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Friday, 16 February 2018

Sugar Awaits Further Slide on Reports of Higher Production

The Indian Sugar Industry is at a very interesting juncture at this point of time.  The sugar cycle has been conventionally understood as following a 4-5 year cycle; 3 years of increasing trend followed by 2 years of declining trend. Higher sugarcane production results in falling sugar prices and non-payment of dues to farmers compelling them to switch to other crops thereby causing a shortage of sugarcane, consequently leading to an increase in sugarcane prices, resulting in an imminent switch back to sugarcane. Such a vicious circle is characteristic of the Indian sugar production. There is now evidence that this cycle is now becoming a 2-3 year cycle. Sugar still stands listed in several states under the purview of the Essential Commodities Act, 1955. Sugar is a politically sensitive commodity, with strong lobbies including the cane growers, sugar mills, gur and khandsari producers, consumers of subsidized sugar having a say in influencing the price. Pressures are often reflected at various central and state levels, which sometimes have independent interests. The government through pragmatic policies can remove or at least minimize the infamous sugar cycle and bring about long term healthy growth of the Indian Sugar Industry and its stake holders.


The Indian Sugar Industry, with an annual productive capacity of over 25 MMT, stands out to be the second largest in the world after Brazil, accounting for around 15 per cent of the global sugar production. Uttar Pradesh is leading in producer of sugar with 39.40 per cent followed closely by Maharashtra (33.74 per cent), Karnataka (7.62 per cent) and Gujarat (4.23 per cent). The country consumes approximately 25 MT of sugar annually, with Maharashtra contributing over 60 per cent of it while the rest of the output come from states like Tamil Nadu, Karnataka, Uttar Pradesh and Madhya Pradesh. In 2017–18, the FRP for cane has been hiked to Rs 255 per quintal. Besides the cyclical downturn that may have set in leading to a decline in crop output, deficient rainfall in some of the major sugarcane producing states of Maharashtra, Karnataka and Tamil Nadu has also been a contributing factor.

The current production scenario suggests that we can notice Uttar Pradesh leading the National Sugar Supply amicably making up for the shortages reported from other states. Indian Sugar Mills Association (ISMA) has revised country's 2017-18 sugar production upward by about 4 per cent for the current season to around 261 lakh MT, against the first advance estimates of ISMA of 251 lakh MT. the current year’s sugar consumption is expected to reach 26 million MT, a marginal increase from the 25.6 million MT estimated for current year. Bulk consumers account for two-thirds of total sugar consumption in India which caters to soft drink manufacturers, bakeries, hotels, restaurants and other bulk and individual users. Global S&D reveals that Brazil and India are the two major players in the global market producing about 36.44 per cent of global production. Other countries with significant production are China (5.84 per cent), Thailand (6.25 per cent), United States (4.39 per cent) and Mexico (3.66 per cent). Though India ranks 2nd in terms of production, it is the largest consumer of sugar with global share of 15.15 per cent. Other major consumers of sugar are China (9.21 per cent), Brazil (6.35 per cent) and United States (6.51 per cent). The global sugar market is likely to end its surplus trend after three consecutive year of surplus in 2017.
As per the International Sugar Organization, the global sugar production is likely to be reported at 8.08 million MT higher than consumption in the current marketing year, as dry weather during the last months of the crushing period in Brazil’s main cane cultivation areas caused production in the region to race ahead of market expectations. Meanwhile, production across India, Russia and Europe and Mexico are expected to see sluggishness due to fall in international sugar prices. Global output this year will increase marginally by 7.86 per cent to 184.94 Million MT. Demand will also stay stable at 174.22 million MT, while stockpiles at the end of 2017-18 will be 40.82 million MT. Going forward the growing demand for ethanol and incentives for ethanol production in Brazil is likely to bring in some stability in the sugar supply-and-demand equation.

The Indian sugar industry is also confronting with the perennial issues of Regulation of FRP, Low Recovery of Sugar from cane, lack of trust and transparency in weighing of sugarcane and problem of arrears. Some State governments, namely, Haryana, Punjab, Tamil Nadu, Uttar Pradesh and Uttarakhand have been announcing their own State Advised Prices (SAPs) which are not based on scientific basis and are usually higher than the FRP. The SAP does not incentivize efficiency in terms of better sugar recovery as SAP is not linked to sugar recovery rate unlike FRP which could be a more logical approach. For Ensuring more remunerative prices to the farmers Sugar Price Stabilization Fund (SPSF) under the Sugar Development Fund (SDF) can be created. Recovery rate of sugar mainly depends on sucrose content in sugarcane, conditions of plant and machinery, cane supply arrangements in the State and agro-climatic conditions in the region. Except the agro-climatic condition, which is a natural factor, the other factors can be influenced by taking appropriate initiatives to improve recovery rate.  Lack of trust and transparency in weighing of sugarcane is also a concerning factor for dissatisfaction among sugarcane growers. Government should persuade the state governments/Cane Commissioners and sugar mills to make adequate arrangements for electronic weigh bridges/machines, which measure and display the actual weights so as to improve trust and transparency between these two stakeholders. Apart from production of sugar, the mills should also develop facilities for production of alcohol, ethanol, power and other downstream products, which would make the sugar mills as energy hubs of the country and enable them to pay remunerative price to cane growers.     


The current falling prices in the country has been the major concern for the government in the recent months. According to ISMA, the Government that there is an immediate need to take action to control the falling prices, for which some of the stocks could be exported as quickly as possible. The Government has also appreciated the concern of the sugar sector and agreed that all steps required to be taken to ensure that the additional sugar stocks gets exported quickly, will be taken soon. This could include similar steps as taken by the Government in the past like mandatory sugar exports by each sugar mill in the country. Since, the quota levy system has been removed, the Sugar prices are determined by market sentiments and market forces, and the government can’t have much direct control over it. Everything remains good until the high FRP of sugarcane results in over-production of cane and sugar. In order to support the industry, the government may marginally raise the corpus for Sugar Development Fund (SDF) to Rs. 500 Crore in the Budget for 2018-19. SDF, managed by the food ministry, is used for lending money to mills at lower interest rates. In order to arrest the falling prices, the central government has put a ceiling on the amount of sugar mills can sell by imposing significant minimum stocks for the next two months to check falling prices. As per the new quota imposed on sugar sales, in February mills must maintain sugar stock of not less than 83 per cent of the closing stock on the last day of January in addition to sugar produced in February, less sugar exported during the month. For March, sugar mills have to keep not less than 86 per cent of the closing stock on the last date of February, in addition to sugar produced during March less sugar exported in the month. There are also indications that the government may allow export of raw sugar under Duty Free Import Authorization (DFIA) scheme, which was withdrawn in May 2015. These two measures have become necessary to ensure that the Indian sugar mills are able to pay the sugarcane arrears of farmers. Moreover, there are also concerns over development in the neighbouring countries. Pakistan has hiked the amount of sugar eligible for export subsidies to two million tonnes from five lakh tonnes in view of excess domestic supplies. In order to counter such moves, The Central Government hiked the Import duty on sugar is to avoid any shipment of the sweetener. Apprehending import of cheaper sugar from Pakistan, the food ministry has pushed for 100 per cent import duty on the sweetener from 50 per cent to nip in the bud the possibility of subsidised sugar imports from Pakistan.

Tuesday, 6 February 2018

Extended Bull Run for Copper Awaits the Current Consolidation

The year 2017 had been a prosperous year for copper as its prices moved higher amidst increased positivity in the market and overall optimism in the demand from China and other user country. The disruptions in supplies also amply supported the bulls which had increased the output costs. As hopes for synchronized economic growth in 2018 rise, there is a brighter outlook for industrial demand of copper. The Asian nation is no longer the sole marginal driver for copper as the US and global growth is holding is demand on the higher side which would ensures that the copper prices in all likelihood remain well supported. The increase prospective demand is also likely to come from the developing economies where infrastructure and urbanisation are essential for reaching the next stage in their expansion. 

The supply disruption could be the main stay for the copper market in the year 2018, as this year there are a lot of labor contracts in Chile and Peru coming up and you can expect those negotiations to be challenging and it could be supported from a supply standpoint. In 2017, we saw labor-related incidents at several mines (ANTO) including mines owned by Southern Copper (SCCO) and Teck Resources (TECK). Since copper prices are currently near multiyear highs and commodity markets seem to have put the worst behind them, labor unions might be a bit more demanding during labor negotiations. There are between 20 and 25 collective negotiations expected (locally in Chile & Peru) and if some of them lead to significant strikes that would have a positive impact on prices. Among the most notable mines that will be negotiating labor contracts in 2018 are BHP Billiton’s Escondida, which is the largest copper mine globally. The mine faced a labor action last year that negatively impacted BHP Billiton’s copper production. Chile's state copper commission has predicted a global copper supply deficit of 175,000 tonnes in 2018, versus 67,000 in 2017. 

World mine production is estimated to have declined by 2.6 per cent in the first ten months of 2017, with concentrate production declining by 2.2 per cent and solvent extraction-electro-winning (SX-EW) declining by 4.3 per cent. The decline in world mine production was mainly due to a 2 per cent decline in production in Chile, the world’s biggest copper mine producing country which was negatively affected by the strike at the Escondida mine and lower output from Codelco mines, reductions in concentrate production in Argentina, Canada and Mongolia of 55 per cent, 17 per cent and 17 per cent respectively were mainly due to lower grades in planned mining sequencing and Argentina’s Alumbrera mine approaching end of life, a 15 per cent decline in Indonesian concentrate production as output was constrained by a temporary ban on concentrate exports that started in January and ended in April and a 12 per cent decline in production in the United States mainly due to lower ore grades, reduced mining rates and unfavourable weather conditions at the beginning of the year. However these reductions in output were partially offset by 32 per cent and 3.5 per cent increases in Kazakhstan and Peruvian concentrate output, respectively, with both countries benefitting from new and expanded capacity that was not yet fully available in the same period of last year. Brazil, Mexico, Myanmar, Spain and Sweden also contributed to world growth. On a regional basis, mine production is estimated to have declined in Africa by 1 per cent, in the Americas by 3 per cent, in Asia by 4 per cent and in Oceania by 3 per cent while increasing in Europe (including Russia) by 2 per cent. World refined production is estimated to have remained essentially unchanged in the first ten months of 2017 with primary production (electrolytic and electro-winning) declining by around 2 per cent and secondary production (from scrap) increasing by 9 per cent. Increased availability of scrap allowed world secondary refined production to increase, notably in China. The main contributor to growth in world refined production was China (increase of 5 per cent), followed by India (7 per cent) and some EU countries recovering from maintenance shutdowns in 2016. However, overall growth was offset by 8 per cent decline in Chile, the second largest refined copper producer, where both primary electrolytic refined production and electro-winning production declined. Production also declined in the third and fourth world leading refined copper producers, namely, Japan (-4 per cent) and the United States (-10 per cent). On a regional basis, refined output is estimated to have increased in Asia (3 per cent) and in Europe (3.5 per cent) while declining in Africa (2 per cent), in the Americas (8 per cent) and in Oceania (10 per cent).

On the demand side, the key driver for the same would be China since the country accounts for roughly half of global copper consumption. We have witnessed some moderation in China’s construction activity in the second half of 2017. There are also concerns that China’s construction boom, which lifted its economic activity last year, might not continue in 2018. Looking at copper, it’s more of a late cycle metal when it comes to the construction sector, unlike steel which is used in the initial stages of construction. So we might not see much of a negative impact on copper demand in 2018 from the expected slowdown in China’s construction activity. China’s automotive sector has also been strong. Although the sales tax cut, which gave a boost to Chinese car sales, is being completely withdrawn in 2018, it might not have a major impact on China’s automotive sales. China’s industrial sector has also been reasonably strong, which could support copper demand in 2018. 

Copper, like other metals, is widely recycled. Last year, we saw improved scrap flows as copper prices moved to higher price levels. Higher scrap flows helped blunt some of the supply shortfall that resulted from strikes at leading mines. Over the last couple of years, China has taken several measures, including curtailing its polluting steel, coal, and aluminum plants, to help reduce the smog during the winter months. Global copper scrap markets might need to readjust themselves since China plans to ban certain grades in 2019. Energy prices tend to impact commodity market sentiments. Along with boosting copper market sentiments, higher energy prices have an impact on copper miners’ production costs. Other factors supporting the bullishness in copper are the passage of the tax reform bill which has raised hopes of growth in the United States and the strengthening of US Dollar owing to expected repatriation of overseas profits. 

While the markets focus on Chinese copper demand, the other half of the demand, which is the world ex-China, tends to be overlooked. In 2018, we could see a strong copper demand from the world ex-China. The Federal Reserve raised its outlook for US economic growth in December 2017. Economic activity has been strong in the Eurozone, largely defying concerns over a hard Brexit. Looking elsewhere, economic activity has been reasonably bullish in emerging economies such as India.

Monday, 22 January 2018

NBHC’s First Rabi Crop Estimates for 2017-18

The northeast rainfall of 2017-18 was best since 2013 at 10 per cent below normal but its distribution has created dry and drenched zones. Cyclonic activities (Cyclone Ockhi) gave retreating rainfall down south but have left the North and Central areas of the country considerably dry. According to Indian Meteorological reports the states of Madhya Pradesh and Uttar Pradesh have received below normal rainfall from south west monsoon. The rainfall was deficient by 16 per cent for western MP, 24 per cent for eastern MP, 31 per cent for western UP and 28 per cent for eastern UP. Also the northeast rainfall has been deficient by 95 per cent in UP and 67 per cent in MP. It has spurred a major decrease in Rabi acreage and has specially affected Rabi-wheat sowing in MP and UP. 

The total Rabi Cereals production for the year 2017-18 is expected to be lower by 6.65 per cent to 115.40 Million MT owing to scanty and inequitable distribution of rainfall in major growing areas. Wheat is expected to show a decline in area by 3.70 per cent to 30.39 Million Ha and production by 6.33 per cent to 92.16 Million MT over last year owing to lesser crop preference by farmers and expected decline in yield in major growing areas. Rabi rice acreage is recorded lower by 13.48 per cent and its production is expected to decrease by 13.82 per cent due to staggered rainfall. Jowar sowing area is expected to be increase by 6.48 per cent and the production is around 4.26 per cent lower than previous year. Maize production is also expected to decrease by 2.91 per cent and pegged at 6.82 Million MT. Barley, however is the only coarse cereal with positive trend in production and is expected to be 12.77 per cent higher than previous year at 1.96 Million MT.

Chana, Masoor and Field Peas are the pulses that are giving the positive pull to total pulses production. The Gram acreage has increase by 12 per cent and likewise the production is expected to cross 10 lakh MT for the first time in 2017-18. Many of the farmers have shifted to Bengal Gram (Chana) from Wheat as it requires comparatively less moisture from deep soil. Overall, the pulses have shown significant increase in acreage by 9.11 per cent and the production is expected at 14.73 Million MT. Masoor (Lentils) have also shown a surprising uptrend in production and higher stacks have led to uplifting of the export ban. Rabi Masoor production is estimated 25.79 per cent higher at 1.28 Million MT as against 1.02 during 2016-17.

With decrease in Rabi cereal production, the Rabi Foodgrain production is expected to decrease by 4.84 per cent to 130.13 Million MT as compared to 136.75 Million MT reported last year. 

Oilseeds however have observed a downtrend in both acreage and production by 8.82 per cent and 9.34 per cent. The decreased production estimates is majorly due to a 13.54 per cent decline in mustard sowing mostly in Rajasthan which has resulted in lowering of the production estimate by 10.63 per cent to 71.28 Lakh MT. As Rajasthan didn’t receive appropriate rain during September-October and higher temperatures during these two months resulted in lower soil moisture levels causing lower sowing. Also, mustard prices during last season had created a disappointment among farmers further weakening the sowing. Sunflower and safflower production for 2017-18 has been estimated lower at 139.83 and 58.67 lakh MT than 143 and 78 lakh MT during 2016-17. Rabi Groundnut production is expected to decrease by 3.52 per cent at 12.95 lakh MT as against 13.43 lakh MT during 2016-17. Odisha has recorded lower Rabi sowing at 0.72 lakh Ha which is less than previous year by 0.18 lakh ha, while Telangana Rabi sowing was recorded 0.13 lakh ha less than previous year at 1.31 lakh Ha.


Saturday, 6 January 2018

Copper to Gain More Positive Traction in 2018

The year 2017 has been quite outstanding for copper and other base metals. In the year 2017, copper demand, especially from China, turned out to be better than expected. China’s housing market proved resilient, while global economic growth also strengthened over the year. There were more surprises on the supply side. Earlier this year, two of the biggest copper mines, Escondida in Chile and Grasberg in Indonesia both experienced prolonged disruptions, while other producers also suffered cutbacks due to declining ore grades and weather factors. Copper exceeded expectations in 2017 as demand proved stronger than expected while supply suffered some major disruptions. LME copper prices were up 26 per cent year to date, reaching $6906/MT on 19th December.

On the supply side, while labour disputes and weather factors continue to pose a risk to supply going forward, we do not expect supply cuts to be as severe as what we’ve seen earlier this year. Combined with capacity restarts in the Democratic Republic of Congo and Zambia and to a lesser extent additional output from new projects and expansions, we expect to see world mine production increase slightly in 2018. Better availability of copper concentrates should see refined production increase as well in 2018. That will however be limited to some extent by China’s recent ban on scrap imports. World mine production is estimated to have declined by around 2.5 per cent in the first nine months of 2017, with concentrate production declining by 1.7 per cent and solvent extraction-electro-winning declining by around 5 per cent. The decline in world mine production was mainly due to a 4 per cent decline in production in Chile, the world’s biggest copper mine producing country, negatively affected by the strike at the Escondida mine and lower output from Codelco mines, a decline in Argentina, Canada and Mongolia concentrates production of 52 per cent, 18 per cent and 18 per cent, respectively, mainly due to lower grades in planned mining sequencing and Argentina’s Alumbrera mine approaching end of life, a 18 per cent decline in Indonesian concentrate production as output was constrained by a temporary ban on concentrate exports that started in January and ended in April, a 11 per cent decline in production in the United States mainly due to lower ore grades, reduced mining rates and unfavourable weather conditions at the beginning of the year. However these reductions in output were partially offset by 34 per cent and 4 per cent increases in Kazakhstan and Peruvian concentrate output, respectively, with both countries benefitting from new and expanded capacity that was not yet fully available in the same period of last year. Brazil, Mexico, Myanmar, Spain and Sweden also contributed to world growth. On a regional basis, mine production is estimated to have declined in Africa by 1.5 per cent, in the Americas by 3.5 per cent, in Asia by 2 per cent and in Oceania by 2 per cent while increasing in Europe (including Russia) by 2.5 per cent. World refined production is estimated to have grown modestly by 0.5 per cent in the first nine months of 2017 with primary production (electrolytic and electro-winning) declining by 1.3 per cent and secondary production (from scrap) increasing by 9.5 per cent. Increased availability of scrap allowed world secondary refined production to increase, notably in China. The main contributor to growth in world refined production was China (increase of 6 per cent), followed by India (7.5 per cent) and some EU countries recovering from maintenances shutdowns in 2016. However, overall growth was offset by a 10 per cent decline in Chile, the second largest refined copper producer, where both primary electrolytic refined production and electro-winning production declined. Production also declined in the third and fourth world leading refined copper producers, namely, Japan (-3.7 per cent) and the United States (-8.5 per cent). On a regional basis, refined output is estimated to have increased in Asia (4 per cent) and in Europe (4 per cent) while declining in Africa (2 per cent), in the Americas (9 per cent) and in Oceania (8.5 per cent).

World apparent refined usage is estimated to have increased modestly by around 0.5 per cent in the first nine months of 2017. Improved scrap supply is constraining world refined copper usage growth globally in 2017. Preliminary data indicates that world ex-China usage might have increased by about 1 per cent. However, China apparent usage (currently representing almost 50 per cent of world refined usage) remained essentially unchanged. Chinese apparent usage (excluding changes in unreported stocks) remained essentially unchanged as although refined copper production increased by 6 per cent, net imports of refined copper declined by 13 per cent. Among other major copper using countries, usage increased in India and Japan but declined in the United States, Germany and South Korea. The demand outlook for the red metal remains positive with expectations of a recovery in Chinese demand. This has been driven by President Trump’s plans to boost spending on infrastructure and construction, depreciation of the US dollar and the rising use of copper in electric vehicles and other electrical applications. The primary boost is expected to come from the recovery of the Chinese economy as the country continues its transitions towards a domestic demand driven economy.

The global copper market is eyeing at China’s ambitious USD 4 Trillion One Belt, One Road (OBOR) infrastructure development plan that aims at developing trade corridors across Asia, Europe, Africa and Middle East which would further drive demand. Other notable factors which are expected to drive the demand of the red metal include the rising production of electric cars, which use four times the amount of copper than a vehicle with a traditional combustion engine. According to International Copper Association, copper demand from electric vehicles is expected to be nine times higher by 2027 from the current level of 185,000 MT. Owing to the above expansion plan, the IMF has recently revised China’s GDP growth forecast for 2017 and 2018 to 6.7 per cent and 6.4 per cent respectively, reflecting the high levels of public investment in the country which augurs well for the steady and continued copper demand in the country.

Copper is currently in a supply deficit which is likely to increase over the next three years. As the global copper deficit intensifies and the price outlook remains strong, miners can be seen to focus on the expansion and development of new projects to meet increased demand. Production from brownfield expansions at Escondida in Chile, the restart of Glencore’s African copper operations, First Quantum Minerals’ new Cobre Panama mine and OZ Minerals’ construction of the Carrapateena copper mine in South Australia are expected to come online and increase output in the future. Prospects of a Chinese economic recovery, rising demand from electric vehicle manufacturers and US infrastructure plans announced following the election of President Trump are all driving copper demand. Meanwhile, labour disruptions, declining ore grades and a lack of new capacity are constricting supply, thereby resulting in a tightening market. Thus, we can see that irrespective of prospects of marginal increase in supply is on the cards, the supply deficit is expected expand further and leading to increased bullishness and it won’t be a surprise if we see new record high levels before the end of 2018.

Tuesday, 26 December 2017

NBHC’s Final Kharif Crop Estimates for 2017-18

The year 2017-18 was marked by good monsoon onset which had led to increased acreage in most of the kharif crops. The uncertainty of monsoon rains created doubts in the farming situation as it progressed. The plentiful of rains in the first two month of the monsoon season was followed by deficit precipitation in the final two months. The month wise quantum of rains in the country showed that it was 104 per cent of LPA in June, 102 per cent of LPA in July, 87 per cent of LPA in August, and 88 per cent of LPA in September. Apart from the quantity of the rains the distribution of it was also a point of concern. The region wise Seasonal rainfall over Northwest India, Central India, South Peninsula and Northeast (NE) India were recorded at 90 per cent, 94 per cent, 100 per cent and 96 per cent of respective LPAs. Around 59 per cent of India had received substantially less rainfall as compared to LPA. Around 235 out of 647 districts across the country faced the prospect of drought this year as the monsoon appears ended for a below-normal performance, with the season's deficit currently at 5 per cent of normal. Major states affected by this monsoon pattern were Rajasthan, Gujarat, Uttar Pradesh (West), Madhya Pradesh, Chhattisgarh, Telangana, Karnataka and Maharashtra. 

In our first estimate (First Kharif Crop Estimates for 2017-18 – 01st September 2017) we had broadly concluded that in the year 2017-18, the production of total cereal, pulses and oil seeds are expected to decline by 1.72 per cent, 9.51 per cent and 12.43 per cent over 2016-17. In the current assessment, the total cereals and pulses have marginally pushed in the positive region with an expected increase of 0.79 per cent and 11.91 per cent respectively while the scenario of oilseeds continues to remain in the negative territory and its gap has further widened to 19.84 per cent. Major reason for the significant change in the estimate has been the in-equitable distribution of monsoon, both in quantum and spread, the details of which is been given below. 

The crop wise analysis reveals that in the group of cereals, the rice crop was least affected by the irregularity in monsoon as it is grown mostly in well irrigated areas. For the year 2017-18, rice production is expected to improve marginally by 2.53 per cent over last year and decline marginally by 0.14 per cent over last estimate. It is to be noted that the Basmati rice production is expected to fall decline by about 25 – 28 per cent but this short fall is being compensated by the increase in the Non-Basmati rice, keeping the overall rice production on track. Maize is expected to decline marginally by 8.72 per cent over last year. The decline in the sowing area in Karnataka & Telangana was the main cause for the decline in production. In the minor cereals, Small Millets, Ragi and Bajra production is expected to improve by 11.48 per cent, 3.28 per cent and 4.21 per cent respectively while Jowar is expected to decline by 8.72 per cent over last year.

The increased focus on pulses production by the central government is clearly visible in the major pulses growing states. This year the favourable monsoon at the time of sowing and substantial increase in MSP has resulted in increased area for pulses. Accordingly, the production of Urad, Tur and Kulthi are expected to increase by 16.47 per cent, 9.87 per cent and 29.68 per cent respectively over last year. Moong is the only pulse showing a marginal decline of 4.88 per cent over last year.

The oilseeds sector is been the worst hit crop section in the current kharif season. Occurrence of heavy rains in the initial sowing stages and moisture stressed situation in the later stages has led to significant decline in production. The decline in soybean production is expected to the tune of 26.42 per cent to 10.47 million MT against last year’s production of 14.22 million MT. Groundnut production is expected to stage a decline of 9.88 per cent over last year. Other oilseeds such as Castor, Sunflower and Sesame are also expected to decline by 9.64 per cent, 12.84 per cent and 8.50 per cent respectively.

In the cash crop section, cotton is been seriously affected fluctuating weather conditions. In the initial phase, the sowing was affected by heavy rains and flooding of fields and in the later stages the crop was seriously infected by the cotton ball worm which has resulted in 12.45 per cent lower production figures for cotton over last year. 

Sugarcane is expected to increase marginally by 8.47 per cent on increased sowing and lastly Jute & Mesta is expected to decline marginally by 3.87 per cent amidst decking marketing prospects. 

The table below shows the details of the final estimate for the 2017-18 Kharif crop:


Friday, 13 October 2017

Copper Heats up the Base Metal Rally in the Global Market

The copper market continues to find support from the increase demand support from Chinese market and supply disruptions in copper mining in major supplying countries. Copper started the year with an impressive performance in Jan’17, but unfortunately plunged soon in the following months through May’17. Widely considered an economic barometer, Copper posted a dismal performance in the first quarter, hurt by disappointing economic data releases from China and rising inventories at both LME and Shanghai warehouses. But, the reports of supply disruption at world’s biggest copper mines - Escondida mine in Chile and Grasberg mine in Indonesia and the improving numbers in the subsequent months provided temporary respite and since then, the market is on the Bull Run. After a turbulent August, in which the prices for nonferrous metals seemingly knew only one direction and copper meanwhile marked a new three-year high, the situation calmed down again noticeably in the course of September. The price for copper is currently indeed lower, but appears to be consolidating at this level. Exaggerations had previously repeatedly been reported; therefore, a correction was seen as overdue. In September, there was basically little situation-changing news. 

The supply side continues to haunt the copper market and support the bullishness in the copper prices. World mine production is estimated to have declined by around 2 per cent in the first half of 2017, with concentrate production declining by around 1.7 per cent and solvent extraction-electro-winning (SX-EW) declining by around 3.5 per cent. The decline in world mine production was mainly due to a 9 per cent (245,000 MT Cu) decline in production in Chile - the world’s biggest copper mine producing country, negatively affected by the strike at the Escondida mine and lower output from Codelco mines, decline in Canada and Mongolia concentrates production of 22 per cent and 21 per cent, respectively, mainly due to lower grades in planned mining sequencing, 9 per cent decline in Indonesian concentrate production as output was constrained by a temporary ban on concentrate exports that started in January and ended in April and about 10 per cent decline in production in the United States mainly due to lower ore grades, reduced mining rates and unfavourable weather conditions at the beginning of the year. However these reductions in output were partially offset by a 9 per cent and 7 per cent rise in Mexican (concentrate and SX-EW) and Peruvian (concentrate) output, respectively, with both countries benefitting from new and expanded capacity that was not yet fully available in the same period of last year. Globally, mine production has improved in the 2nd quarter of 2017 as compared to 1st quarter 2017 but is still 1 per cent below that of the 2nd quarter 2016.

World refined production is estimated to have remained essentially unchanged in the first half of 2017 with primary production (electrolytic and electro-winning) declining by 1.5 per cent and secondary production (from scrap) increasing by 12 per cent. Increased availability of scrap allowed world secondary refined production to increase, notably in China. The main contributor to growth in world refined production was China (increase of 7 per cent), followed by India (9 per cent) and Mexico (10 per cent) where expanded SX-EW capacity contributed to refined production growth. However, overall growth was partially offset by a 12 per cent decline in Chile, the second largest refined copper producer, where both primary electrolytic refined production and electro-winning production declined. Production also declined in the third and fourth world leading refined copper producers, namely, Japan (-4 per cent) and the United States (-10 per cent). On a regional basis, refined output is estimated to have increased in Asia (5 per cent) and in Europe (including Russia) (3 per cent) while declining in the Americas (10 per cent) and in Oceania (6 per cent) and remaining essentially unchanged in Africa. 

World apparent refined usage is estimated to have declined by around 2 per cent in the first half of 2017. Preliminary data indicates that world ex-China usage might have remained essentially unchanged, however China apparent usage (currently representing almost 50 per cent of the world refined usage) declined by 4 per cent. Chinese apparent usage (excluding changes in unreported stocks) declined by 4 per cent because, although refined copper production increased by 7 per cent, net imports of refined copper declined by 27 per cent. Among other major copper using countries, usage increased in India, Japan and in the United States but declined in Germany. On a regional basis, usage is estimated to have declined in Africa by 3 per cent, in Asia by 2 per cent (when excluding China, Asia usage increased by 4 per cent), and in Europe by 4 per cent while increasing by 1 per cent in the Americas.

World refined copper balance for the first half of 2017 indicates a deficit of around 75,000 MT. This is mainly due to stagnant growth in world refined copper supply. In developing its global market balance, ICSG uses an apparent demand calculation for China that does not take into account changes in unreported stocks [State Reserve Bureau (SRB), producer, consumer, merchant/trader, bonded]. To facilitate global market analysis, however, an additional line item—Refined World Balance Adjusted for Chinese Bonded Stock Changes—is included in the table below that adjusts the world refined copper balance based on an average estimate of changes in unreported inventories provided by three consultants with expertise in China’s copper market. In the first half of 2017, the world refined copper balance adjusted for changes in Chinese bonded stocks indicates a deficit of around 5,000 MT.

Major global economic developments are continuously supporting the long term uptrend in the prices. China’s central bank have trimmed the amount of cash that some banks must hold as reserves for the first time since February 2016 in a bid to encourage more lending to struggling smaller firms and energize its lackluster private sector. Copper supply dynamics however, continue to provide a cushion after a notice by China Non Ferrous Metals Industry Association to its recycling branch that imports of scrap metal including Copper in wire, motors and bulk scrap metal form will be prohibited from the end of 2018. This boosted refined metal demand prospects in the world’s biggest consumer whose imports have plunged by 22 per cent in Jan-Jul’17 compared to 16 per cent increase in scrap imports. Big manufacturers have more confidence in Japan’s business conditions than they have had for a decade as a weak yen and robust global demand add momentum to the economic recovery. The upside for Copper is finding support in supply disruption concerns. Labour problem at Grasberg, world’s second biggest Copper mine in Indonesia, escalated to violence as former mine workers clashed with security forces, providing Copper another boost. Chinese factory activity continues to be in the expansion phase, dismissing tighter credit and slowing property market induced growth concerns. Overall I feel that the bullishness is likely to continue in the coming months amidst sustained support from demand expansion economic activities.

Monday, 4 September 2017

NBHC’s First Kharif Crop Estimates for 2017-18

With the Kharif season almost on the verge of completion we at NBHC are releasing our 1st Kharif Crop Estimate - 2017-18. As per our analysis and industry’s feedback on the sowing progress and the status of the current crop, the total Kharif Cereals production is likely to decline marginally by 1.72 per cent. For the current season the monsoon had arrived timely in good quantum but the distribution has not been uniform. The country has been affected by heavy rains in some states leading to massive flooding while the other states are dealing with significantly deficient and draught like situations. Based on the above conditions we fell that the total Kharif crop production scenario for the year 2017-18 would turn out to be as explained in table given below.   
Rice is expected to show a marginal Improvement in area by 2.84 per cent and a fall of 0.14 per cent in production over last year owing to wide spread rains in major paddy growing areas. Maize is the other cereal crop with significant decline in area as well as production. The area is expected to decline marginally by 1.17 per cent and the production is expected to decline by 7.94 per cent to 17.71 Million MT as major stretch of maize producing areas in major states are experiencing deficient rainfall situations. Maximum Decline is expected in Small Millets whose production is expected to fall by 12.54 per cent while its area is likely to shrink by 27.88%. Lack of remunerative income has led Jowar & Bajra farmers to shift their cropping pattern to other cash crops.   
In the pulses sector, the increased positive focus of the government was clearly visible over the last two years. In the pulses growing states of Madhya Pradesh, Karnataka, Andhra Pradesh and Telangana the production is expected to be marginally affected by the lack of rains in the growing areas. We expect the area under Tur, Moong, Urad and Kulthi to increase sharply by 11.41 per cent, 8.86 per cent, 17.10 per cent and 3.82 per cent respectively but the production is not expected to follow the same path owing to adverse weather situations developing in major growing areas. Overall, the total Kharif pulses production is likely to decline by 9.51 per cent over last year with maximum decline expected in Moong (17.15 per cent) flowed by Urad (13.11 per cent) and Tur (12.40 per cent).

The oil seed sector is likely to see a marginal decline in production by 12.43 per cent. Maximum Decline of 17.98 per cent in production is expected in case of soybean followed by 8.28 per cent production decline in Groundnut.
In this current monsoon season, the cash crop section is likely to show an overall positive growth in terms of production. In sugarcane, the production is likely to increase by 14.81 per cent while in cotton the production is likely to decline by 3.98 per cent.


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