'Non-agriculture commodities set to fall by 20%'

The steep price rise in non-agri commodities internationally may see correction in the coming months as funds are expected to book profits.

"Agri commodities will continue to be driven by strong demand and any correction, lead by profit booking from funds internationally, may be short-lived but crude oil, bullion and other metals will see an average correction of 15-20 per cent by year-end or the first quarter of 2009," Scott Slutsky, managing director of Chicago-based commodity trading firm Alaron told Business Standard.

Alaron is a leading trading firm on US comexes and has also entered in to an MoU with Reliance Money to help the latter offer global commodity products to Indian investors.

Gold prices have plunged from $1,032 per ounce to below $900 at present. Slutsky believes profit booking has already started in non-agri commodities and it will increase in the next couple of months when stocks are expected to bottom out and value buying emerges.

According to him, by January 2009, gold may come down to $750 an ounce while oil could drop to $75 per barrel.

Slutsky, a generation old trader, said Brazil, Russia, Argentina and some other countries were currently evaluating ways to effectively employ their petro dollars.

"Many West Asian nations are looking to invest their profits from oil and the falling stocks markets will surely attract them."

Though the worst was yet to come for the US market, Scott said that some more correction would bring petro investments to stocks, be it US or Indian.

He is bullish on agri commodities like wheat, corn, soya and even sugar as demand continue to be strong as against the supply. However, he said some correction might be seen in this space on profit booking by funds. "They will remain bullish," he added.

He believes that commodity markets would remain volatile and "risk management will be the key to success. Traditional strategies of buying and holding for long will not help commodity traders and suitable risk management will be necessary to stay float."

On the prospects of the Indian commodity market, he said the heavy tax on lenders would badly affect growth. He also gave a thumbs down to the Commodity Transaction Tax (CTT), which was proposed in the budget.