Monsoon Likely To Wash Away Phase Of Seasonal Lethargy

Indian commodities markets are awaiting monsoon rains to wash away a phase of seasonal lethargy, traders said on Sunday.

"The monsoon is a crucial factor. Prices of most agricultural commodities move up or down depending its progress," said Bombay Oilseeds and Oils Exchange president Navin Shah. India depends more on the four-month June-September monsoon season than its limited irrigation facilities for growth of its crops.

In the week to Friday, edible oil prices were subdued, a trend that traders predict will continue through the next week.

"The timely monsoon rains or a delay in their arrival makes a difference," Shah said. Regular monsoon is yet to break over India though pre-monsoon rains lashed parts of the country. "There are enough palmolien stocks and imports are in the pipeline for July/August/September delivery," Shah said. "My feeling is that prices will stabilise at some lower level."

 

Palmolein was quoted at 272 rupees per 10 kgs on Friday against 276 rupees a week ago. Groundnut oil gained 3.0/6.0 rupees to 360-363 rupees per 10 kg from 357 rupees a week ago. Gold turned south at the end the four-month wedding season in May, losing 100 rupees per 10 grammes to 4,680 rupees. Mumbai dealers said a wave of sea-borne gold hit the market last week, as smugglers raced from the Gulf in their small boats to beat the monsoon storms.

Silver, however, recovered 155 rupees per kg on industrial and speculative buying. "Limited supply and demand will keep gold prices in a narrow band," said Bombay Bullion Association president M L Damani. He said farmers would be busy with sowing work in June and July which are normally lean months for bullion trade. "But if rains are good, there will be a rise in rural demand from August onwards," Damani added.

Among non-ferrous metals, copper was active, gaining 150 rupees per quintal (100 kg) to 13,750 rupees on demand for imported stocks, available at competitive prices.

Traders said a recent firm trend on the London Metals Exchange (LME) had prompted local producers to raise prices.

Importers who had brought in stocks at lower prices earlier enjoyed market advantage, said Bombay Metals Exchange president Sharad Parikh. " They could offer stocks cheaper." State-owned Hindustan Copper Ltd quoted wire bar prices at 14,260 rupees per quintal against a market rate around 13,750.

Nickel lost 250 rupees per quintal to 36,500 rupees but other base metals were generally steady in dull trade. "I expect the local market to stay firm this week in line with LME trends," Parikh said.

LME prices influence local markets as India imports most of its base metals.

Sugar prices moved up as summer demand continued, with S-30 gaining 15 rupees to 1,430 rupees per quintal and M-30 rising by 10 rupees to 1,470 rupees.

Traders said sugar prices will depend on the release of free sale quota by the government for the July-September quarter. It released 2.17 million tonnes for the three months ending June. The cooling monsoon rains are likely to reduce bulk demand from soft drink and ice cream makers, dampening the market.

Cotton traders said prices will remain firm as most of the 1996/97 (October/September) crop, estimated at a record 16.78 million bales of 170 kg each had already reached the market. Reports the government was considering allocating an extra 150,000 bales for export helped market sentiment turn strong.

Among oilseeds extractions, soymeal was under pressure with export demand dull due to thin crop arrivals and high prices. It may lead to a drop in 1996/97 (November/October) soymeal exports to 2.2 million tonnes, down 400,000 from last year.

Another commodity chasing exports is rubber (latex) with traders keen to explore world markets due to low domestic demand and relatively high global prices.