commodities april 2013 review

7/28/2019 Commodities April 2013 Review

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Monthly ReviewApril 20th, 2013 Volume 7, Issue 3

Inside this issue

Ventura Column

Top Stories

Currency Update

March'13 Performance of SelectFew Commodities

US Economy Update

Report on Jeera

Event calendar

Call Performance


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What does Open Interest mean?

Mohammed imranExecutive Research (Bullions and Energy)

Open Interest is the total number of outstanding contracts held by marketparticipants at the end of the day. Alternatively, it is the total number of futurescontracts that have not yet been exercised (squared off) or expired.

Open interest indicates the trend in the F&O market and measures the flow ofmoney into the futures market. The open interest position represents theincrease or decrease in the number of contracts for a day, and it is shown as apositive or negative number.

If we read open interest data with the price changes and volume in the market,we may get meaningful information.

Here are the thumb rules-

Prices will continue to rise when volume, prices and open interest arerising

If prices are rising, but volume and open interest keeps falling- It means thatan uptrend would gradually halt.

It's a weak market if the prices are falling, but volume and open interest arerising. New money is entering the market in the form of shor t sellers.

And finally, when prices, volume and open interest are all declining, then wecan assume that the market has almost bottomed out.

Advantages of monitoring Open Interest Changes in the Open Interest asmentioned earlier can help a trader interpret the future trend of a particularcontract.

Open Interest RISING -> Indicates that the present trend (up, down, flat)will continue

Open Interest FALLING-> Indicates that the present trend(up, down, flat) islikely to change or is coming to an end

THE USE OF OPEN INTEREST

Top StoriesA 'bail-in' saved Cyprus. But dark days are ahead.

The political elites in Brussels can once again breathe a sigh of relief. Cyprus did implode and take the euro with it. In many ways, the latest drama in Cyprus followe

familiar pattern: the so-called tro ika of European leadership (the European Commissthe European Central Bank, and the International Monetary Fund) flew to a countryEurope's periphery to rescue its failing banks, that country's leadership balked, and theventually caved to Brussels's demands.

In the past, the troika had rescued failing banks with taxpayer-financed bailouts, whshareholders took a hit but bondholders and depositors were lef t unscathed. This is familiar model we saw in Greece, Ireland, Portugal, Spain, and again in Greece. So wwas different about Cyprus, and why did things turn sour? Well, this time, the trochanged the model from a bailout to a bail-in.

Under the bailout model, taxpayers implicitly promise to bail out bank creditors adepositors when things go south. Accordingly, banks are regulated by the governmentorder to protect taxpayers. By contrast, under the bail-in model, depositors and invest(who loan money to banks) must foot the bill and bail-in banks in times of trouble. Tgives them a big incentive to keep a watchful eye over bankers.

Until now, Europe (and the U.S.) has chosen the bailout route. Banks were deemed too to fail, and the public believed it. Indeed, in Cyprus, it was well known that several labanks were insolvent as early as the fall of 2011. Yet most depositors didn't run for exits. They thought the taxpayers (in other words, Germany) would bail them out.

They were wrong. Despite the Cypriot rescue package being only a fraction of the sizprevious euro-zone bailouts, European leadership decided that, this time, taxpayers wonot be left footing the bulk of the bill for the risks taken by bankers. Rather than simpenalize EU taxpayers and the owners of Cypriot banks, the troika made the baiconditional on a wealth tax on Cypriot bank depositors and creditors.

The problem was that, in the original proposed bail-in deal, this tax would have applied tobank deposits, including ones implicitly insured by the European Central Bank. This sshock waves through the European banking system, as depositors throughout Eurowondered just how safe their insured deposits actually were. Fearing a financial paEuropean leaders ultimately modified the program. As usual, in the eleventh hour, a dwas struckone that preserved small, insured Cypriot deposits while exacting a hefty

on larger, uninsured deposits.In the long run, this new model may represent an improvement. But the euro remaincreature of politics, not economics and finance, and only time will tell if European leadwill stick to the Cyprus bail-in model. For now, this uncertainty and the persistent pattergoverning by crisis will spawn continued anxiety for European savers and investors. Twill only exacerbate Europe's credit crunch, promising weak economic growth going forwa

Contrary to the relatively rosy picture being painted by European leaders, the Cypeconomy will be hit especially hard. By my estimate, Cyprus can expect its GDP to contrby 12.2 percent in 2013. For Cyprus, even if a financial apocalypse was averted, it appe

the darkest days are yet to come.

1

Rupee Hits One-Month High

Dollar Falls To Lowest Level Against Euro Since Late February

The Indian rupee hits one-month high against the U.S. dollar continuingits strong run on expectations that a recent fall in commodity priceswill help narrow the current-account deficit. The rupee has gainedmore than 1.0% as commodity prices, particularly those of crude oiland gold, fell heavily on concern of economic slowdown in China.

Crude oil and gold, India's top two commodity imports by value, arethe biggest contributors to the current-account deficit, which swelledto a record 6.0% of gross domestic product in the October-December quarter. The curreaccount deficit is widely seen as the main drag on the rupee, which fell 3% against tdollar in 2012 after falling more than 16% in 2011.

Lower commodity prices may also slow the pace of inflation, allowing the Reserve BankIndia to ease monetary policy to boost growth.

The dollar is losing ground against its major European competitors. The risk appetite

investors has increased, as evidenced by the rebound in equities.

Currency Update

Contract Price Open Interest (%) Future Trend(predicts)

Rising Rising The Contract is likely to trade strongin the coming days

Rising Falling The Contract is likely to see somedownside in the coming days

Falling Rising The Contract should not be enteredas of now

Falling Falling The Contract can be entered, as itslikely to go up

TrendOpenInterestVolumePrice

Strong up

Strong down

Weak up

Weak down

* Open interest often falls when big uptrends end with a crash as longs liquidate.


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US Economy Update

2

MARCH '13 PERFORMANCE OF SELECT FEW COMMODITIES

Commodity Contract 1stMarch Rate 30th March Rate % Change

Gold 05th Apr 29717 29394

Silver 04th May 54946 53072

Crude Oil 19th Apr 5058 5400

Natural Gas 25h Apr 195.9 221.9

Copper 30th Apr 430.45 410.1

-1.09

-3.41

-4.73

6.76

13.27

Manufacturing in U.S. Grew for Third Month in February TO 54.2

Trade Gap in U.S. Widened on Costlier Energy Import

Payrolls Rose as U.S. Employers Looked Past Budget Cuts

Consumer sentiment hit by fiscal policy concerns in March

Manufacturing in the U.S. expanded in February for a third month as businessesinvested more in new equipment. A reading of 54.2 which was projected for theInstitute for Supply Management's factory index after a nine-month high of 53.1 inJanuary.

The trade deficit in the U.S. widened in January from a three-year lowas costlier crude oil lifted the impor t bill. The gap expanded to $44.4billion from December's $38.5 billion that was the smallest shortfallsince January 2010.

Sustained spending gains by U.S. consumers and businesses, willprobably keep driving up imports this year even as oil costsmoderate. Overseas purchases of American-made goods, whichhelp to contain the trade gap, are also poised to rise as nations fromEurope to China use stimulus measures to revive growth. Withincreasing oil prices, the trade gap tends to widen. U.S. economy islooking for the trade deficit to return to a level consistent with growingimport demand and expor t demand from abroad.

Payrolls probably grew in February, a sign U.S. employers were undaunted by thebudget impasse in Washington as sales rose. An additional 165,000 workers werehired last month after a 157,000 increase in January. Consistent with the moderatepace of economic growth, conditions in the labor market have been improvinggradually. A recovery in house prices and a need to enlarge the supply of homes forsale has stirred construction activity.

Consumer sentiment tumbled to its lowest since December 2011 in early March, hitby dissatisfaction with government economic policies and as fewer Americansexpected to see improvements in growth or the labor market. University ofMichigan's preliminary reading on the overall index on consumer sentiment

There was also some much better than expected U.S. economic data released,including housing starts and industrial production.

With new construction of multi-family homes showing a substantial increase,showing that housing starts in the U.S. increased by much more than anticipated in

the month of March.

The Commerce Department said housing star ts jumped 7.0 percent to an annualrate of 1.036 million in March from the revised February estimate of 968,000.Economists had expected housing starts to climb to an annual rate of 930,000from the 917,000 originally reported for the previous month.

Consumer prices in the U.S. unexpectedly showed a modest decrease in the monthof March, according to a report released by the Labor Department, with the droplargely due to a sharp decrease in energy prices.

The International Monetary Fund trimmed its growth projections for the global

economy as it saw a three-speed recovery evolving mainly owing to the diverginpaths of the U.S. and the euro area.

The U.S. economy is expected to grow 1.9 percent this year, which is smaller thanthe 2 percent expansion forecast in January. The growth forecast for next year waleft unchanged at 3 percent.

Within Eurozone, France, Italy and Spain are forecast to witness economiccontractions this year. Germany is expected to log 0.6 percent growth. Theinsufficient progress toward stronger economic and monetary union could lead toa slower than expected recovery, the IMF warned.

The IMF raised the forecast for Japan to 1.6 percent growth this year from 1.2percent expected earlier, citing the new government's aggressive monetarystimulus plans. Next year, the Japanese economy is seen growing 1.4 percentdouble the 0.7 percent expansion seen earlier.

dropped to 71.8 from 77.6 in February, short of expectations for 78. Across-theboard government spending cuts of $85 billion went into effect at the beginning o

the month after U.S. lawmakers failed to come to a new deal.

Builders began work on more houses in February and permitsfor future construction climbed to the highest level in almost fiveyears, pointing to a sustained rebound that will help power the U.Sexpansion. Advances in residential construction will probably givan even bigger boost to growth this year than in 2012, when icontributed for the first time in seven years. The gains arerippling through the economy as improving property values helprestore consumer confidence and benefit builders and homeimprovement retailers, offsetting some of the damage fromgovernment cutbacks.

Sales at U.S. retailers climbed twice as much as forecast in February

showing improving job prospects are helping consumers and theeconomy overcome higher taxes and gasoline prices. The

sequestration and the cutbacks will hurt and take some toll. The home resalemarket is also experiencing lean inventories. The recovery in the sector is beingsupported by record-low mortgage rates, which have been held down by theFederal Reserve's very accommodative monetary policy stance.

The Pending Home Sales Index, a forward-looking indicator based on contracsignings, slipped 0.4 percent to 104.8 in February from a downwardly revised105.2 in January, but is 8.4 percent higher than February 2012 when it was 96.6Contract activity has been above year-ago levels for the past 22 months; the datareflect contracts but not closings. Before January, the last time the index showed higher reading was in April 2010 when it was 110.9, shortly before the deadline fothe home buyer tax credit. The index is based on a large national sample, typicallrepresenting about 20 percent of transactions for existing-home sales.

Gains in Building Permits Signal Sustained U.S. Housing Rebound

Sales at U.S. Retailers Advance by Most in Five Months

Pending Home Sales Slip on Constrained Inventory

Commodity Contract 1stMarch Rate 30th March Rate % Change

Nickel 30th Apr 927.3 911.5

Zinc 30th Apr 112.2 102.9

Kapas 30th Apr 975 953.5

Jeera 20th May 13047.5 13187.5

Ref.Soya oil 20th May 669.6 679.55

-1.7

-8.29

-2.21

1.07

1.49


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3

INTRODUCTION

JEERA CULTIVATION PATTERN

Cumin seed commonly known as Jeera (Cuminum cyminum) belongs

to Apiacae family.Though Cumin is a native of Egypt, it now mostly

produced in India. India is the largest producer and consumer of Jeera

(cumin seed) in the world. Jeera is an ancient spice having a history of

over 5000 years and referred as native to the historical Levant region

and northern Egypt.

Cumin (jeera), the second most important spice in the world after

pepper, is grown for its seeds, which are used in various cuisines. It is

mainly grown in the Mediterranean region, including India, Syria,

Turkey and China.

Jeera is a tropical plant and grown in cooler regions which is best

suited for sandy soil. It is grown from the seed. It requires less water

and more cold for its better growth with ideal temperature of 25 to 30

degree. High humidity during flowering & fruit set, causes fungal

diseases in this crop.

The cumin crop can be produced on almost all soil types but the soil,

which suits the best to this crop, is a well-drained, fertile sandy soil

type. It needs a minimum of 3 to 4 months of duration period af ter

which it is harvested.

JEERAThe plant becomes mature and ready to harvest when it turns

yellowish brown. After the crop gets harvested, the cumin seeds are

cleaned up through the winnowing process.

Jeera crop is highly sensitive to rain, if rain occurs during harvesting

time (February to March) quality of the Jeera will be badly affected and

which affects production also. It will turn black color and fetches

lowest price in the market.

It had a major role as a flavoring, spice and medicinal uses throughou

history.Cumin is used mainly where highly spiced foods are preferred. It

features in Indian, Eastern, Middle Eastern, Mexican, Portuguese and

Spanish cookery. Cumin is often grounded to mix with other spices

and to use in various cuisines.

Improved varieties like S-404, MC-43. Gujarat Jeera-1 (GC-1), GC-2

GC-3, RS-1, UC- 198, RZ-19, etc., evolved by Agricultura

Universities of Gujarat and Rajasthan having higher yield potential are

useful for cultivation. The maturity varies between 110 and 115 days

depending on the variety.

Jeera is packed in gunny bags and each bag contains 55 kg weight o

jeera seed. Before packing in the jute bags, it is cleaned by machines

in order to remove the stalks, other foreign material, stones, dust etc

Generally jeera is harvested manually, and that is why before

packaging it is required to be cleaned properly and cut by machine.

During storage, jeera absorbs moisture immediately. Therefore, it is

advisable to store it in one-layer plastic coated bags. Jeera is also

packed sometimes in cloth, paper or polythene bags depending on

the requirements of the buyer. It is preserved at least one to two fee

away from the walls in order to save it from moisture. The jute bagsare staked over wooden car ton or plastic sheet for more security.

India has ever been the world spice home and has always been

renowned for the best and expensive variety of spices that are

produced in the country. The similar reputation is repeated in the case

of jeera or cumin seeds. Being the largest producer, consumer and

exporter of jeera in the world, India claims to be the most dominating

player in the world market scenario.

USES OF JEERA

JEERA VARIETIES

PACKAGING AND STORAGE

DOMESTIC SCENARIO


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4

2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13E`

0

100,000

200,000

300,000

400,000

500,000

600,000

PRODUCTION & AREA OF JEERA IN INDIA

YEARS

AREAHECT

&PRODUCTION

IN

TONNES

Jeera is Rabi crop it is generally sowed in the month of October and

November and it get harvested after 4months (110 to 120 days) in the

month of Feburary and March.

The production of jeera in India hovers around 1.5 to 2 lakh metric tons

as it also has the maximum area granted to the cultivation of this spice.

Gujarat scores the highest production in the country constituting to

70% of the total production in the country. The trend of production is

observed to be in a rising trend.The domestic consumption demand of

the spice in the country is around 80% production and the rest of the

production is used for export purposes.

PRODUCTION & AREA OF JEERA

JEERA CROP CALENDAR

Country

INDIA

Jan Feb Mar Apr May Jun July Aug Sep Oct Nov Dec

Harvesting Sowing

CROP CALENDAR

GUJARAT

70%

RAJASTHAN

25%

OTHERS5%

JEERA PRODUCING STATES

Banaskantha and Mehsana in Gujarat and Barmer, Jalore, Jodhpu

and Nagaur in Rajasthan are the biggest producers of jeera.

ARRIVALS & MAJOR TRADING CENTRE

JEERA ARRIVALS IN UNJHA (MEHSANA)

2008-09 2009-10 2010-11 2011-12 2012-13

250

200

150

100

50

0

YEARS

FIGIN

TONNES

114.6

195.3

21.9

96

177.7In 2012, the domestic prices witnessed a roller coaster ride due to

higher production and surge in export demand. The prices plummeted

around 33% in the first quarter of 2012 (calendar year) due to a sharp

rise in production by about 34% to 38 lakh bags (1 bag = 55 kg).

India's 2013 Jeera output is estimated at 38-40 lakh bags (of 55kgs

each), at par with the production in 2012

According to Gujarat State Agri. Dept., Jeera sowing area is around 3,

24,400 ha. Three year average of total sowing is around 3, 18,900 ha

in Gujarat. Last year saw production of bumper crop and total 3,

64,000 ha. area was under Jeera Cultivation.

MAJOR PRODUCING STATES IN INDIA

In India Jeera is cultivated in the states of Gujarat, Rajasthan,Utta

Pradesh,Punjab and Tamil Nadu.,But Jeera grow abundantly in

Gujarat and Rajasthan due to its favorable climatic condition,they

contribute around 95% of total jeera production.


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5

India is largest exporter, but face stiff competition from Syria and

Turkey as they have more export surplus. India exports only 20

percent of its domestic production. Exports have seen strong growth

in last six years,that is since launch of futures trading and touched

record high of 52550MT in 2008-09, four times higher than 2005 with

quantity is beneficial for domestic farmers.

JEERA EXPORTS FROM INDIA

2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13E

0

10000

20000

30000

40000

50000

60000

12879

26042 280

00

52550

49750

32500

45500

60000JEERA EXPORT FROM INDIA

YEARS

QTYINTONNES

70%

16%

5%4% 3

%2%

JEERA PRODUCING COUNTRIES

INDIA

SYRIA

TURKEY

CHINA

IRAN

OTHERS

As per the production data ,India's share is 70% to global production

while that of Syria, Turkey, China and Iran has been 16%, 5%, 4% and

3% respectively.

CROP CALENDAR

Countries Sowing Duration Harvesting

Turkey Nov-Dec 4 months (110-120 days) April-May

Syria Dec-Jan 4 months (110-120 days) May-June

Iran Dec-Jan 4 months (110-120 days) May-June

The new crop in Syria and Turkey is harvested in May-June, so unti

then, Indian jeera will find good market in overseas countries. The

global market for jeera shows a lower pressure during June -July due

to arrival pressure from Syria, Turkey and Iran.

March to July is the peak arrival season of cumin in India. Unjha

market in the state of Gujarat is the major trading center for cumin

seeds. Most of the traders are concentrated in this market. This market

has a share of over 80% among the primary markets. In Unjha, as

many as 15 grades are being traded. Hence, prices are varying widely.

The other primary markets are Jodhpur, Jaipur and Kota (in

Rajasthan).

On the other hand, Delhi, Rajkot and Mumbai are the major terminal

markets for Cumin, from where it moves to other consumption centers

of the country.

This year exports target of 45,000 tn has already been achieved. Tota

exports for 2012-13 season is now estimated at 60,000 tn. Due to

lower production in Syria and Turkey, coupled with the ongoing

tensions between them, exports are not taking place and have beendiverted to India.

UK, USA, Brazil, UAE,Nepal, Malaysia and Pakistan are the main

markets for India's Jeera. These countries together account for 44

percent of the country's Jeera exports.

Out of total Global production of Jeera ,India contributes about 70

75% of total output. Other major producers are Syria, Turkey ,China

and Iran. These countries are net exporting countries and are majo

competitors for India.

GLOBAL SCENARIO


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6

SPOT MARKET PRICE OF JEERA

Apr-12

May-12

Jun-12

July-12

Aug-12

Sep-12

Oct-12

Nov-12

Dec-12

Jan-13

Feb-13

Mar-13

10th Apr-13

May-13

Jun-13

Jul-13

10000

12000

14000

16000

18000

1273

0134

601398

2

15975

15606

1443815

043

1501

7

1483

0

1400

0

1332

213

34313

763

JEERA SPOT PRICE

Rs/Quintal

Similar Upside trend is

expected in the coming

months

From the above chart we analyse that from the month of april prices

likely to shoot up as the harvesting season is about to end and jeera

arrivals are going to drop in the market which could shoot up the prices.

India's 2013 Jeera output is estimated at 38-40 lakh bags (of

55kgs each), at par with the production in 2012.

The government of Rajasthan has exempted Jeera from value

added tax, might result in cheaper availability of jeera which may

attract bulk buyers.

In Rajasthan new arrivals have started,export and upcountry

demand in spot market is still strong but increasing new crop

arrival can pressurize the price.

India Spices Board has set the target to export 45,000 tons cuminseed, which has been achieved and export is still continued and

it is expected that expor t may be around 60,000 tons.

Lower production in Syria and Turkey, coupled with the ongoing

tensions between them, exports are not taking place and have

been diverted to India.

CURRENT SCENARIO

6

NAME TREND CMP SUPPORT KEY LEVELS RESISTANCE

S1 S2 S3 R1 R2 R3

JEERA BULLISH 13740 13400 13050 12800 14150 14900 15300 15700

SYRIA :The second largest producer of Jeera

Syria is the second largest producer of Jeera contributing 16% to the

global production. Syria has been a major competitor for India along

with Turkey as the quality of produces is considered at par with that ofIndia, hence give a stiff competition for Indian Jeera exports.

2010 2011 2012 2013E

0

5000

10000

15000

20000

25000

30000

35000

40000 35000

40000

21250

17000

SYRIA JEERA PRODUCTION

Years

FiginMT

In Syria there is shortage of laborers and due to unfavorable weather

conditions jeera production is expected at 17000 tons, lower by 20%.

Seasonal variation : Price tends to be lower as harvesting

progresses and produce starts coming into the market. At the

time of sowing and before harvesting price tends to rise in view of

tight supply situation.

Temperature, rainfall and soil moisture in the cultivating areas.

Structure of the market.

Stockiest and speculators.

Flow of Information.

Production at other producing countries.

Demand and Supply scenario.

MARKET INFLUENCING FACTOR

OUTLOOK

Increased in the production of Jeera in the domestic markets and lower output in Syria and Turkey a major exporting countries of the world, India

has a good oppurtunity to export their surplus stocks in the global markets. Thus, we expect Jeera prices to remain firm in the short to medium term


8/8

67747555 / 67547298

CALL PERFOMANCE FOR MARCH 2013

Total No. of Calls : .......................................................65

Target Achieved : ........................................................32

Stoploss Triggered: .................................................... 23

Success Ratio : .................................................. 49.23%

US Event Calendar for the period 21st April to 20th May 20136th May

13th May

EUR Retail Sales m/m

Core Retail Sales m/m

Retail Sales m/m

Business Inventories m/m

23rd April

30th April

German Flash Manufacturing PMI

EUR Flash Manufacturing PMI

Flash Manufacturing PMI

New Home Sales

GfK German Consumer Climate

German Unemployment Change

Unemployment Rate

7th May

14th May

EU Economic Forecast

German Factory Orders m/m

EUR Industrial Production m/m

24th April

1st May

Core Durable Goods Orders m/m

Durable Goods Orders m/m

Crude Oil Inventories

API Weekly Crude Stocks

EUR Final Manufacturing PMI

ADP Non-Farm Employment Change

ISM Manufacturing PMI

Construction Spending m/m


FOMC Statement

8th May

15th May

German Industrial Production m/m



German ZEW Economic Sentiment


EUR CPI y/y

EUR Core CPI y/y

PPI m/m

TIC Long-Term Purchases

Industrial Production m/m


25th April

2nd May

Unemployment Claims

Natural Gas Storage

EUR Minimum Bid Rate

ECB Press Conference

Trade Balance

Unemployment Claims

Natural Gas Storage

9th May

16th May

Unemployment Claims

Wholesale Inventories m/m

Natural Gas Storage

Federal Budget Balance

EUR Trade Balance

Building Permits

Core CPI m/m

Unemployment Claims

CPI m/m

Housing Starts

Philly Fed Manufacturing Index

Natural Gas Storage

26th April

3rd May

German Retail Sales m/m

Advance GDP q/q

Revised UoM Consumer SentimentNon-Farm Employment Change

Unemployment Rate

ISM Non-Manufacturing PMI

Factory Orders m/m

10th May

17th May

German WPI m/m

G7 Meetings

Prelim UoM Consumer Sentiment

22nd April

29th April

Existing Home Sales

Core PCE Price Index m/m

Personal Spending m/m

Pending Home Sales m/m

MON

DAY

TUESDAY

WEDNESDAY

TH

URS

DAY

FR

IDAY

Employment Cost Index q/q

S&P/CS Composite-20 HPI y/y

Chicago PMI

CB Consumer Confidence

Federal Funds Rate


commodities april 2013 review

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