Beruflich Dokumente
Kultur Dokumente
Content
Price performance Domestic Production Procurement and Stock Position Exports Food Security Bill Global Updates Outlook
Prepared by
Vedika Narvekar Chief Manager- Agri Commodities vedika.narvekar@angelbroking.com (022) 2921 2000 Extn. 6130
Angel Commodities Broking Pvt. Ltd. Registered Office: G-1, Ackruti Trade Centre, Rd. No. 7, MIDC, Andheri (E), Mumbai - 400 093. Corporate Office: 6th Floor, Ackruti Star, MIDC, Andheri (E), Mumbai - 400 093. Tel: (022) 2921 2000 MCX Member ID: 12685 / FMC Regn No: MCX / TCM / CORP / 0037 NCDEX : Member ID 00220 / FMC Regn No: NCDEX / TCM / CORP / 0302
Disclaimer: The information and opinions contained in the document have been compiled from sources believed to be reliable. The company does not warrant its accuracy, completeness and correctness. The document is not, and should not be construed as an offer to sell or solicitation to buy any commodities. This document may not be reproduced, distributed or published, in whole or in part, by any recipient hereof for any purpose without prior permission from Angel Commodities Broking (P) Ltd. Your feedback is appreciated on commodities@angelbroking.com
www.angelcommodities.com
www.angelcommodities.com
www.angelcommodities.com
Stocks in the government warehouse stands significanlty higher than buffer norm Bumper harvest in the past few years have created large stock piles of Wheat in the domestic markets. The stocks of wheat in Government godowns was recorded at 40.3 mn tn as on 1st August, 2013. which is lower compared to last year. However, we can clearly observe from the adjacent chart that the current years stocks stands almost double the buffer norm requirement. Thus, as mentioned earlier, even if exports gain pace in the coming months, upside in the prices shall remain capped due as huge stock piles.
Source: Dept of Food and Public Distribution
Wheat exports from India may resume amid weakening domestic currency Wheat exports have taken a hit in the current marketing year mainly on account of uncompetetive Indian quotes against the cheaper availability from the Black sea region. Despite weakening Indian Rupee and thereby a persistent fall in wheat export price, domestic quotes remained unattractive as an impact of a steep fall in international prices amid seasonal supply pressure. Wheat price (FOB) at $258 per tonne stands much above Russian wheat at around $ 240-245 per tonne (FOB). In the second week of August Indian government allowed an extra 2 mn tn of wheat exports via state-run trading firms with a floor price of $300 a tonne. However, higher floor price failed to attract foreign buyers. From the adjacent chart , we can observe that India exported highest quantity of Wheat in the month of September as prices were ruling below the international prices. Despite of a consistent fall in the international prices since Novemebr 2012 and comparatively higher quotes of Indian origin, overseas shipments remained robust as a result of wheat export ban by Ukraine. A fall in exports have been seen only after May amid higher availability from other exporters.
www.angelcommodities.com
Going forward, we expect exports to resume (by the private companies) after bieng hit in the last 3 months. Indian supplies are quoted slightly higher than that of Russia and thus if Rupee continues to weaken then overseas shipments shall become attractive. However, sales from state reserve at $300 per tonne will fail to attract foreign buyers.
Source: Agriwatch
With an aim to ease poverty and malnutrition, Parliament of India gave its nod to the landmark Food Security Bill that seeks to provide highly subsidised foodgrains to the country's two-third population. The bill plans to subsidize wheat, rice and cereals for some 800 million people under a $20 billion scheme. The food security programme is not restricted to the poor and the population covered by it is about three times the number of people below the poverty line. According to the Bill, the beneficiary will be entitled to 5 kg of rice, wheat and coarse cereals per month at a fixed price of Rs. 3, Rs. 2 and Re 1, respectively. Under the scheme, foodgrains procured from the farmers by the Government at the MSP will then be transferred to those who qualifies for the subsidized grains. Since wheat farmers will be assured a minimum price for their wheat crops, they will be opt to produce more cereal crops and less diversification in the product basket will be observed. Excess production of wheat will create ample stocks within the country ensuring smooth supplies. Global Updates The focus of the global wheat market last month turned towards the production figures which showed an upward revision in the world wheat output forecast. Global Wheat production is revised upward by 4 million tonnes to 691 million tn in 2013-14 season reflecting higher output in Canada , EU and Ukraine. Revised output stands almost 6 percent higher compared to last years 654 mn tn. Export demand has been solid, in part due to quality issues with Chinas crop and despite of near record output, carryover stocks are expected to rise only marginally by 2 percent.
www.angelcommodities.com
Fundamentals of major producing nations U.S US wheat prices have been volatile on the back of growing concerns about how dry weather in the country could impact the soybean crops there. A severe drought in Southern Plains during the early stage of planting has reduced survival rate and yields. As a concequence, production in the country is estimated to decline by 7 percent compared to last year. As per International Grains Councils (IGC) recent estiamtes, US wheat end stocks are expected to decline as a result of lower production. Grain growers have nearly completed harvesting both winter and spring wheat harvest, about two weeks earlier than normal. Overall prices in the country remained on the upside due to climate concerns in the main wheat growing areas of the country. Forecast for the next year revealed that US farmers will boost soybean and wheat acreage and cut back corn. Wheat planting, which will begin soon, could therefore increase to 57.76 million acres. Ukraine Harvesting of Wheat in Ukraine is almost complete and output is estimated significnalty higher supported by favourable climatic conditions for the growth of wheat crop. IGC estimated 2013-14 Ukraine Wheat production at 22 mn tn which is up by a whopping 39.2 percent. Higher supplies may boost exports this season and are currently estimated at 8.5 mn tn. Increased supplies from Ukriane may add to the global wheat supplies thereby curbing losses of lower US production to some extent. The country exports its grains traditionally to the Middle East and North Africa. However, due to natural calamities not favouring the regular level of production of wheat in China, Ukraine sees China as its top importer in the near future.
www.angelcommodities.com
China China, the world's largest grower of wheat, was forced to make its largest purchase of the grain from the US in nearly two decades after severe flooding earlier this year cut its reserves. Production has dropped by 2.2 percent compared to last year. Consequently, the imports have almost doubled. Soaring Chinese wheat purchases due to weather-related crop damage have the potential to lift global prices of the grain higher over the long term. China has purchased 3.7 million metric tons of wheat from the U.S. as on 19th August, 2013, or nearly 4.6 times more wheat than last year's purchase of 805,400 metric tons. In addition to the flooding this spring -- the worst in some areas since 1954 -increased demand for high-quality wheat have dented grain stocks in China. In addition to purchasing from the US, China is also looking at Australia for its imports. The Chinese Government always makes sure it has enough stocks to control inflationary pressures. Russia Russia, historically the world's third largest exporter, will boost wheat harvest by one third this year and has already reaped 39 mn tn from 54 percent of the area sown this year. The production has increased to a noticable extent this year compared to 2012-13 when drought hit crop yield in Russia. The increase in production by 36.6 percent from last year may be attributed to favorable weather conditions. On the trade front, despite increase in production, exports are expected to remain much below 2011-12 season at 21.6 mn tn. IGC estimated Russian wheat exports 25 percent higher at 14.1 mn tn compared with 11.2 mn tn in 2012-13.
www.angelcommodities.com
Outlook A divergent performance in the global and domestic wheat prices have made exports from India unviable in the past 2-3 months. However, with expectations of Rupee to depreciate further considering ongoing economic and geopolitical developments, exports by the private traders might turn viable. Internationally, wheat prices generally tend to rally into the late Sep/early Oct time and the same is expected this year as well - before the Southern Hemisphere harvest starts in late October. Thus, an upward bias in case of domestic wheat shall continue in the current month. Stocks in the central pool continue to remain elevated and exports at higher floor price from government stocks seems gloomy. This may cap sharp upside in the domestic wheat prices. Also a timely harvesting of kharif crops will ensure a timely planting of rabi crops too. Wheat sowing shall commence in October and higher MSP and favorable soil moisture level may boost wheat plantings in the coming season. Thus, despite exports gearing up, higher crop prospects for the coming season may limit the upside.
Trading Strategy (1 month) Buy NCDEX October Wheat between 1540-1550, with a strict stop loss below 1460 and a target of 1680/1720.
www.angelcommodities.com