unfluctuating prices of this trade good is that the output has been haltered because of the monsoon and the weather being murky and mingled. Guar seeds commodity therefore is not a bad option to invest in. SOYABEAN Omitting Gujarat, with almost no impingement on the overall necessity, the rainfall experienced is controlled. Therefore, the monetary value of Soyabean is hoped-for to be horse barn. Hence, Soyabean gets a green signal for the investors to induct. TUR DAL Supposedly, the cost of Tur Dal is going to depress. Individuals that have short-term scenes can invest into this commodity. But owing to belated rains in the parts of the state of Maharashtra and peninsula where the crop is planted, it is not advisable for the individuals having a scene of long-run prospects to go for this commodity. One of the other reasons for not inducting in this crop for them is due to heavy rainfall received in the states of Orissa and Gujarat, which spilled over the farms leading in hampering of the crop. So, it would be a wise decision not to opt for Tur Dal commodity.

COFFEE EXPORTS HIT A FRESH RECORD Source: Economic Times January 1, 2009 Indias coffee exports for calendar 2008 broke all previous records in terms of value, whether in dollars, rupees or realizations per tonne. Coffee Board chairman GV Krishna Rau told ET here on Tuesday that despite a marginal fall in volume to 219,583 tonnes as against 220,000 previously, the total value realized for this years coffee exports had touched $575 million or Rs 2,400 crore, based on per-tonne realizations of Rs 109,946. The previous highest by way of Indias coffee Exports was $469 million or Rs 1,931 crore in 2006. The record for this year was due to a peak performance in the first three quarters when, despite volumes falling to 149,421 tonnes from 152,178 in the corresponding period of the previous year, the total value of exports was 19% higher at $395 million ($332 million). This was because the unit-value realized per tonne in the first nine months of 2008 was 27% higher at Rs 113,763 (Rs 89,346 in the corresponding period of 2007). Mr. Rau said Indias coffee exporters had cashed in on the higher prices to sell as much as they could. However, the last quarter of 2008 saw a setback. Volumes in the last quarter fell by 18% to touch 37,535 tonnes from 45,935 tonnes in the corresponding period of 2007. The Coffee Board chief said that export-value for the last quarter of 2008 had also fallen due to global factors like the turmoil in financial markets, a credit squeeze for buyers and the fear of recession. The saving grace, Mr. Rau added, was that the old-crop sales had almost been exhausted and the new-crop arrivals delayed because of heavy rains in the coffeegrowing areas in October-November. Despite all that, we do not see a significant drop in exportvolumes for fiscal 2008-09, Mr. Rau added. Interpretation: The schedule 2008 cracked all the former puts down of Indias coffee exports in terms of value, whether in dollars, rupees or realizations per tonne. ET was been told by the Coffee Board chairman, G.V. Krishna Rau, that despite a borderline come down in bulk to 219,583 tonnes as versus 220,000 previously, the total value realized for this years coffee exports had pertained $575 million or Rs 2,400 crore, based on per-tonne realizations of Rs 109,946. The previous highest byway of Indias coffee exports was $469 million or Rs 1,931 crore in 2006. He said that Indias coffee exporters had cashed in on the more high-pitched costs to sell as much as they could. The Coffee Board chief said that export-value for the last quarter of 2008 had also diminished due to global components like the turmoil in fiscal markets. Mr. Rau also contributed that the old-crop sales had almost been discharged and the new-crop arrivals delayed because of heavy rains in the coffee-growing areas in OctoberNovember. Despite all that, they do not see a substantial deterioration in export-volumes for fiscal 2008-09, he added to ET.

GOVT LEFT WITH LIMITED OPTIONS TO CONTROL SURGING SUGAR PRICE Source: Economic Times January 12, 2010 A few options may be available with the government for putting a lid on the spiraling price of sugar, for which it has come under sharp criticism from the opposition. One is to increase the amount of nonlevy or free sale quota (FSQ) sugar that it prescribes for release by mills in the market at the beginning of each month, and the other is to reduce the restriction period on selling 50% of the FSQ from 15 days to seven days, said an industry source from Delhi, who is closely watching developments at the Centre. The issues were to be discussed at the Cabinet level on Thursday, but the meeting was cancelled due to the illness of CPMs ailing leader Jyoti Basu. The main reason for sugar prices having risen this month to over Rs 40 a kilo, up almost twofold from a year ago, is because of a 2.17 lakh tonne decrease (16.39 lakh tonne) in the January FSQ from the same period a year ago. Apart from the FSQ, each sugar mill has to supply 20% of its annual output for release to the public distribution system, under which the government provides sugar at a subsidized rate to ration card holders. Sugar mills have to offload 50% of the FSQ amount in the first 15 days of Bitter Taste a month and sensing the shortage of free sale to the market this month, speculators have driven up the price, said the industry official. If the government increases the FSQ and reduces the restriction on offloading the quota to seven from the present 15 days, it can ensure a greater flow of sugar to the market and a consequent reduction of prices. Interpretation: Perhaps, a couple of alternatives are available with the government for placing a hat on the coiling cost of sugar, for which it has been brought underneath a dangled sword from its foes. The malady of Jyoti Basu, CPMs ailing leader, led to the cancellation of the Cabinet-level meeting on the same topic. The Economic Times put forward that the main reason for sugar prices having gone up this month to over Rs 40 a kilo, up almost double from a year ago, is because of a 2.17-lakh tonne decrease (16.39-lakh tonne) in the January FSQ from the same period a year ago. The industry official said that the sugar mills have to offload 50% of the FSQ quantity in the first 15 days of a month, and smelling the dearth of free sale to the market this month, plungers have approached the price, and that if the government increases the FSQ and reduces the limitation on offloading the quota to seven from the present 15 days, it can assure a greater flow of sugar to the market accompanying decrease of prices. Ram Narsinghdev Sahgal submitted that the production in the sugar year (October 2009-September 2010) was figured out to be 15.5 million tonne, against 14.7 MT last year, after a plentiful crop of 26.4 MT in 2007-08 season.

SILVER IMPORT DROPS 24% ON HIGHER PRICES Source: Economic Times March 24, 2011 Imports of silver into the country could be lower this financial year with figures from Gujarat, the silver hub of India, showing a 24% reduction in imports in the eleven months of FY11due to skyrocketing prices. Silver imports from April 2010 to February 2011 dropped to 343 tonne from 451.5 tonne in the corresponding period of FY10 as prices surged beyond 50,000 a kg over the past two months. While the state imported the highest quantity of 161.77 tonne in January, imports plunged over 70% to 47 tonne last month and the figure up to March 18 was an abysmal 6 kg, data from Gujarat State Export Corporation (GSECL), show. We have seen a drop in imports since January and expect the trend to continue this month too with prices having breached 50, 000, said an official from MMTC, one of the largest suppliers of gold and silver in the country. Kandla port in Gujarat is a favorite destination for silver shipments into the country since transport by containers is the cheapest route. If figures from Gujarat show imports have dipped, its possible overall imports could be lower this year, he added, requesting anonymity. There has been a significant decline in silver imports this year, said Samir Mankad, director of GSECL, which facilitates import of precious metals to Gujarat via its air cargo complex at Ahmedabad. During the same period in 2008-09, silver imports into the state were ruling at 1418.23 tonne. GSECL is a government-recognized exim house extending services to exporters, importers, trading agents or indenters. The fall, according to market experts, comes as no surprise as silver has risen 24% from 44,175 a kg (excluding 1% VAT) since the beginning of February to 54,715 on March 22. The price in the financial year to March 22 has doubled from the previous financial year as overseas funds pumped money available at close to 0% interest rates into commodities, particularly precious metals like gold and silver. Experts like Ketan Shroff, a leading bullion dealer with an office in Ahmedabad, explained that the spike in the international market led to a disparity between local and bank rates. Silver for March delivery on local commodity bourse MCX traded at a discount of 1,000 a kg to the bank rate towards expiry of the contract, resulting in people taking delivery on the bourse instead of opting to buy from banks whose rates were higher. A disparity in bullion rates occurs when there is a sudden spike in international rates. This results in local market prices lagging the overseas rate. Over time, this disparity shrinks and local rates arrive at parity with international price. India is a major importer of both gold and silver. Unlike gold, there is no organized compilation of silver imports and consumption trends in India, but imports were pegged by some industry sources at around 3,000 tonne in FY10 and 4,000 tonne in the previous fiscal. Apart from jewellery and gift items, silver is used mainly as plating in electrical and electronic applications.

Interpretation: With Gujarat, the silver hub of India, demonstrating a 24% reduction in imports in the 11 months of financial year 2011 due to skyrocketing prices, imports of silver into the country could not be higher this financial year with computes. An official from MMTC, one of the largest suppliers of gold and silver in the country, stated that they have seen a cut down in imports since January and expect the trend to continue this month too with costs having gapped 50, 000. According to the Economic Times, during the period in 2008-09, silver imports into the state were dominating at 1418.23 tonne. It further stated that silver for March delivery on local commodity Bourse MCX traded at a discount of 1,000 a kg to the bank rate towards expiry of the contract, ensuing in people taking delivery on the Bourse instead of choosing to purchase from banks whose rates were higher. Ram Sahgal & Madhvi Sally also stated the fact that unlike gold, there is no coordinated compilation of silver imports and consumption trends in India, but imports were stabilized by some industry sources at around 3,000 tonne in FY 2010 and 4,000 tonne in the previous financial year.

WHEAT RESUMES RALLY ON DRY WEATHER WOES Source: Economic times January 2, 2012 Wheat futures rose for the ninth time in 10 sessions on speculation that dry weather from Ukraine to Argentina will limit global grain supplies. Ukraines winter-wheat crop is in poor condition after persistent dry weather, and the lack of snow cover may leave crops vulnerable to damaging cold, Telvent DTN said. The countrys grain exports fell 9.3 percent in December from November, UkrAgroConsult said. A lack of sufficient rain also may hurt developing corn and soybean plants in Argentina, DTN said. A month ago, we all thought we were going to drown in wheat from Ukraine, and now all of a sudden, theyve scaled their exports back, Jason Britt, the president of brokerage Central States Commodities, said by telephone from Kansas City, Missouri. With the corn and bean markets doing what theyre doing, thats sure helping our exports. Wheat futures for March delivery rose 1.2% to settle at $6.5275 a bushel on the Chicago Board of Trade. The price is up 13% since midDecember. Futures still dropped 18% this year, capping the biggest annual slump since 2008, on increasing world output. US exporters sold 431,213 tonne of wheat in the week ended December 22, 19% more than a week earlier, the US Department of Agriculture said. Wheat can be used as an alternative to corn and soybeans in livestock feed. Wheat also may have gotten a boost from speculators buying contracts to close out bearish short positions, or bets prices will fall, Britt said. Hedge funds and other speculators have cut net-short positions by 17 percent since Nov. 22, when funds were the most bearish since at least 2006, U.S. Commodity Futures Trading commission data show. Interpretation: Oh darn! Wheat futures rose for the ninth time in 10 sessions on a guess that dry weather from Ukraine to Argentina will limit global grain supplies. Bloomberg Chicago states that the Telvent DTN aforementioned that Ukraines winter-wheat crop is in an inadequate circumstance after recurring dry weather, and that the lack of snow cover may leave crops in a dangerous state to damaging cold. The US Department of Agriculture proposed that the US exporters sold 431,213tonne of wheat in the week ended December 22, 19% more than a week earlier. Thus, Hedge funds and other speculators have cut net-short positions by 17 percent since November 22, when funds were the most negative since at least 2006, U.S. Commodity Futures Trading Commission data show.