Published on 14/07/2017 11:09:23 AM | Source: Angel Commodities Pvt Ltd

Cotton futures are expected trade sideways - Angel Commodities

Posted in Commodities Reports | #NCDEX #Commodity Tips #Angel Broking Pvt Ltd


Agri-Fundamentals

Soybean

NCDEX Soybean August futures slipped by about 2% on Thursday as market participants have initiated fresh selling on hope that monsoon rains will cover soybean areas this weekends. The market arrivals have been diminishing and there is also good demand. According to SOPA press release, India's exports of soymeal rose 56.1% on year to 64,000 tonnes in June. As per government data, area under soybean crop across the country for the 2017-18 kharif was 53.6 lakh hectares till last week, up by about 10% on year. Last year, the acreage was 48.6 lakh hectares. As per SOPA, as of June-end, soybean inventories with farmers were at 36 lakh tonnes, over three times the amount a year ago.

CBOT August soybean futures closed lower on Thursday despite good exports data and Chinese agreement to purchase US beans. USDA forecast, soybean production at 115.8 mt, up 0.1 million on increased harvested area. China's soybean imports dropped from the month before to 7.69 million tonnes in June, below market expectations due to plentiful stocks at crushers and a change in taxes.

 

RMseed (Mustard seed)

Mustard Aug futures witnessed some fresh selling from market participants as the demand is steady. The prices have been trading in range on reports improvement in exports of meal during the first quarter of 2017/18. Meal exports from the country during the first quarter increase to 1.36 lakh tonnes from 60,889 tonnes last year same period. Mustard meal exports in June this year is pegged at 44,074 tonnes, down 21.4% compared to previous month in May. Last year, India exports 43,636 tonnes of meals in June.

According to data compiled by Mustard Oil Producers Association of India, Oil mills in the country crushed 550,000 tn mustard seed in June, 23% lower from the previous month.

As per Agmarknet data, the mustard arrivals during current week (Mon-Thu) are 17,698 tonnes compared to last week’s arrivals of 12,552 Higher stocks level in country is still pressurizing prices.

Mustard prices have been under pressure this season due to record production in 2016/17 and higher imports of Mustard oil during the current oil year started Nov 2016. As per SEA recent data, mustard oil imports for period Nov-May increase 5% to 1.18 lt in 2016/17 from 1.72 lt in the previous year. Moreover, imports increase by 55.7% in May compared to last year imports.

 

Outlook

Soybean futures are expected to trade sideways to down on expectation of revival of monsoon in central India. However, expectation of good crushing demand may keep the prices supportive. Mustard seed futures expected to trade sideways due to steady demand from the industrial buyers as supplies sufficient in the physical market.

 

Refine Soy Oil

Refined Soy Oil Aug futures close lower on Thursday tracking weakness in International edible oil market. Prices may get support if Government hike the import duty on edible oils in view of the sharp fall in domestic oilseed prices. The prices have increase in recent weeks but lower base import prices have put pressure on prices. There is an anticipation of good domestic demand of edible oil during the monsoon season.

The base import price of crude soyoil has been cut by $9 to $803 per tonne for the first half of July. This is the first cut in tariff value in two month. Base import prices of edible oils are revised every fortnight, based on global prices and changes in foreign exchange rate. The prices were last revised on Jun 15.

As per SEA, the import volume is down by about 30% for the period from Nov-May to 16.10 lt compared to 24.22 lt last year for same period.

 

Crude Palm oil

MCX CPO closed lower close to 2% on Thursday tracking weak trend in International markets. Government has cut the base import price of refined, bleached and deodorised palmolein, crude palmolein, and RBD palm oil by $31 a tn each to $716, $713 and $706, respectively. However, reports of import duty hike and expectation of good demand from the stockists may support price.

Due to lower prices this season, the imports of palm oil have been higher by 12 lt to 72 lt in 2017 compared to last year’s 60 lt during the first 5 months of 2017. As per SEA, palm oil import raised 21.6% y-o-y to 7.99 lt in May on higher shipment of crude palm oil (CPO).

Malaysian palm oil futures suffered the sharpest drop in three weeks on Thursday evening after a third straight session of losses, tracking weaker edible oils such as soyoil on the Chicago Board of Trade (CBOT). Shipments of palm oil products from Malaysia fell 1.9% during July 1-10, down from the corresponding period in June, data from cargo surveyor Intertek Testing Services showed on Monday.

As per MPOB data, June production in Malaysia, the world's No.2 palm producer, fell 8.5 % to 1.51 mt, leading to a decline in endstocks as well. Stocks fell 1.9 % to 1.56 mt, while exports for the full month of June dropped 8.4% to 1.38 mt.

 

Outlook

We expect Ref Soy oil to trade sideways on expectation of little corrections however good physical demand may support prices. Moreover, expectation of higher import duty and good demand for the edible oil during monsoon season may keep the prices supported at higher levels. CPO futures may trade lower on weak Malaysia price and higher stocks in the country. Any reports of increase the import duty of edible oil may support prices.

 

Sugar

Sugar Futures closed lower on Thursday on expectation of good production next year and good domestic supplies. India’s sugar production is set to rebound from a seven-year low as abovenormal monsoon rain in the world’s largest consumer helps the cane crop that will be crushed from Oct. 1. According to government data, sugarcane acreage in the country was at 47.5 lakh ha, higher than 44.8 lakh ha a year ago. Recently government hiked Sugar import duty to 50 per cent to support domestic prices.

ICE Raw sugar futures settled higher due to strong Real. Moreover, contract has been boosted by worries about tighter nearby deliverable supplies. Biweekly cane industry data from Brazil showed millers in the country's center-south region increased sugar output in the second half of June.

 

Outlook

Sugar futures may trade sideways on sufficient supplies in the domestic market Production is expected to be higher by 25% in 2017/18. Increase in FRP is encouraging farmers to take sugarcane crop while good sowing progress in the country will keep pressure on the sugar prices.

 

Cotton / Kapas

MCX Cotton edged down for the fourth consecutive trading session yesterday on technical selling by the market participants due to good progress in cotton sowing in the country. USDA in its latest monthly report increase the production forecast by 1.28 million bales (1 bale = 170 kg). As per latest data from Agricultural Ministry, cotton is planted in 71.8 lakh hectares (l ha) till last week, higher by 5.8% compared to last year acreage of 68 lakh ha for same period.

However, there is fear of decline in yield due to deficient rainfall in major growing areas but higher acreage may keep the production at higher levels.

ICE cotton futures hit their lowest in over two weeks on Thursday after federal data showed that 2016/2017 U.S. exports dropped sharply to a marketing-year low. U.S. exporters sold 13,000 running bales of upland cotton in the week ended July 6, touching a marketing-year low for 2016/2017. That was down 93 percent from the previous week and from the prior four-week average. The world 2017/18 production estimate was raised by 636,000 bales to 115.4 million bales.

 

Outlook

Cotton futures are expected trade sideways to down on mixed fundaments of higher acreage and good physical demand. Moreover, dry spells in cotton growing areas may support prices in the domestic market. However, sufficient stocks and weak international prices may pressurize cotton prices.

 

Spices (Jeera & Turmeric)

NCDEX Jeera for Aug delivery surge for second consecutive day on Thursday as market participants initiated fresh buying due to lower than expected stocks levels in the country. Moreover, lower physical arrivals too support prices. The jeera arrival in June is lower this year compared to May as well as June last year. As per the data release by government, jeera exports in April 2017 was 14,599 tonnes, were down 9% from March.

In 2016/17, country exports increase by 26% to 1.24 lt in as per the data release by Dept. of commerce, GOI. The stock levels in the NCDEX warehouse increased to 1,313 tonnes as on July 10 from 1,187 tonnes on Jun 30. Last year, stocks were higher at 3,482 tonnes.

NCDEX August Turmeric fell on Thursday mainly on profit booking by the market participants from 13 month higher prices. Still there is good physical demand from upcountry buyers and stockists as Telangana, highest producing turmeric state, has received large deficient rains (-60% LPA) last week. In Telangana, turmeric acreage as on 10-Jul-17, up 9.5% to 23,000 hectares as compared to last year acreage of 21,000 hectares. The normal acreage is close to 47,000 hectares. Market arrivals dropped about 60% in June compared to May. As per Agmarknet data, about 27,448 tonnes arrived in June compared to 73,436 tonnes during previous month. As per the data release by government, turmeric exports during first four months in 2017 is 42,855 tonnes, up 40.7% compared to last year same period.

 

Outlook

We expect Jeera futures expected to trade sideways to higher on tight supplies and good physical as well as export demand but profit booking at higher levels may keep prices under pressure. Turmeric futures expected to trade sideways on good physical demand and below normal rains in Telangana in last 10 days. Moreover, improving demand from upcountry buyers and expectation that farmer may sow lesser area this season may keep the prices supported.

 

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