Market trend

November 2016

MARKET TREND

TURMERIC 

Turmeric on NCDEX settled up on rising domestic as well as exports demand at the spot market. Though, some gains were capped on heavy arrivals as the turmeric crop in Maharashtra and Andhra Pradesh are in good condition.

Currently the supplies are for medium and poor quality during the rest of the season till new crop arrived which may keep the prices sideways to higher.

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Officials of Horticulture department estimate that turmeric farmers in the Nizamabad may not get expected yields this year due to the heavy rains in the last week of September. After a severe drought and a subsequent good monsoon, farmers have cultivated turmeric in around 30,000 acres across the Nizamabad. The crop grew on expected lines and the farmers were confident that this year they will surely get 45 to 50 quintals yields per acre.

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Turmeric cultivation has come down in Kerala, TN, AP and Maharashtra and they thought Nizamabad farmers may achieve record yields. However the situation changed due to the rains but the farmers are in better position compared to the last two years. At Erode market arrivals were reported at 400 quintals, up by 200 quintals from previous day’s arrivals. Technically market is under short covering as market has witnessed drop in open interest.

PEPPER 

We notice that Chinese traders are staying longer than expected in the Vietnamese pepper market. As a result the market remains firm. Vietnamese sellers feel no obligation to lower prices as long as the Chinese buyers keep buying. The market opened this week at the same levels of last week. However, this might not be a permanent trend.

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We hear that the Chinese are the main active buyers, and for the time being the market will much depend on their buying activity. Pepper market showed a mixed response during the week, with limited activity.

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In Vietnam the price has shown an increase both in local and as well as in FOB price after decreased in the last months due to Chineses traders booked some quantities for prompt shipment. Otherwise, Middle East more activities but my records they still unwilling to pay at high level. We still thinking its temporary trends and unstable due to main buyers from USA/Germany/India kept quiet and almost covering from Indonesia/Brazil. Other reports said Indonesia/Singapore traders still long position and aggressive to bring firm offer both prompt and further shipment more competitive than Vietnam so much. An increase is also recorded in Sri Lanka and Bangka. The price increase prevailed during the week reflected limited supply at the sources.

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In India the price reaching at a high level for the last few months in 2016. Pepper harvest in India which will take place in Jan 2017 with crop size around 50-55k tones (Cochin 35k and Karrnataka 20k tones).

PEPPER 

In Sarawak and Lampung, the price had also increased at different levels, likely Lampung is more increasing and follow up due to good demand from oversea.

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Brazil pepper from Espirito Santo will come to the market during Feb/March between 15 - 20k tons will be spread to these month. This caused some aggressive from the Para state in the coming month.

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Vietnam there seems stable/increasing potential due to stock quiet tight end of crop 2016. Other origin maybe increasing trend continuing by reason of demand from Europe/USA for prompt/Jan 2017 shipment and depend on currencies weakening than USD.

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During end of Dec/early Jan 2017 we predict bearish tone when Vietnam new crop starting with bumble crop size from 210 - 230k tones. However, very difficult to predict market trend due to Chineses traders and other rumors said Vietnam exporters already sold out some quantity for Jan/Feb shipment.

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In Sarawak and Lampung, the price had also increased at different levels, likely Lampung is more increasing and follow up due to good demand from oversea.

PEPPER 

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Brazil pepper from Espirito Santo will come to the market during Feb/March between 15 - 20k tons will be spread to these month.

This caused some aggressive from the Para state in the coming month.

Vietnam there seems stable/increasing potential due to stock quiet tight end of crop 2016. Other origin maybe increasing trend continuing by reason of demand from Europe/USA for prompt/Jan 2017 shipment and depend on currencies weakening than USD. During end of Dec/early Jan 2017 we predict bearish tone when Vietnam new crop starting with bumble crop size from 210 - 230k tones. However, very difficult to predict market trend due to Chineses traders and other rumors said Vietnam exporters already sold out some quantity for Jan/Feb shipment.

CHILLI 

GUNTUR: The onset of chilli marketing season seemed to have eased the nervousness of black money hoarders especially in chilli producing districts like Guntur, Krishna, Prakasam and Kurnool.

For, the chilli traders are making payments to the farmers only in old high denomination (OHD) currencies and thus helping those who stashed up huge OHDs in rerouting their monies.

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Many influential rich people are flocking to the chilli merchants to transact their old currencies, taking advantage of the situation.

CHILLI 

Keeping in view of the debts to be cleared by them, farmers are also not resisting to accept the old notes. Besides, the traders are also enlightening them that they need not bother about exchanging the old notes in banks as agriculture income is exempted from income tax payments and also scrutiny. Guntur chilli yard, the biggest to handle chilli stocks, has been flooded with huge stocks in the last few days and farmers are returning home with OHDs. According to agriculture market yard chairman Mannava Subbarao, daily arrivals are in the range of 20,000-25,000 bags which could go up to one lakh bags in the coming weeks.

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“We are lucky to have the season begin a little early as it helped us in rerouting old currency without any hassle,” admitted a financier. Sources said merchants are accepting monies from the financiers on the condition that they would return their monies at the end of the business season around March next. “It is a win-win situation for all — merchants, financiers and farmers,” observed a senior marketing official.

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With farmers in Guntur district sowing chilli in over one lakh acres, a production of nearly 25-30 lakh quintals is expected this current season.

CARDAMOM 

Cardamom on MCX settled up amid uptick in physical demand for cardamom in the domestic spot market. India’s production is likely to fall by 30-40% in 2016-17 due to unfavourable weather conditions. Prolonged dry weather occurred in the Idukki district, which has severely affected yield of the crop, which was in the flowering stage at that point of time. In many cases, the plants have been partially or fully destroyed due to the dry weather, as many plantations in the region do not have irrigation facilities.

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The Spices Board had reported in June that cardamom crop loss due to deficient rainfall and high temperature is likely to be up to 20-25% during the 2016-17 crop season. Damage to plants in Idukki due to drought-like conditions is 5-10%. Board data shows production of small cardamom during 2014-15 pegged around 18,000 tonne from 69.970 hectares. Exports of cardamom during 2015-16 are pegged at 5,938 tonne as compared to 4,371 tonne during 2014-15. Farmers did not want to sell fearing delayed receipt of sale proceeds while the buyers were not enthusiastic to buy for want of sufficient funds and that in turn led to the suspension of over 50 per cent of the auctions last week.

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Small cardamom exports from India are likely to earn as much this fiscal as the last one despite a shortfall in volumes, as shippers are getting good price for the spice. Technically market is under fresh buying as market has witnessed gain in open interest.

CUMIN 

Cumin on NCDEX settled up on the back of lower arrival in the mandis and fresh export demand. Demand increased from exporters and against it supply was tight at producing centres which lifted up jeera prices. India’s cumin exports rose 36% on year to 73,000 tn in Apr-Oct as demand from overseas buyers was robust and output in other significant exporting nations dried up.

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The country had exported 53,800 tn of the commodity in the same period last year, according to Spices Board India. Traders peggedcumin exports in November to be around 7,000-8,000 tn. Exports have remained unaffected despite domestic demand taking a hit after the government withdrew currency notes of higher denominations.

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Exporters see jeera exports in 2016-17 (Apr-Mar) rising to around 100,000120,000 tn from 98,700 tn reported by Spices Board India last year. Syria, Turkey and China are the other major producers of jeera globally, but geopolitical uncertainties in Syria and lower output in the other two countries have left India being the key supplier in the global market. Technically market is under fresh buying as market has witnessed gain in open interest by 0.86% to settled at 7752 while prices up 365 rupee, now Jeera is getting support at 18440 and below same could see a test of 18110 level, and resistance is now likely to be seen at 18935, a move above could see prices testing 19100.

SESAME 

Market has been stable since last week due to Demonetization (banning of currency in denomination of Rs 500/1000 notes that is 86% of currency) which lead to closure of mostly all market-yards here in India, as there is lot of confusion among traders, agents, farmers and factories as to how to route the business with new currency. There is a 50000 Rupees limit per week for currency withdrawal for business while 25000 Rupees limit for farmers/ general public that has left no doors open for the trade, because in India the farmers only sell their products on hard-cash as a traditional business model.

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Even if businesses pay each other or to their procurement agents via online transfer, the farmer will only see money in his account but he cannot withdraw - leading to no incentive for him to bring his produce from his farms to the market yards for selling aggressively. Luckily for the spot basis. Some stockiest selling cargo in spot basis in higher prices around 10% higher with the old currency notes but no one can buy such higher prices, as the buyers outside Indian unwilling to pay so higher. Mostly there is a huge import arrival of “RED CRUSHING GRADE SUDAN SESAME” in India and people cheating customers by selling/blending crushing grade seed as a bakery grade by making same purity. Post the Trump win, most currencies with US Dollar have devaluated leading to expensive imports & thus Indian market levels is almost par with African levels in the Hulled Sesame. I think these are quite bottom levels for sure amidst all these global changes while heard that market in Africa (Sudan) also picking up 30-40 USD slowly on Chinese demands.

GARLIC 

As reported earlier, last summer due to a reduced crop size, and very high fresh garlic prices, heavy speculation and strict pollution control in Jingxiang, (Shandong, the biggest garlic dehydration area) , the dehydration of garlic had been reduced. The total dehydration quantity of last July/August is reported to be around 50,000 Mt - 60,000 Mt compared to 80,000 – 90,000 Mt the year before.

There was some late sprouted garlic dehydration on going in the end of September and October but the total quantity dehydrated was reported to be small due to the high prices of the fresh raw material.

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The planting in October 2016 for next season was reported to have increased 30% compared to last year which is mainly a result of farmers very good income made from crop 2015. This year, the garlic farmers are the big winners!

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The carry over stocks of dehydrated garlic flakes from previous years are smaller than in previous years, especially good micro flakes for low back products ( within TPC<300,000) and top grade flakes without roots are scarce.

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The normal global demand is around 150,000 Mt – 160,000 Mt per year. We expected the overseas buyers to reduce the buying quantities due to the high prices, but till today, we see a very normal demand in line with previous years.

However, we notice that customers and suppliers are more careful with there orders on a longer term. So the current market demand is considered to be only a rigid demand.

GARLIC 

Since June, the market was heating up and the last weeks, it reached its highest level in history with prices for flakes 3x higher than last year at the same time.

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Based on the facts described, the market of dehydrated garlic may remain very firm the coming period. Only when there are fundamental factors that could possibly change towards the next new crop, it will be unlikely that the market weakens in the coming period.

KONJAC 

All konjac growing area reports have shown 10-30% lower production than last year. And there is NO CARRY OVER from last year konjac material. It has lead raw material price with short period stable and then price moving up quickly, and cause some market panic to purchase more to build up stock from various konjac processors, this has caused further price increasing for raw material.

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Besides, it seems all production costing in China are increasing. This is due to energy price increasing sharply in China, ( Chinese government is restricting coal mine production quantity in order for improving air quality in China. This has lead coal price increasing sharply, particularly winter approaching. This has caused all other chemicals price increasing. You may already notice Xanthan price has increased from China.

SOY PROTEIN 

The RMB fall against to USD, this will lead the ISP price to be down. The RMB to USD is from 6.6:1 to 6.87 to 1. This will lead the ISP price to decrease 550RMB/MT=80USD/MT.

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For example, soybean flake, coal, truck transportation charges, etc. This will lead the ISP to be rise. This year, the quality of soybean is not good, the protein content is 35%-36%, under the 38% , It will lead the cost of production be up. The main material- defatted soy flake increase 200RMB/MT, this will cause the ISP cost to increase 460USD/MT=67usd/mt.

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In order to sterilize ISP, water steam from coal is being used. In these two months, the price of coal increase from 400RMB/MT to 800RMB/MT. This will increase ISP cost 880RMB/MT=128USD/MT

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The fossil oil price also increases too much these days. This will cause the sea freight, truck freight to rise in future. It will also cause other farm products to rise according to last years data.

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The Chinese ISP output is big, but the cost of production is also high.

MILK 

SWEET WHEY POWDER: Whey prices in Europe are slightly weaker. Market activity is slow, with less buying interest than selling interest. EU whey powder export volumes January-September this year are 6.9% above the same period, last year according to Eucolait.

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The main destinations and percent of the total are:  China, 28.6%;  Indonesia, 15.6%;  Malaysia, 10.7%.

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The European Commission late last week worked toward initiating sales of SMP from intervention stocks. Sales will be of SMP entered into intervention before November 1, 2015. Eligible volumes are 22.15 metric tons. Controlling scheduling specifies the Commission consider the draft of the regulation on November 24. It is contemplated to offer the first tender on December 13, assuming that necessary internal Commission procedures can occur in time. This will be the only tender during 2016.

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Beginning January 2017 two tenders each month are anticipated. It was noted that the Commission seeks to avoid overheating the market and this sales process is designed to allow the reaction of markets to be evaluated.

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SKIM MILK POWDER (SMP): Skim milk powder pr ices in Europe are steady to slightly weaker. SMP markets are quiet and expected to remain quiet through the end of the year. Many customers have already contracted for needs through the first quarter of 2017, so few have current supply needs. EU SMP export volumes January-September this year are 18.7% below the same period last year according to Eucolait.

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The main destinations and percent of the total are: Algeria, 14.8%; China, 8.3%; and Indonesia, 8.2%.WHOLE MILK POWDER (WMP): European whole milk powder prices moved to a narrower range, firming at the bottom but declining slightly at the top.

European sellers feel that WMP from the region is now more competitive globally, especially with the weaker Euro. There is hope for more export activity in the near future. EU WMP export volumes January-September this year are 1.7% above the same period last year according to Eucolait. The main destinations and percent of the total are: Oman, 14.7%; Algeria, 8.5%; and Lebanon, 4.7%.

PALM OIL 

Heavy rains over Argentina in October had delayed the soybean planting but have improved the soil moisture which has boosted the 2016/17 soybean production estimate by 2% to 55.3 million tonnes compared to last year’s estimates which stood between. Malaysian palm futures rose in early trade on Monday, in line for a sixth consecutive session of gains, as market sentiment is bullish on tight supplies. Palm hit its highest levels since September 2012 on Thursday tracking the soy oil market, and is seen remaining at current levels by traders due to a lack of bearish factors.

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Soy oil futures on the Chicago Board of Trade jumped nearly 7% last week, on news of higher biodiesel mandates in the US. In general there is a feeling of tightness as output and stocks are not rising. Palm prices could rise 10% from current levels by the first quarter of 2017, before declining again as stockpiles recover. Palm oil production in Indonesia and Malaysia, which account for 80 percent of global supply, is forecast to decline nearly 5 percent to 58.8 million tonnes in 2016 from a year ago, following dryness caused by El Nino, data from the U.S.

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Department of Agriculture showed. Indonesia's production of palm oil is expected to decline to 28.5-30 million tonnes this year, before climbing by up to 16 percent to 32-33 million tonnes next year, said Fadhil Hasan, executive director of the Indonesian Palm Oil Association.

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Despite the projected higher output, it would remain "significantly below potential" because of lingering impacts of the El Nino in 2015.