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Published on 16/07/2019 9:32:36 AM | Source: Angel Broking Pvt Ltd

Cotton futures may trade sideways due to good sowing progress in Gujarat - Angel Commodities

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Soybean

NCDEX Aug Soybean increased to 2-week high but closed lower on Monday due to fresh selling by the market participants on expectation of better output and higher imports of edible oil due to lower tariff value. As per farm ministry, acreage under soybean is 51.94 lakh ha so far, up from 27 l hac from previous week but down about 19% from last year acreage of 64.04 lakh ha. This season so far, area in MP and Maharashtra, where reportedly lower by 21%. Government hike minimum support price by 9% or 311 rupees to 3,710 per 100 kg for 2019/20 which also helps to increase acreage this year.

As per SOPA, press release, the arrivals of soybean improved during June to 4.5 lt compared to Apr and May. Overall, arrivals this season is 89.25 lt compared to 75 lt last year. Soy meal exports provisionally down by 82.5% in June to 18,185 tonnes compared to last year. Similarly, exports for 1st quarter (Apr-Jun) are down by about 55% to 1.12 lt compared to 2.5 lt last year. In the 3rd advance estimates, government increased production forecast of soybean to 137.43 lt (Vs 109.33). USDA kept soybean output forecast unchanged at 109 lt in 2019/20 but down 5.2% y/y.

CBOT soybean closed lower on Monday on forecasts for beneficial rains in U.S. growing areas this week coupled with good export figures. USDA Export Inspections report showed soybean exports of 854,373 MT for the week ending on July 11. That was a 12.17% jump from the previous week and 34% above the same week last year.

Outlook

Soybean futures expected to trade sideways due to expectation of improving sowing progress in central India due to fast progress of monsoon rains. Moreover reports of increasing import duty for edible oil will support oilseed prices. However, declining meal exports may put extra pressure on Oilseeds as the sowing season progressing.

 

RMseed (Mustard seed)

NCDEX Aug Mustard closed higher for the third consecutive session mainly on fresh buying by the market participants on improved physical demand and diminishing arrivals. The reports of nil imports of rapeoil for third consecutive month in May keep domestic crush demand intact. As per data released by MOPA, with the new season arrivals is just above 50 lt. In its 3rd adv estimates, mustard production revises higher to 87.82 lt from 83.97 lt in 2nd estimate. USDA maintain export forecast of rapemeal to 9 lt and output in 2019/20 at 77 lt (Vs 80 lt ) in its monthly report. As per SEA, rape meal exports also down 23% to 2.5 lt during the first quarter of 2019/20 compared to 3.2 ltlast year. For June, rape meal exports are provisionally kept at 54,250 tonnes, down by more than 40% on year.

Outlook

Mustard futures expected to trade sideways and looking to consolidate above 3900 levels as with steady demand for exports of rape meal. However, good demand for mustard oil and slowing supplies in physical market may support prices.

 

Refine Soy Oil

Refined Soy Oil futures close higher for the third consecutive session due to short covering by market participants. In a fortnightly notification, government cut tariff rate for soyoil to $686 for 2nd half of July from 697 dollar earlier. According to monthly report released by SEA, Soyoil imports down 22.8% to 2.23 lt in Jun compared to 2.90 lt last year same month. Overall, imports are down 4.80% for the first eight months of OY 2018/19 (Nov-Jun) at 16.92 lt compared to last year same period.

Soy oil imports were down for the third consecutive month in June compared to last year while the import of refine palm oil increase more than 50% on year since November. As per latest SEA, edible oil stocks are at 21.5 lt as on 1st Jul, down compared to 25.18 lt last year same time.

USDA revised higher domestic consumption to 50 lt for 2018/19 compared to 49 lt in its monthly report. Consumption forecast to increase to 52 lt in 2019/20.

Outlook

We expect Ref Soy oil may trade positive on good physical demand as stocks are lower at ports despite improvement in imports. Moreover, monsoon progress and cut in tariff value may be keep prices under check.

 

Crude Palm oil

MCX CPO touched one week high on Monday but then closed lower on reports of higher imports on palm oil and cut in tariff values. It closes at 498.10 rupees per 10kg. According to SEA monthly press release, In June, import of Crude palm oil higher by 38.2% on year at 4.21 lt while import of RBD Palmolein up by about 44% to 2.56 lt due to lower prices in the international markets. Palm oil exports up by 40.5% on year at 6.77 lakh tonnes. For 2nd half of July, tariff value for CPO and RBD Palmolein further cut by 11 and 7 dollar to 497 and 533 dollar per ton. According to USDA, India's palm oil imports in 2018/19 (NovOct) are expected to jump by 20% on year to 105 lt due to weak International prices. Currently, CPO prices are about 18-20% down on year due to weak international prices and higher import prospects.

Malaysian palm oil edged higher Monday to their highest in more than a week, tracking firmness in related edible oils on China's Dalian Commodity Exchange. Palm oil exports from Malaysia, the world's second-largest producer and exporter, have risen in the first half of this month from a month earlier, according to cargo surveyor data from AmSpec Agri Malaysia and Intertek Testing Services.

Outlook

CPO futures expected to trade sideways to lower due to higher stocks in the port and expectation of higher imports in coming months coupled with lower Malaysian price. However, any import duty hike by the government may support palm oil prices.

 

Chana

NCDEX Chana closed nearly unchanged on Monday to close at 4,305 rupees per 100 kg due to balance supply and demand situation. Improvement in demand in physical market may support price but there is ample supplies in physical market due ot record production last year. NAFED is still holding more than 12.8 lakh tonnes of chana from last season and procured about 7.75 lakh tonnes this season compared to more than 23 lakh tonnes last season. As per govt data, chana imports increase by 212% in April compared to last year at 24,600 tonnes. Currently, chana attract 60% import duty since Mar 2018 which restricted imports. However, imports were down 84% to 1.86 lt in 2018/19 (Apr-Mar) compared to 9.81 lt last year, while exported are about 2.28 lt compared to 1.28 tonnes last year. In 2018/19, chana output forecast revised slightly lower at 100.90 lt in 3rd advance estimate compared to 103.2 lt in 2nd advance estimated by Government.

Outlook

Chana futures will trade sideways as government agencies holding major portion of Chana. Moreover, good stocks with physical traders due to higher production this year are pressurizing the prices. Procurement of chana at MSP by NAFED is slow and may pick up in coming weeks.

 

Cotton / Kapas

MCX Jul cotton edged little higher to close at 21,330 per bale as cotton due to steady increase in demand and expectation of slowing of imports. USDA increase production forecast for cotton in India by 1.75% this month to 29 million bales while the stocks jump by 17.8% to 8.93 million bales. As per farm ministry report, acreage under cotton in the country was 77.71 lakh ha so far, up slightly from 77.50 lakh ha from a year ago. Anticipation of improving sowing in Central and Western parts of country after consistent rains in cotton growing states is keeping prices in check. Area in Gujarat under cotton is higher by 64% as on 12-Jul19 at 18.76 lakh ha compared to 11.44 lakh ha last year. Preliminary data published by the Ministry of Commerce indicates that shipments in the month of April 2019 are 74% lower at 2.11 lakh bales (Vs 8.23) as compared to last year. Government increase MSP for cotton (medium staple) and cotton (long staple), by Rs. 105 per quintal and Rs. 100 per quintal respectively.

ICE cotton gained 2% on Monday, due to short covering on concerns of crop damage in major cotton-growing regions due to Hurricane Barry. After the close, NASS showed 60% of the US cotton crop was squared (69% avg) and 20% of the acres were setting bolls (25% avg) as of Sunday.

Outlook

Cotton futures may trade sideways due to good sowing progress in Gujarat. However, an extended dry spell in Gujarat has started affecting standing crop. Moreover, expectation of steady increase in demand and slowing in imports may support cotton prices in coming weeks

 

Spices

Jeera

The most active Jeera futures climb to highest levels in current calendar year on reports of improving export demand from China. The crop from competing countries — Syria and Turkey — are poor, and hence India will be the major source of supply in the world market. As a result, China has increased offtake of jeera from India. It closes at 18,255 rupees per 100 kg and jump close to 6% this month. As per, Agmarknet data arrivals of jeera in Gujarat is about 12,800 tonnes during first half of July compared to 5000 t last year same period. As per Commerce Ministry data release, Jeera exports in April is down by more than 11% on year to 23,300 tonnes. Overall, exports during first 4-months in 2019 down 14.4% on year to about 66,000 tn compared to 77,000 tn last year for same period. According to third advance estimates by Government, India’s cumin seed (jeera) output in 2018/19 is 5 lt, down 36.3% than the previous year’s output of 7.85 lt.

Outlook

Jeera futures expected to trade sideways to higher due to rebound in export demand.

 

Turmeric

Turmeric Aug futures jumps to 5-week high to close at 7,000 rupees per 100 kg on fear that deficit rains in southern parts of country may impact turmeric output for next season. The rain deficit increase to currently 28%. Arrival of turmeric at the Erode markets in July declines after prices slipped to 4-month lows last week. Turmeric exports during the month of April, little down 1.61% y/y to 10,744 tonnes (Vs 10,919 t), as per govt data. While, turmeric exports in first 4-months in 2019, up by 10% to 42,000 tn compared to 38,171 tn. Country exported about 1.33 lakh tonnes of turmeric in FY 18-19 compared to 1.11 lt last year. In 2018/19, production is forecast at 10.77 lt in the 3rd advance estimates by the government.

Outlook

Turmeric futures expected to trade positive due to low level buying and expectation of improvement in upcountry demand. Moreover, deficient rains in turmeric growing areas may also support turmeric price in coming weeks.

 

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