Monsoon, Edible Oil and Coffee


Monsoon, the main source for irrigation for the country’s 235 million farmers, may be on the lower end of the forecast. Rainfall in the June-September season will be 93% of the long-period average of 89 centimetres (35 inches). Rain in July, the wettest month in the June-to-September monsoon season, was 98% of the long-period mean, or more than forecast. That wasn’t enough to make up for the 52% shortfall in June.

Despite bearish prospects in the medium to long term, edible oils such as soya and palm have rallied over the past few days on cues from overseas exchanges. Price support came from Chinese demand and an increase in crude oil prices. Edible oils are diverted for making bio diesel when the price of crude goes up.

India exported over 20% less coffee so far this calender year at about 1.18 lakh tonnes, compared to 1.48 lakh tonnes last year. Export orders suffered due to higher prices of the Indian coffee, compared with that of Vietnam, Brazil and the US. Indian coffee is quoting 10-15% higher than that of Vietnam and the US in the global market. Export of instant coffee fell to 17,646 tonnes from 23,751 tonnes in the previous year.

 

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    Sugar

    Sugar price has hit a 28-year high on the international market (ICE). One of the reasons is India’s deficient monsoon. Production in India is projected to fall to 15-17 million tonnes in 2009-10 from the initial forecast of 20 million tonnes. Paradoxially, what has made things worse is excess rainfall in Brazil which is the world’s largest sugar producer. Indian prices have also risen in anticipation of a surge in demand during the coming festive season and fears that the government will impose import restrictions to curb prices.
     

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    Platinum and Black Pepper

    Platinum is the new attraction for traders in the commodity market in India. The daily average volume of the white metal on the Multi Commodity Exchange (MCX) has risen five times in July, albeit from a small base. As volumes have picked up, the spreads have narrowed. Globally, platinum is traded by sophisticated commodity traders. Recently, Goldman Sachs & Co has painted a bullish outlook for the metal. It has advised investors to buy platinum futures on the New York Mercantile Exchange (Nymex). The cause of bullishness is reduced supply from the world’s largest producer, South Africa, due to mine blackouts.
    The metal, used mostly for pollution-control devices in cars, might again expose South African supply problems, in the second half of 2009. Platinum had slipped to $863 an ounce in January when the economic outlook turned bleak. Car-makers consume 60% of the production. With the economic outlook reversing, platinum is back in demand.
     
    Black pepper exports, a major contributor to the Indian spices export, have fallen sharply in the first quarter of the current financial year. Exports crashed 46% during April-June 2009. Indian market has been taken over by cheaper exports from Indonesia and Vietnam. For the past 12-15 months, Indian prices were higher by $200-$300/tonne, on an average, than prices in Vietnam, Indonesia and Brazil. Indeed, import of pepper has increased sharply to 5,451 tonnes against 3,971 tonnes during the same period of 2008-09, the spice coming mainly from Vietnam and Indonesia.

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