smc global monthly report on other commodities

07 May 2014

Monthly Report On

OTHER COMMODITIES May 2014

Presented by:Subhranil Dey Sr. Research Analyst

1

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

Price movement of other commodities on NCDEX

Source: SMC Research

Price movement of other commodities on spot markets


®

-7.34

-6.20

-1.59

2.98

-8.00

-6.00

-4.00

-2.00

0.00

2.00

4.00

Mentha Chana Wheat Sugar

% Change

-5.90-5.53

-2.22

2.86

-7.00

-6.00

-5.00

-4.00

-3.00

-2.00

-1.00

0.00

1.00

2.00

3.00

4.00

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

2

MARKET MOVEMENT AHEAD

Commodity: CHANA (June) Trend: Range bound Range: 2950-3170

Domestic Fundamentals

�Chana futures (June) is likely to trade in the range of 2950-3170 levels.

�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 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.

�At JNPT (Mumbai) port, 19 containers of Chana (Chickpeas), 23 containers of Burmese Moong (Green Gram), 23 containers of

Malawi and 18 containers of Mozambique Tur (Pigeon Pea),

and 9 containers of Burmese Urad Dal have arrived on 2nd May

2014.

�Government run trading firm PEC Ltd has been authorised to

export about 291 tonnes of pulses to Maldives till 2016-17. For

2014-15, 2015-16 and 2016-17, the government has allowed

exports of 87.85 tonnes, 96.63 tonnes and 106.29 tonnes

respectively to Maldives. - The Directorate General of Foreign

Trade (DGFT)

®

May Jun Jul Aug Sep

May - - - - -

Jun -65.00 - - - -

Jul -135.00 -70.00 - - -

Aug -203.00 -138.00 -68.00 - -

Sep -274.00 -209.00 -139.00 -71.00 -

Calendar spread of Chana futures

As per closing on 2nd May 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


Commodity: SUGAR(JUNE) Trend: Range bound Range: 2960-3160

Domestic fundamentals

�Sugar futures (June) is likely to trade in the range of 2960-3160 levels.

�The Vashi market carries over 115 truckloads of stocks hence stockists are shying away from bulk buying.

�Cane farmers in Maharashtra and Uttar Pradesh are waiting for new support price for sugar cane. Fixation of new support price in

both the states is under way.

�Export demand of sugar has weakened due to lower sugar export parity as prices of sugar in domestic market have surged sharply.

�Government decided to continue with the raw sugar export subsidy of Rs 3300 per ton for April to May period.

�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.

�On International front, Brazil sugar FOB prices are quoting $485.75/ Ton.

�231.5 lakh tons of sugar has been produced upto 15th April, 2014 in the 2013-14 sugar season. This is about 10 lakh tons less than

the sugar produced upto the same corresponding period last year when 241.5 lakh tons of sugar was produced.

� ISMA has estimated that 238 lakh tons of sugar will be produced in the current season, which will be 13 lakh tons less than 251 lakh

tons produced in 2012-13 sugar season.

3,045.00

3,110.00

3,180.00

3,248.00

3,319.00

2,900.00

2,950.00

3,000.00

3,050.00

3,100.00

3,150.00

3,200.00

3,250.00

3,300.00

3,350.00

May June July August September

4

®

� As compared to 115 sugar mills operating on 15th April last year, around 200 sugar mills are still operating as on 15th April, 2014.

This could also be said to be because of late start of the current sugar season’s crushing. However, the 200 mill still operating are on

the verge of stopping their crushing operations soon.

� 74.7 lakh tons of sugar has been produced upto 15th April 2014 in Maharashtra, which is about 6% lower as compared to 79.1 lakh

tons of sugar produced upto 15th April last year. As compared to 14 sugar mills operating at this time last year, there are 53 sugar

mills which are still crushing sugarcane in Maharashtra. Another 3 to 3.5 lakh tons of sugar is expected to be produced by the sugar

mills in Maharashtra during the current sugar season.

� The Maharashtra sugar mills have crushed 656 lakh tons of sugarcane upto 15th April 2014 at an average recovery of 11.4%, which

is slightly lower than 695 lakh tons of sugarcane crushed last year upto same period, though at the same recovery rate as that in the

current season.

�The sugar mills in U.P. have produced 62.6 lakh tons of sugar which is almost 10 lakh tons less than the 72.9 lakh tons of sugar

produced at the same time last year. The mills have crushed 676 lakh tons of sugarcane till 15th April 2014 and have got an average

sugar recovery of 9.26% during the current season, as compared to 793 lakh tons of sugarcane crushed last year at an average

recovery rate of 9.18%. The main reason for lower sugar production this year in U.P is the fact that the sugar mills started crushing

slightly late because of the uncertainty on the sugarcane pricing, lower sugarcane yields and slightly higher diversion of sugarcane

into Gur manufacturing. As compared to 56 mills which were crushing sugarcane last year on 15th April, only 45 sugar mills are

operating as on 15th April 2014.

� Karnataka has produced the highest ever sugar production in its history and as on 15th April, 2014, it has produced 40.5 lakh tons of

sugar. In the previous season, Karnataka had produced 33.5 lakh tons, but it closed its crushing operation by now. As compared to

that, 19 sugar mills continue to crush sugarcane this year. Karnataka State has received better rainfall during both the South-West

monsoon as well as from the retreating monsoon in the previous year, which has helped in better yields and sugar recoveries.

� Andhra Pradesh produced 9.8 lakh tons of sugar, which is the same as that of last year. Still 9 mills are crushing sugarcane, but may

close soon. Tamil Nadu has produced 10.25 lakh tons of sugar, which is about 30% less than last year. It is expected that another

about 3.5 lakh tons of sugar will get produced in the special season in August – September, 2014.

� During the first 6 months of current season i.e. 1st October 2013 to 31st March, 2014, the sugar mills have dispatched 125 lakh tons

of sugar for sale in the domestic market, which is 10 lakh tons more as compared to despatches of 115 lakh tons during the same six

month period in the last sugar season. The slightly higher despatches are because of better lifting during the last few months after

improvement in the market sentiments.

� Upto 31st March, 2014, about 15.4 lakh tons of raw sugar has been produced by the sugar mills, out of which 8.5 lakh tons has been

dispatched for export as raw sugar.

� It is estimated that around 14.5 lakh tons of sugar, both as raw and white, have got exported out of the country in the first six months.

Out of the above, about 3.50 lakh tons of sugar has got exported in the month of March, 2014 itself, which may be eligible for the

incentives announced by the Government on 28th February, 2014.

� However, the Government is yet to announce the incentive for raw sugar production and exports thereof, effective from 1st April

2014 for the months of April and May 2014, which as per the Government notification of 28th February 2014 was supposed to be

based on the USD-Rupee exchange rate prevailing in the last seven days of March 2014. Since the Rupee had only appreciated, the

market expects the Government to announce the incentive rate at atleast Rs. 3300 per ton, if not more.

� As per reports from the ports, about 3.5 to 4 lakh tons of sugar is expected to be physically shipped in the months of April and May

2014. Some of these quantities has already been dispatched from the factory and would be in transit. Some more raw sugar has

been contracted for exports directly as well as through refineries, which are expected to be exported in April, May 2014 and

thereafter. Therefore, the incentive rate to be announced by the Government is eagerly awaited by the exporters and the sugar mills.

The delay in announcement of incentive rate by the Government is adversely impacting the physical shipments of sugar exports

already contracted.

Sugar futures Seasonal Index V/s Monthly close price 2014


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



5

®

International fundamentals

�Speculators raised their net long positions in raw sugar to a 5-1/2-month high on ICE Futures U.S. in the week ended April 29, U.S.

Commodity Futures Trading Commission data showed on 2nd May, 2014.

�The noncommercial dealers increased their net long position in raw sugar by 3,186 contracts to 96,406 contracts, their biggest

bullish position since mid-November 2013. The move took place as the futures market geared up for the expiry of the May contract,

which saw a large delivery of over 800,000 tonnes that was at the high end of trade estimates.

�The Brazilian Sugarcane Industry Association (UNICA), in conjunction with other producer associations in Brazil's South Central

region and the Center for Sugarcane Technology (CTC), announced its estimate for the 2014/2015 sugarcane harvest. The projection

indicates a cane crush of 580.00 million tons, a 16.94 million ton reduction from the 2013/2014 crush of 596.94 million tons.

�The projection reflects an increase in the area available for harvesting but a significant drop in agricultural yields stemming from a

long period of drought stretching from the end of 2013 into early 2014.

�Data collected by UNICA along with satellite images indicate an increase of around 5% in the area available for harvesting. That

modest increase stems from a reduction in cane-field renewals and the significant amount of sugarcane left unprocessed in the

2013/2014 season, which should represent around 3% of the area to be harvested in 2014/2015.

�Agricultural yield is expected to drop by around 8% compared to 2013/2014, when the yield was 79.8 tons of sugarcane per hectare.

With that drop being greater than the increase in the harvested area, the amount of sugarcane processed in 2014/2015 is expected to

be about 2.84% less than in 2013/2014.

�UNICA estimates that 56.44% of the cane processed in 2014/2015 will go toward ethanol production, representing a percentage-

point increase of 1.66 compared to 2013/2014. As a result, sugar production is estimated to be 32.50 million tons, representing a

5.23% drop from 34.29 million tons produced in the 2013/2014 season.

6

®

participation at current levels with the anticipation of limited

supplies in next marketing season.

�Spot prices of mentha oil are hovering in the range of Rs. 870-

960/qtl.

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

the range of USD 1550-1560/Quintal.

Commodity: Mentha Oil (June) Trend: Range bound Range: 815-915


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

815-915 levels.

�Adequate availability of stocks at the physical markets

supported by the weak demand from mint consuming

segments is pressurizing Mentha oil prices.

�Alongside this, the speedy progress of mentha sowing in the

major growing regions of Uttar Pradesh is further weighing

on market sentiments. This year Mentha coverage is likely to

down by around 20-25% from last year due to crop shift and

also lower price realization in previous year.

�The total production of mentha oil in the current year is likely

to be around 35-36 thousand tonnes against the previous

year of 50 thousand tonnes.

�The total exports is likely to reach in the range of 21000 to

21500 tonnes as most of exporters are showing strong buying

As per closing on 2nd May 2014

Forward curve of Sugar futures


Calendar spread of Sugar futures

May Jun Jul Aug Sep

May - - - - -

Jun 29.00 - - - -

Jul 2.00 -27.00 - - -

Aug -27.00 -56.00 -29.00 - -

Sep -40.00 -69.00 -42.00 -13.00 -


3,205.00

3,176.00

3,203.00

3,232.00

3,245.00

3,140.00

3,160.00

3,180.00

3,200.00

3,220.00

3,240.00

3,260.00


Calendar spread of Mentha Oil futures

May Jun Jul Aug

May - - - -

Jun -9.30 - - -

Jul -17.00 -7.70 - -

Aug -25.30 -16.00 -8.30 -

As per closing on 5th May 2014 Source: SMC Research

7

®

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


Forward curve of Mentha Oil futures


833.60

842.90

850.60

858.90

820.00

825.00

830.00

835.00

840.00

845.00

850.00

855.00

860.00

865.00

May June July August

8

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Commodity: WHEAT(June) Trend: Down Range: 1515-1650


�

�Wheat production in India, the world's second biggest grower,

is pegged at 95.6 million tonnes for this year as against 93.51

million tonnes in the year-ago period.

�Wheat procurement volume has improved considerably in

the last week of April despite sluggish start in the first

fortnight. It may improve further once when arrivals in

Punjab increases.

�Till 30th April, FCI and other procurement agencies had

procured 178 lakh tonne wheat. It is almost 30 percent lower

than last year till date. Uttar Pradesh, Bihar and Punjab would

contribute higher volume from Mid May as harvesting started

at least three weeks delay.

�Govt. has set procurement target at 31 million tonne wheat

this year. The target seems within reach as procurement in

Punjab and Uttar Pradesh is yet to pick up.

�The government's wheat procurement target for the ongoing

2014-15 marketing year is likely to be missed and slip below

the last year's level of 25 million tonnes. According to Food

Ministry data, FCI and State government-owned agencies

have procured 7.5 million tonnes of wheat so far this year,

significantly lower than 11.96 million tonnes purchased in

the year-ago period.

�The wheat marketing year runs from April to March but FCI's

procurement operation gets completed in three months.

�The overall wheat purchase is expected to be much lower than

the target of 31 million tonnes set for the current year.

�Uttar Pradesh and Bihar would contribute more wheat this

year to the central pool kitty as production in both states are

said to be satisfactory, slightly higher than last year.

�Harvesting in both the states continued and higher arrivals

are expected from mid May. Reports from Bihar suggest that

farmers are getting 11 to 12 qt. wheat per bigha this year

against 10 to 10.5 qtl. last year.

�Average yield in western U.P. is normal while eastern U.P., as

report suggests, may realized 5 to 7 percent higher yield this

year. States like M.P. and Rajasthan have not contributed as

per expectation till now.

�Quality/crop loss in M.P., Rajasthan too remains a problem at

Wheat futures (June) is likely to trade in the range of

1515-1650 levels. procurement front. In Madhya Pradesh the arrival dropped

from 4.25 million tonnes to 3.17 million tonnes.

�In Haryana, more than 58.89 lakh metric tonnes (MT) of

wheat has so far arrived in various mandis during the current

procurement season. HAFED has purchased highest 22.16

lakh MT of wheat followed by 16.63 Lakh MT purchased by

Food and Supplies Department. Similarly, Agro Industries

Corporation has purchased 5.28 lakh MT, Haryana

Warehousing Corporation 5.90 lakh MT, CONFED 1.43 lakh

MT and Food Corporation of India had procured 7.44 lakh MT

of wheat during current procurement season so far.

�Wheat purchase by private buyers is likely to remain 3 lakh

tonne in Punjab in the ongoing procurement season, almost

double of what was bought last season.

International fundamentals

�U.S. wheat futures rose as much as 3 percent 5th May, 2014 to

an 11-month high on fears that recent hot, dry weather will

curb production in the United States, the world's largest

exporter.

�The U.S. National Weather Service said temperatures across

the southern wheat Plains topped 90 degrees Fahrenheit on

Sunday, with forecasts for the hot, dry weather to continue

into the week, raising the risk of further damage to the U.S.

Hard Red wheat crop.

�The U.S. Department of Agriculture said on April 29 that the

winter wheat crop was rated 33 percent good to excellent,

down 1 point from the previous week and well below the five-

year average of 49 percent, USDA said in its weekly crop

progress report.

�There are also concerns that violence in Ukraine spread to the

Black Sea gateway of Odessa, boosting concern exports will be

disrupted.

�As cited by the International Grain Council:

�World production is projected to decline by 2% in

2014/15, to 697 million tonnes, mainly due to more

normal average yields after the very high levels of the

previous year.

�Global consumption of wheat was pegged at 701 million

tonnes, up 1 million tonnes from the previous month and

higher than the previous year's 691 million tonnes.

9

Wheat futures Seasonal Index V/s Monthly close price 2014


®

As per closing on 02nd May 2014

Forward curve of Wheat (Delhi) futures


Calendar spread of Wheat (Delhi) futures

May Jun Jul Aug Sep

May - - - - -

Jun -31.00 - - - -

Jul -64.00 -33.00 - - -

Aug -92.00 -61.00 -28.00 - -

Sep -120.00 -89.00 -56.00 -28.00 -


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



1,553.00

1,584.00

1,617.00

1,645.00

1,673.00

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

1,660.00

1,680.00

1,700.00


®

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

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