commodity outlook 2020 - smc trade online€¦ · way through this 24 hours ticking turbulent...

12th Annual Commodities Research Magazine (For private circulation only)

C MMODITYO U T L O O K 2 0 2 0

Is commodity the way to grow in 2020?

as on 31st March, 2019

CONTENT COMMODITYOUTLOOK2020

DearReaders,

SMCCommodityAnnualOutlookisenteringinanewdecade,afteracompletionofonethatendedin

2019.Wearesurethatovertheseyears,thiscommoditymagazinehasguidedtheinvestorstopark

thehardearnedmoneyintherightplaceandgivengoodreturnsontheirinvestments.Goingahead,

mycommodityteamassurestoholdthehandfirmlyinthesamewayroundtheclockandleadthe

waythroughthis24hourstickingturbulentcommoditymarket.

Nowaday’scommoditiesareslowlybutsurelymakingabaseline.Wehaveseenmarginalupsidein

commodities in spite of major hurdles such as economy slowdown issues, hostile trade

environment,tradetensions,Brexit,MiddleEasttensions,fragiledemand&tonameafew.Sharp

interestratecutbymajorCentralbanksvizFed,EU,ChinaandIndiatogetherwithstimulusand

someimprovementineconomicindicators,gavetheunderlyingsupportstothecommodityprices.

Commodity prices remained steady despite weak demand growth in the year gone by, due to

reducedsupplyresultingfromdecliningcapitalexpenditure.Foroneandhalfyear,theentireworld

facedthebruntoftradewarbetweenUSandChina;althoughthepositivetradedealattheendof

2019,wasthemostencouragingdevelopmentintheeconomicworld.Thedemandofcommodities

affected severely as twomajor economies US and Chinawhich drives the 50-60% of physical

demandweretotallyinvolvedintradetussle.However,bytheendof2019,itwasdecidedthatthe

U.S.willscrapplanstoaddtariffson$160billionworthofChinesegoods,andinexchange,Chinawill

buy more agricultural goods from the U.S. To mark the event of partial new US-China trade

agreement,asigningceremonywillbeheldon15thJanuary,2020attheWhiteHouse.Thisgood

newswaswelcomedbymarketsbeitequityorthecommoditiesmarkets,globally.Anothercheerful

momentforthemarketwasaclearcutvictoryofBorisJohnsonasthispavedthepathforBrexit.

Undoubtedly,thesetwoeventsaddedmoreconfidenceinthecommoditiesrally.

Globalgrowth,whichhasbeenslidingslowly,isbeginningtostabilizeandislikelytoseearecovery

in2020.Blendofimprovingmacroeconomicenvironmentandfinancialconditions,mildearnings

recovery and attractive valuations points that equity bulls are going to stay in 2020 as well;

meanwhilecommoditiesareexpectedtocatchuptherallylaterpartof2020.Pipelinesaredryin

manybasemetalsandagricommodities,OPECcountrieshavealreadydeepeneditsproductioncut.

Iffreshdemandemerges,thenitwillbedifficultforthesupplytomatchwiththesamepace.Adecline

inoverallcapitalexpenditureincrudecanresultinreducedsupply;itmaymakecrudeoneofthe

mostattractivecommoditiestoinvestinaswell.

Commoditiesdiscussioncan’tbecompletedwithouttalkingaboutdollarindex. Itwasabsolutely

stronginmostof2019duetotheurgencyofdemandforsafehavensalongwithgold,whichin

generalhavenegativecorrelation.Itisexpectedtotradeonlowersidein2020,thoughFedismost

likelytokeeptheinterestrateunchangedinthefirsthalfof2020.Ifittradesdown,thencommodities

shouldaccordinglybenefitfromit.Thenbullioncounter,whichgotsuperchargedafterthe2008

crisisasinvestorsranforsafety,isagaingoingtobeinvestorsfavorite.Investorsnowaday’spreferto

keepsmallchunkoftheirmoneyinbullionsasan“Insuranceoftheportfolio”.Thegoldenruleof

investing–InvestinGold!,buttheremightbeatwistassilverpricesaremorelikelytoriseinthenext

fewyears.

Wehavealreadyseensomestrongupsidemovesinfewagrocommoditiesin2019,whichislikelyto

becontinuedin2020aswellduetolowerproductiontogetherwithlowcarryforward.Mostkharif

crops,barringcotton,areexpectedtowitnessdropinproductiondueheavyrainsandfloodsinmany

partsofthecountryduringthejust-gonebymonsoonseason.Oilseeds,edibleoil,pulses,wheat,

cardamomarelookingpromisingincomingdays.Sugarisexpectedtobemoresweetened.

Looking ahead into 2020, the end of the trade war will be a huge catalyst for commodities.

Furthermore,clearmajoritytotheBorisJohnsonshouldprovideclarityontheroadmaptoBrexit.

Easing in monetary policies, stimulus, and comparatively constructive trade environment will

providepositivetriggerstothecommoditiescycle.Afterafallof11%in2018,somehowCRBheld

itselfin2019,andenjoyedmarginalgain.Thisreversalofcommoditycycleistypicallyasignthat

economicslowdownisgoingtoend.

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TheviewsexpressedbytheResearchAnalystinthisReportarebasedsolelyoninformationavailablepubliclyavailable/internaldata/otherreliablesourcesbelievedtobetrue.SMCdoesnotrepresent/provideanywarrantyexpresslyorimpliedlytotheaccuracy,contentsorviewsexpressedhereinandinvestorsareadvisedtoindependentlyevaluatethemarketconditions/risksinvolvedbeforemakinganyinvestmentdecision.TheresearchanalystswhohavepreparedthisReportherebycertifythattheviews/opinionsexpressedinthisReportaretheirpersonalindependentviews/opinionsinrespectofthesubjectcommodity.

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PleasenotethatSMCitsaffiliates,ResearchAnalyst,officers,directors,andemployees,includingpersonsinvolvedinthepreparationorissuanceifthisResearchReport:(a)fromtimetotime,mayhavelongorshortpositionsin,andbuyorsellthecommoditythereof,mentionedhereinor(b)beengagedinanyothertransactioninvolvingsuchcommoditiesandearnbrokerageorothercompensationoractasamarketmakerinthecommoditiesdiscussedherein©mayhaveanyotherpotentialconflictofinterestwithrespecttoanyrecommendationandrelatedinformationandopinions.AlldisputesshallbesubjecttotheexclusivejurisdictionofDelhiHighcourt.AlldisputesshallbesubjecttotheexclusivejurisdictionofDelhiHighcourt.

PageNo.

1.Performanceofrangeforecast2019

&eventsof2020 4

2.Commodityperformance2019 5

3.Assetclasscomparison2019 6

4. Spanofpricemovement 7

5.Commoditycallsperformancein2019 8-13

6.Economicindicators 14-15

7.Outlook2020

i. Bullions 16-18

ii. Energy 19-21

iii. Basemetals 22-26

iv.Oilseeds&edibleoil 28-30

v. Spices 31-34

vi. OtherCommodities 35-38

8.TechnicalCorner 39-45

(VandanaBharti)

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