Commodity Research Report Ways2Capital 29 August 2016

Iraq's government would consider selling crude through Iran should talks with the autonomous Kurdish region on an oil revenue-sharing agreement fail, a senior oil ministry official in Baghdad told Reuters.

? GLOBAL UPDATE
Iraq's government would consider selling crude through Iran should talks with the autonomous Kurdish region on an oil revenue-sharing agreement fail, a senior oil ministry official in Baghdad told Reuters.
Gold World no. 1 copper miner Codelco produced more copper in the first half of 2016 than a year ago, but made a financial loss, and the chief executive said on Friday that the company position was "extremely fragile.
SPDR Gold Trust GLD, the world's largest gold-backed exchangetraded fund, said its holdings stood at 956.59 tonnes, remain unchanged from previous business day.
ExtendingHoldings of the largest silverbacked exchange-traded-fund (ETF), New York's iShares Silver Trust SLV, stood at 11100.66 tonnes, remain unchanged from previous business day.
Nigeria's military said on Saturday it had launched a new offensive against militants in the oil-producing Niger Delta, killing five and arresting 23. Armed groups have claimed responsibility for a series of attacks on oil and gas pipelines in the southern region, reducing the country's oil output by 700,000 barrels day

? GOLD
Gold traded in a narrow range on Wednesday as investors waited for clues on whether the US Federal Reserve would hike interest rates this year. At the end of the week, Fed Chair Janet Yellen is scheduled to address a gathering of global central bankers in Jackson Hole, Wyoming. Recent hawkish comments from some policymakers have raised investors' expectations that Yellen might also take a less cautious tone.

Gold for delivery in October dropped Rs 91, or 0.29%, to Rs 31,288 per 10 grams in a business turnover of 252 lots at the Multi Commodity Exchange. In a similar fashion, the metal for delivery in far-month December was trading down Rs 73, or 0.23%, at Rs 31,578 per 10 grams in 7 lots. Market analysts said the fall in gold futures was mostly in step with a weak trend overseas after a Federal Reserve official signalled that an increase in US interest rates is still possible this year, hurting demand for the precious metal as a safe-haven investment. Meanwhile, gold prices fell 0.16% to USD 1,336.50 an ounce in Singapore today.

India's gold demand fell significantly in the first half of 2016. World Gold Council data show the combined demand for jewellery and investment at only 247 tonnes. Import during January-June was 248 tonnes, 42 per cent lower than the corresponding period last year and lowest since 2009. Even in calendar years 2013 and 2014, when the trade was under severe regulatory stress in India, demand and imports were higher than seen in 2016 so far. Estimates peg imports in 2016 at 650 tonnes, after taking into account some recovery expected in rural demand, led by a good monsoon. However, this will be the lowest after 2009, when imports were 559 tonnes. Notably, the trend has continued after June. Sudheesh Nambiath, lead analyst for precious metals at GFMS Thomson Reuters, said: "In July, imports fell 78 per cent year-on-year to 20.8 tonnes, the lowest since September 2013. Has the cycle of Indian gold imports hit the trough? Possibly, yes. experts, is similar in August. The domestic price continues to trade $25 an ounce lower than the landed cost of imported gold, making imports unviable. Bachhraj Bamalva, director, All India Gems and Jewellery Trade Federation, said: "Due to high import duty and several measures implemented by the government in the past few quarters to disincentivise black money, gold demand saw a huge impact and our estimate is that 2016 is likely to end with 650 tonnes of imports. If demand improves significantly, in the most optimistic scenario, imports might be 700 tonnes." Apart from anti-black money measures like providing the income tax PAN for purchase of jewellery in cash above Rs 2 lakh and excise duty on jewellery, a sharp increase in global gold prices and better returns in other asset classes like equities has lured buyers away. However, even as Indians are not buying as much gold as in the past, experts say one should not write off the yellow metal. Jean-François Lambert, managing partner, Lambert Commodities, says: "So long as India is India, its love affair with gold will endure."

Gold recovered by Rs. 100 to Rs31,250 per 10 grams on Saturday on fresh buying by jewellers at the domestic spot market to meet retailers' demand even as the metal weakened overseas. Silver also rebounded by Rs 280 to Rs 44,700 per kg due to increased off-take by industrial units and coin makers. Traders said fresh buying by jewellers to meet festive season demand from retailers led to the recovery in the precious metal prices. They said, however, a weak trend overseas capped the gain.

Globally, gold fell 0.08 per cent to $1,320.50 an ounce in New York on Friday after the US Federal Reserve chairman Janet Yellen said the case for an increase in interest rate has strengthened, in an address to central bankers in Wyoming . In the national capital, gold of 99.9 per cent and 99.5 per cent purity went up Rs 100 each to Rs 31,250 and Rs 31,100 per 10 grams, respectively. The metal had lost Rs 100 on Friday. Sovereign, however, remained flat at Rs 24,300 per piece of eight grams in limited deals. Tracking gold, silver ready recovered Rs 280 to Rs 44,700 per kg and weekly-based delivery by Rs 115 to Rs 43,975 per kg. On the other hand, silver coins continued to be traded at the previous level of Rs 75,000 for buying and Rs 76,000 for selling of 100 pieces.

Gold discounts in India fell to nearly three-month lows this week while fresh buying gathered some steam elsewhere in Asia as price corrections and festive buying lifted demand for the yellow metal. The safe-haven asset, which is highly sensitive to interest rates, has declined more than one per cent this week as upbeat US economic data boosted expectations of an interest rate hike by the US Federal Reserve this year. In India, the second-biggest gold consumer, dealers were offering discounts of up to $25 an ounce over official domestic prices, the lowest since the first week of June, and down from up to $52 last week.

? CRUDE OIL
In volatile market, crude oil prices still on slippery ground Oil prices rise in thin Asian trade; production freeze may occur Oil prices retreat from 2016 highs on OPEC output boost. Supply worries wane, but for how long?, Oil rises as lower output tightens market, outweighs weak China data. Oil prices fell early on Wednesday as an unexpected build in US crude stocks weighed on markets, along with concerns that Chinese crude demand could falter as Beijing clamps down on alleged tax evasion in the oil industry. International Brent crude oil futures were trading at $ 49.57 a barrel at 0054 GMT, down 39 cents, or 0.8%, from their last close. US West Texas Intermediate crude was down 46 cents, or 1%, at $47.64 a barrel. Robust Chinese crude demand growth has been driven by independent refiners, also know as teapots, who began to import crude last June after obtaining government crude import quotas and licences. But Beijing's crackdown on alleged tax evasion in the oil industry, targetting the teapots, threatens to put a lid on Chinese demand. "The question now is whether the teapots will start cutting runs," a Singapore-based trader said, adding that falling Chinese demand would be a double whammy for the oversupplied crude market.

Oil prices dipped in early trading on Friday after the Saudi energy minister tempered expectations of strong market intervention by producers during talks next month. International benchmark Brent crude oil prices were trading at $ 49.55 per barrel at 0114 GMT, down 12 cents from their previous close. US West Texas Intermediate crude was down 7 cents at $47.26 a barrel. Saudi Arabian Energy Minister Khalid Al-Falih told Reuters late on Thursday that "we don't believe any significant intervention in the market is necessary other than to allow the forces of supply and demand to do the work for us," adding that the "market is moving in the right direction" already.


Goldman Sachs warned that the recent rally in oil prices was not based on fundamentals and played down recent hopes that an agreement between members of the Organization of Petroleum Exporting Countries would be able to sustain current prices. "While oil prices have rebounded sharply since August 1, we believe this move has not been driven by incrementally better oil fundamentals, but instead by headlines around a potential output freeze as well as a sharp weakening of the dollar," Goldman said in a note to clients dated August 22. Hopes that OPEC may come to an agreement to stabilize the market in informal talks to be held on the sidelines of the International Energy Forum in Algeria on September 26-28 helped oil enter a bull market with prices up more than 20% through last Friday.“We are, in Saudi Arabia, watching the market closely, and if there is a need to take any action to help the market rebalance, then we would, of course in cooperation with OPEC and major non-OPEC exporters,” the country’s energy minister Al-Falih said.Goldman remained skeptical about the effectiveness of such a freeze, which could become “self-defeating” as higher prices incentivized increased output elsewhere.

? COPPER
Copper down 0.1% on global cues, weak demand, Surplus supply, weak demand from China to hit copper prices, Copper down 0.1% on muted demand. Copper prices moved down by 0.06% to Rs 318.20 per kg in futures trade today as speculators cut down their bets amid a weak trend overseas and low demand at spot markets. Copper for delivery in August shed 20 paise or 0.06% to Rs 318.20 per kg in a business turnover of 790 lots at the Multi Commodity Exchange. Likewise, the metal for delivery in November traded lower by 10 paise or 0.03% to Rs 324.85 per kg in 68 lots. Analysts said copper prices fell in line with a weak trend in base metals pack at the London Metal Exchange and strengthening dollar sent commodities down as comments from a US Federal Reserve official bolstered speculation that borrowing costs may rise this year.


NCDEX - WEEKLY NEWS LETTERS
? GLOBAL UPDATE
National Commodity and Derivatives Exchange today said it has helped over 8,000 farmers across the country hedge their commodity price risk on its platform. Over 8,000 farmers across the country participate on NCDEX platform to hedge their commodity price risk, it said in a statement here. Spread across Rajasthan, Madhya Pradesh and Bihar, farmers are using aggregation of produce to gain bargaining power and using the futures platform to smoothly hedge their lo hedge their location and basis risks to protect their income, the statement added. To double their income by 2022, farmers need to achieve higher crop yields and sell larger surpluses. Finding it difficult to compete in formal markets and without the assurance that their efforts would pay off, farmers remained unwilling to take risks in increasing their production. Using its national online footprint, the exchange has collaborated with Farmer ProducerProducer Companies to demonstrate that investments in linking farmers to markets, coupled with supply-side activities such as capacity building and input supply, can have a major positive effect on raising farmer incomes.

With Sebi seeking explanation for suspending futures trade in castor seeds, NCDEX today said a probe by an external audit firm has been initiated into the role of brokers and individual traders. The exchange has also placed the trading terminals of four members on 'Square-off mode'. On January 27, the exchange had suspended futures trading in all castor seeds contracts after it found the open interest positions for the next month contracts to be high and the prices low. "The exchange has initiated investigation into the role of members and their clients through external Audit firm/s," the commodities derivative exchange NCDEX said in a statement.

National Commodity & Derivatives Exchange today said its cotton contract has performed well registering a jump of 338 per cent at Rs 1,376.71 crore for the quarter till March 21, 2016. "Our cotton contract has performed well and traded value jumped by 338 per cent at 1,376.71 crore for the quarter till March 21, 2016 as against Rs. 313.99 crore in the quarter ended December 2015," NCDEX said in a statement here. "The contract also witnessed increased participation on the exchange; with 224 per cent increase at 24,820 of average daily traded quantity on QoQ basis," it added. The contract has also witnessed 75,072 units of open interest position, a jump of 483 per cent on QoQ basis. The exchange said it has helped raise the bar on quality of cotton bales traded in futures. "Increased participation in NCDEX cotton is very encouraging. We are committed to offer a safe, credible and transparent marketplace. We have been at the forefront of unleashing a slew of warehousing reforms aimed at giving participants a superior user experience and it is indeed heartening to see this growing confidence." NCDEX MD & CEO Samir Shah said.

Domestic cotton prices are on the upside since April, due to expectation of weak production. This has affected exports, mainly to Pakistan. In the current cotton year, about 37 per cent of exports have been to Pakistan. However, with prices moving up to Rs 50,000 a candy, this is being hit, says the trade.“China is the major buyer for Indian cotton but this year's demand was not so good. Against it, due to crop failure, Pakistan became a major importer. However, if our prices were lower, our overall export might be higher than it has,” said J Thulasidharan, president of the Indian Cotton Federation.

Continuing its losing streak for the seventh straight day, refined soya oil prices eased further by 0.27% to Rs 656.10 per 10 kg in futures market today as participants engaged in trimming their positions, taking negative cues from spot market on easing demand.At the National Commodity and Derivatives Exchange, refined soya oil for delivery in October drifted lower by Rs 1.80, or 0.27% to Rs 656.10 per 10 kg with an open interest of 50,650 lots.Likewise, the oil for delivery in September contracts shed Rs 1.40, or 0.22% to Rs 648.90 per 10 kg in 53,800 lots.Analysts said offloading of positions by traders due to subdued demand in the spot market against adequate stocks position, mainly kept refined soya oil prices lower at futures trade.

Jeera prices were down by 1.17% to Rs 18,575 per quintal in futures trading today as participants trimmed their positions, tracking a weak trend at spot market on subdued demand. At the National Commodity and Derivatives Exchange, jeera for delivery in October month fell by Rs 220, or 1.17% to Rs 18,575 per quintal with an open interest 4,362 lots. Similarly, the spice for delivery in September contracts declined by Rs 205, or 1.10% to Rs 18,370 per quintal in 19,473 lots. Analysts said offloading of positions by traders on the back of low demand in the spot market against adequate stocks position on higher supplies from producing regions, mainly pulled down jeera prices at futures trade.

? SOYABEAN
The soyabean counter on agri bourse NCDEX witnessed a long squeeze on Monday, causing the premium between the May and June contracts to widen to an intraday high of 3.8% from the normal 1.5-2%, say brokers like Harish Galipelli of Inditrade. The last traded price of the May contract was Rs 3,882 per quintal while that of the June contract was Rs 4,023. The May contract expires on Friday. The cause for the spike in spread was the final expiry date of stocks for May delivery. Since the stocks cannot be retendered they have to be sold. The selling pressure was so great that buyers were left with the option of accepting deliveries or squaring off at a loss, with many choosing the latter. Prop brokers short bean were able to pocket not just the decline in prices from their higher selling levels but also to sell the June soya bean contract at elevated premia, said Sandeep Bajoria, one of the largest physical market brokers of edible oils.

As per SEA data, Import of soyoil during Jul 2016 down to 3.48 lakh tonnes (lt) from 3.96 lt in Jun 2016. Moreover, Import of vegetable oils during Jul 2016 is reported at 11.41lt compared to 15.01 lt in July 2015, down 24% due to higher stocks in domestic market. The overall import of vegetable oils during first nine months of the current oil year 2015- 16, Nov’15 – Jul’16 is reported at 109 lt compared to 103.5 lt up by 5%.

? SPICES
According to Dept of Commerce, the exports of Jeera in the first two month of 2016-17 increased by more than 82.5% at 33,908 tonnes compared to last year same time. As per the trade sources, India's jeera exports rose nearly 25% to around 50,000 tonnes in Apr-Jul from 40,000 tn in the year-ago period due to good demand from China and Bangladesh. China imported 1,500-1,700 tn jeera in last 15 days. As per 4thadvance estimate of Gujarat State for 2015-16, production is pegged at 2.38 lt compared to 1.97 lt in 2014-15. In 2013-14, production was 3.46 lt.

Turmeric acreage in Telangana as on 24 Aug was up 15.4 % at 45,000 hectares as compared to 39,000 hectares last year. Sowing of turmeric is over in 93 per cent of normal area and up by 110 % of normal sowing area. As per dept of commerce data, turmeric exports in AprilMay 2016 increased by 31% compared to last year at 21,256 tonnes. In 2015-16, 85,426 tonnes exported compared to 90,738 tonnes in 2014-15. Major export destinations in 2015-16 are Iran, Malaysia, UAE, USA and Srilanka. The arrivals in the main physical markets such as Nizamabad, Duggirala (AP), Salem, Erode and Sangli reported decreasing. There is expectation of lower arrivals and good upcountry demand may lend support in coming weeks.

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