Agricultural commodities were once again the major gainers with soyabean rallying to its record highs and turmeric extended the gains for fifth straight week. On the non-agri front there was no major momentum in prices apart from crude oil and natural gas which registered a gain of 6.26 per cent and 6.36 per cent respectively on MCX.

NYMEX WTI crude oil jumped to two month high, above the $90 a barrel whereas on MCX, July contract breached the psychological level of Rs 5,000. Fundamentals are not supportive for crude oil prices as the global economy remained lacklustre with the US macro-economic data’s once again disappointing .

The ongoing political unrest in Syria and Iran’s nuclear programme issues has increased the likelihood of oil supply stoppage which is the only factor supporting and taking crude prices higher.

On the bullions front, trading was flat . In the Indian spot market, 24-carat gold prices witnessed a dip of Rs10/ 10 gm compared with previous week’s close of Rs 29,310.

The rupee weakness is limiting bullions fall in Indian markets as COMEX Gold ended the week with a negative return of 0.56 per cent. Poor macroe-conomic data’s from US is limiting gold’s fall as it raises the hopes of more monetary easing steps by the US Federal Reserve whereas the gains are capped as the FED, till now has not given any hint relating to fresh round of QE3.

Tepid demand

Physical demand from India the largest consumer is also not very encouraging as indicated by a Reuters poll showing the imports might fall more than a third in September quarter due to high prices .

In the agri pack, turmeric was the best performer with a gain of 12.79 per cent in the spot market. The rise in the yellow spice was mainly due to subdued rains in key growing regions which has hit the sowing operations. The total area under cultivation is also expected to fall as farmers are shifting to other crops such as cotton which has given a better return. The next best performer was soyabean which extended its rally on global cues and poor rainfall in India.

In the spot market, soyabean registered a solid gain of 8.78 per cent. This can be attributed to the US crop that has been hit by a severe drought. The bad weather condition has prompted USDA to reduce the rating of the crop to 34 per cent which is one point below estimates of 35 per cent and down six percentage points from the previous week.

On the Indian front, output is a concern as rainfall is still 22 per cent below average. The farmers have cultivated soyabean on 5.45 million hectares as on July 13, compared with 6.73 million hectares during the same time a year earlier according to farm Ministry data. The supplies are expected to remain thin due to bad weather in the US and will continue to influence soyabean prices along with the local fundamentals.

(The author is Vice-President — Commodity Research, Motilal Oswal Commodities. Views are personal)

(This article was published on July 21, 2012)
XThese are links to The Hindu Business Line suggested by Outbrain, which may or may not be relevant to the other content on this page. You can read Outbrain's privacy and cookie policy here.