Market pulse

Brent crude: global factors hold sway
The brent crude oil prices this year surprised economies of almost all developing and developed nations when they scaled a height of $68.06 on August 13. The steep rise in crude prices is mainly attributed to America's war on Iraq and extremists' heinous act to set oil reserves on fire.

Cut in production by the Organization of the Petroleum Exporting Countries (OPEC) from time to time has also led to scarcity of crude oil around the world. India has already announced its reservation for the time being, but supply tightness has adversely affected the economy.

This year brent crude oil prices started moving from $40.38 level on January 1 and continued to advance alarmingly. Oil accounts for about 30 per cent of India's total energy consumption of about 2.2 million barrels per day. The country imports about 70 per cent of its total oil consumption.

Keeping the momentum going, brent crude oil in Mumbai spot market at Multi Commodity Exchange of India (MCX) perked up to Rs 2,991 per barrel (bbl) on September 2 and the same level continued on September 3 due to increasing demand from consumers. On June 22, the brent crude oil price was ruling at Rs 2,504 per bbl.

Crude oil prices have been volatile for quite some time now, and the trend is expected to continue till political situation returns to normalcy in Iraq. National calamities like the one that happened in South America have also contributed to the worsening of the situation.

Despite skyrocketting increase in volume to 40,300 kg in the first week of September from 5,000 kg in the beginning of the year, the open interest declined substantially to 200 kg from 600 kg. The turnover also mounted from Rs 1,201.75 lakh from Rs 4.86 lakh in the comparable period.

Gold: festivity adding to the glitter
Gold starts glittering with the begging of festival season, irrespective of extraordinary circumstances.

Hence, gold trading in India is mostly done in the first and the last four months of the year. Maintaining the trend, spot gold (99.9) on MCX had surged to an all-time high of Rs 6,425 per 10 gm on March 12.

Similarly, gold (99.5) scaled up its own high of Rs 6,385 per 10 gms on the same day. In India, the yellow metal slowed down intermittently to touch the low of Rs 5,990 (99.9) per 10 gm and Rs 5,950 (99.5) per 10 gm on August 2.

Despite having distinction as the world's largest gold consumer with an annual demand of 800 tonne, in India, gold price is mainly regulated by that in London - the main trading hub.

Silver: price movement still stable
Despite having been in demand in India, silver has failed to prove as a substitute to gold.

In spite of it being one of the PGMs, silver is not taken seriously by consumers. Consumers have been attracted towards silver not for storing the metal as an asset but for consumption in terms of bangles and other ornaments.

Abundance of silver, too, has not helped the cause of its price movement appreciably. So, price of silver in the country does not move in the same proportion as that of gold.

On February 22 this year, price of silver was maximum at Rs 11,220 per kg, while it touched the bottom of Rs 10,165 per kg on April 1. Primary mines produce only about 27 per cent of the world's silver, while as much as 73 per cent of the metal comes as a by-product of gold, copper, lead and zinc mining.

The open interest at 70 kg on January 8 surged to 2,29,470 kg, when the price soared to Rs 11,140 per kg on March 9. The turnover mounted to Rs 72,798.72 lakh from Rs 6.65 lakh during the comparable period.

Sugar tastes sweeter with festivals around
Sweet being favourite to Indians, sugar is in high demand in the country. And the demand for the commodity literally soars when it is the festval time.

Producers immensely benefit of rising demand of sugar during the festival season. Sugar prices leap mainly when orders are placed with the producers keen maintaining their stock levels. But when there is supply tightness, the prices go up dramatically, irrespective of seasons.

Sugar prices remained volatile throughout the year till August. Prices of M30 sugar touched the peak of Rs 2,057 per quintal on August 2 after falling dramatically to the lowest level of Rs 1,785 per quintal in the beginning of the year i.e. on February 16.

The price of S30 sugar followed suit. After the initial decline to Rs 1,750.5 per quintal, the S30 sugar reached the high of Rs 1,966.5 per quintal on May 1. India's total sugar production and consumption vary between 17-21 million tonne and 17-19 million tonne respectively. Muzzafarnagar, Mumbai, Delhi, Ludhiana, Kolkata, Hyderabad and Chennai are major trading centres of sugar in India. Groundnut seed & oil: output still fluctuating
With a total production of approximately 6.5 million tonne of seed (23 million tonne the world over) and 1.5 million tonne of oil (5 million tonne), India shares approximately 30 per cent of the world's total production.

Centred mainly in Gujarat (1-3.5 million tonne), Tamil Nadu (1 million tonne), Andhra Pradesh (1-2 million tonne), Karnataka (0.5 million tonne), Maharashtra (0.5 million tonne), seed production mainly depends on rainfall.

Selling prices of seed and oil vary depending upon rainfall and other market conditions, including available stocks from the last year and projected crop and yield thereafter.

Groundnut oil prices were quoted at Rs 478 per 10 kg in the beginning of the year, which later slumped to Rs 433 per 10 kg by the end of the month. Loss in crop position because of heavy rains in its main producing zone lifted the price to Rs 498 per 10 kg in early August i.e. on August 6 and August 8.

Production is highly vulnerable to rainfall deviations and displays huge fluctuation between years. Gujarat (1-3.5 million tonne), Tamil Nadu (1 million tonne), Andhra Pradesh (1-2 million tonne), Karnataka (0.5 million tonne) and Maharashtra (0.5 million tonne) are the major producers of seed. Around 75 per cent of the crop is produced in khariff (June-September) and remaining 25 per cent in rabi (November-March).

India exported around 1 lakh tonne of groundnut oil in 2003-04 after a gap of four decades, as crop failed in Senegal and Argentina.

Turmeric: spices up over demand
Mainly cultivated in Andhra Pradesh, Maharashtra, Orissa, Tamil Nadu, Karnataka and Kerala, turmeric is an important spice in India, Southeast Asia and Indonesia. It is indispensable in the preparation of curry powder. Turmeric has some medicinal properties too.

Therefore, the demand of turmeric in the country multiplies with dual applications. India is the largest producer, consumer and exporter of turmeric with total production variates depending upon season to season. India has 185.32 lakh hectare under turmeric cultivation with a total production of approximately 701.66 lakh tonne.

In 2004, Andhra Pradesh tops both in area and production with 73.93 lakh hectare and 375.77 lakh tonne, respectively. Tamil Nadu follows with 33 lakh hectare with 158.64 lakh tonne. Productivity was highest in Tamil Nadu 6,118 kg per ha. India exports approximately 34,500 tonne of turmeric, valued at about Rs 127.5 crore.

The price of Erode-origin turmeric on MCX was ruling at Rs 2,100 per quintal - the lowest in the year on April 4. With a projected loss in yield this year because of heavy rains in the producing centres, the price shot up to Rs 2,485.4 per quintal on June 24. The Nizamabad-origin turmeric was quoted at Rs 2,772.95 per quintal on March 1 which slid to Rs 2,124.75 per quintal on June 1.

Turmeric Sangli, however, moved in a narrow range and the highest quote was at Rs 3,162.2 on June 9 before drifting down to its lowest of Rs 2,973.45 per quintal on May 31.

Guargum & guarseed: turning pricey
Guargum and guar seed prices remained volatile throughout the year till the first week of September because of a 43 per cent drop in acreage in Rajasthan, the major producer of guar in the country.

The price of guargum and guarseed started picking up since the report was published. The price of Jodhpur-origin guargum which slowed down at Rs 3,367.15 per quintal on January 27 jumped to Rs 5,954.15 per quintal on September 1 and widened the scope further for price growth. India is the major producer of guar seed followed by Pakistan and the US.

India's guarseed production fluctuates between years and has been around 2-6 lakh tonne in the recent years. The country's guar production in 2003 is estimated at around 6 lakh tonne.

India accounts for 80 per cent of the total guar produced in the world. As much as 70 per cent of the production comes from Rajasthan. The other producers are Gujarat, Haryana, Punjab, Uttar Pradesh and Madhya Pradesh.

Considering the US, Australian and African crop, the total world supply of guar split is around 4-5 lakh tonne in a normal year. It may even increase to 8 lakh tonne as has been visible in 2003-04.

Guar is a crop of semi-arid - sub-tropical areas spread over the north and north west of India and east and southeast of Pakistan. It is grown in arid zones of Rajasthan, some parts of Gujarat, Haryana and Madhya Pradesh.

Moving in tandem, guar seed (Bikaner) touched a high of Rs 2,085.6 per quintal on September 1, up from the lowest at Rs 1,317.45 per quintal on January 25. Guar seed of Jodhpur origin jumped to Rs 2,040.4 per quintal on September 1 from its lowest level of Rs 1,358.3 per quintal on January 27 this year.

Urad on a rise
The price of Kolkata-origin urad was range-bound on the MCX as urad is abundantly available in the physical market. The commodity touched a high of Rs 1,873 per quintal on July 21 and sold at Rs 1,807.4 per quintal on the lower side on August 12.

In contrast, Mumbai-origin urad was highly volatile with an exemplary trade on the MCX. Urad of Mumbai-origin started the year at Rs 1,490.9 per quintal and slid to Rs 1,362.1 per quintal on February 17.

Later, demand went on increasing because of a supply constraint thereby enabling price to go up to Rs 1,876.7 on July 19 - the highest of the year till the first week of September.

India annually produces around 1.3-1.5 million tonne of urad, which is normally 10 per cent of its total pulse production of 12-15 million tonne. The major producing states are Andhra Pradesh, Maharashtra, Orissa, Madhya Pradesh, Tamil Nadu and Uttar Pradesh. The country imports urad from Myanmar to supplement the domestic production. This imports are around 1-2 lakh tonne.

The open interest of 6.30 lakh kg on February 25 surged to 6.40 lakh kg on August 4. The total volume also surged to 1.60 lakh kg from 10,000 kg during the comparable period. The turnover also witnessed a sky-rocketting growth from Rs 1.37 lakh to Rs 31.04 in the same comparison.

Copper: LME still holds the key
Much of the trade in copper is done directly through traders and producers. Hence, the impact of demand-supply tightness is comparatively lesser on exchange prices.

Copper wire bar prices in the domestic market follows the the London Metal Exchange (LME) movement and shot up to the highest on September 5 on the MCX at $3,950 per tonne or Rs 230 per kg in comparison with the lowest of $3,070 per tonne on January 5.

In rupee terms, the white metal declined to Rs 202 per kg on May 18. Copper prices on the LME are touching the all-time high of $4,000 per tonne because of the continued warehouse stocks decline. Supply disruption from BHP Billiton and Groupo Mexico has also helped the price to toch an extraordinary height. India produces approximately 4.5 lakh tonne of copper per annum and imports approximately 1 lakh tonne to meet the rising demand.

The open interest of 45,000 kg on May 17 surged to 10.29 kg on August 30 and volume of 29,000 kg also mounted to 1.38 lakh kg. Turnover too increased by Rs 36.78 lakh to Rs 229.57 lakh.

Aluminium: losing the sheen
Aluminium is also moving in line with copper to touch an alarming height of $2,100 on the LME. The domestic market too follows the same trend with price peaking at $2,030.5 per tonne on March 15. However, the momentum could not be kept. Soon after the peak, aluminum sunk to $1,674.5 per tonne on the back of the news that domestic aluminium producers are expanding their capacity to add extra flow to the already overflowed market.

In ruppe terms, aluminium price perked up to Rs 106.25 on April 26. But, towards the beginning of July the price started declining to touch the year's low of Rs 99 per kg. India is producing approximately 8.5 lakh tonne of aluminium per annum and exporting about 2 lakh tonne to neighboring and far-eastern and African countries.

Basmati rice: retaining the aroma
Basmati rice ramained volatile throughout the year on MCX with a total price difference between the highest and the lowest recorded at Rs 463 per quintal. The commodity early this year surged to the highest level of Rs 2,983 per quintal followed by a rising demand from small-time retail buyers. The demand increases with the beginning of matrimonial season. Moving in a close range, the price lowered to Rs 2,520 per quintal on August 26.

India is the largest producer and exporter of basmati rice in the world with an annual production of around 10-15 lakh tonne, of which around two-thirds is exported. The remaining is consumed within the country.

Basmati rice is grown exclusively in the northern part of western Punjab (on both sides of the Indo-Pakistan border), Haryana and Western Uttar Pradesh. Haryana accounts for around 50 per cent of the acreage in the country, followed by Uttar Pradesh (25 per cent) and Punjab (18 per cent). The productivity of basmati paddy in the country is around 1,400-2,100 kg a hectare against the yield of non-basmati paddy of 4,500-500 kg a hectare.

Steel: global trends fuel movement
Steel trade through the exchange is new to India and therefore least trade is reported in future exchanges. With the price picking up in the internaional markets early this year, the domestic market also saw a surge to Rs 31,500 per tonne (steel flat - Mumbai) on March 3.

This was the time when global steel prices were moving up especially in Europe and America. Flat steel of Mumbai origin slumped to Rs 22,320 per tonne on August 08 because of anticipated supply boost from integrated producers'. Steel long of Gobindgarh origin also shot up in the early part of the year which was quoted at Rs30,000 per tonne on February 3.

Later long steel slumped to Rs 18,500 per tonne on July 26. Long steel of Bhavnagar origin moved the top at Rs 23,430 on April 27 and slid in July, as usual, to Rs 18,320 per tonne. India is producing approximately 36 million tonnes of steel per annum and targetting to produce 100 million tonne by 2020. The country exports about 4 million tonne of steel to its neighbouring countries.

Cumin seed: in a grove over supply glut
Cumin seed was perhaps one of the very few commodities that gained least momentum. Cuming seed, of which India is the world's largest producer and consumer, moved in a very slow range on the MCX with the highest level at Rs 72 per kg and the lowest level at Rs 69 on March 2.

Since cumin seed is abundantly available in the open market, only a few traders opt for trades through exchanges. The commodity remained untraded on most of days on the MCX. Unjha-origin cumin seed was ranging between Rs 79.5 per kg on February 24 and Rs 69.2 per kg on August 25. Unjha-origin cumin seed in per quintal term was quoted between Rs 7,905.5 on February 24 and Rs 6,913.7 per kg on August 26.