The Hindu Business Line : Bullish trend in agri commodities to continue

Projections
With the global demand-supply situation being tight for oilseed and Indian cardamom, price outlook remains positive.
With Indian sugar supply situation being surplus, price outlook remains negative.

Suresh P. Iyengar

Mumbai, Dec. 28 Consumers may continue to pay a hefty premium in 2008 for wheat, maize, edible oil, pepper, turmeric and cardamom.

A World Agricultural Supply and Demand Estimates (WASDE) report released by United States Department of Agriculture says the inventory of wheat for 2007-08 are projected lower by 32 million bushels this month, reflecting higher expected domestic use and exports.

Support Prices

At 280 million bushels, this year’s ending stocks are the lowest in 60 years. Global wheat production for 2007-08 was lower at one million tonnes (mt) at 602.31 mt this month with a drop in projected output in Argentina, Canada, and EU-27.

With an estimated import of close to 6.71 mt for 2006-07, India is likely to become a dominant player in the global markets.

“As India continues to rebuild its inventories, domestic prices are not likely to come-off sharply. Moreover, lower prices will provide additional opportunity to the Government in restocking the commodity. This will support prices on the downside,” said a Kotak Commodity research report.

With production estimates of close to 74 mt and demand of about 76 mt, India will have to resort to imports in 2007-08 of two mt.

Maize

Global maize/corn production for 2007-08 is projected higher by 1.1 mt at 769.31 mt this month with increases for Canada, EU-27, and FSU (former Soviet Union)-12.

“As crude oil prices march closer to the $100 a barrel mark, alternative fuels will attract more interest in the days to come. As corn is used to process bio-diesel, the demand for corn is only going to increase. We continue to view corn as positive, but only modestly undervalued,” the Kotak report.

Oilseeds & edible oils

Possibility of a lower rabi oilseed crop for 2008 in India could aid bullish sentiments. As per the data released by the Government, oilseed acreage as on December 14 for the rabi season 2007-08 stood at 7.7 million ha, down 11 per cent from a year ago.

“Although the Government has set the minimum support price for rapeseed at Rs 1,800 per quintal, it might not be sufficient for Nafed to procure mustard this year. Currently the prices are ruling above Rs 2,300 per quintal,” the Kotak report said.

The decline in mustard seed production and lower carryover stocks could lead to lower availability of domestic oil.

The dependence on imports is expected to increase for the next year. India has already imported around 38 per cent more oil in November 2007 compared with last year, despite a higher soyabean crush activity is a cause for concern.

The Indian edible oil imports could touch more than 5 mt this season against 4.7 mt.

As per latest WASDE report, global oilseed production for 2007-08 is estimated at 391.3 mt.

Soyabean production for India is projected at 9.2 mt. India rapeseed production is reduced by 0.3 mt primarily due to a lower area estimate. Larger crops for EU-27 and Kazakhstan for rapeseed could offset lower Indian production. Global oilseed ending stocks for 2007-08 are reduced by 1.8 mt to 54.5 mt, reflecting lower soyabean stocks for Argentina and the US. “With the global oilseed demand-supply situation being tight, our price outlook remains positive for 2007-08,” the Kotak report said.

Sugar

Major sugar producing States like Maharashtra delayed crushing activity by almost a month due to showers in October. Meanwhile, Uttar Pradesh is expected to pick up crushing activity from January after the announcement of sops by the Government and the Allahabad High Court verdict.

Although the crushing in India could continue till end of May, recovery loss could bring down production from the estimated 30 mt to 28 mt. “The drop in production might not affect prices as India has a huge carryover stock of more than 10 mt. With Indian sugar supply situation being surplus, our price outlook remains negative for 2007-08,” Kotak Commodities said.

Pepper

The Indian pepper crop in 2008 is estimated to be 48,000-50,000 tonnes. Harvesting was delayed because of heavy rains in October.

The output is also projected to be less by 15-20 per cent compared with previous year in Kodagu, which caters to the domestic market. Larger crop for Kumily and Waynad could offset lower Kodagu production. Overall, the Indian pepper crop will be more or less the same compared with last year. “The projected drop in the world availability in 2008 might help the prices to remain by and large at the current levels,” the report said.

Turmeric

Acreage under turmeric is expected to be down by 10-15 per cent compared with last year due to lower price realisation for farmers in the current season. But the lower acreage would be set off by the high carryover stock of around 1-1.2 million bags. Prices are expected to trade firm in the short term. “Production this year is expected around 4-4.2 million bags compared with 5.2 million bags of last year,” Kotak said.

Cardamom

Incessant rains in Kerala have delayed the harvest of cardamom. In addition, crops are infected by fungus due to rains.

The cardamom production is expected to be 25 per cent lower at 9,000 tonnes compared with 11,235 tonne last year. “With Indian cardamom demand-supply situation being tight, our price outlook remains positive for 2007-08,” Kotak said.

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