NBHC’s First Rabi Crop Estimates for 2018-19

The northeast monsoon, between October and December, over the country had been “Substantially below Normal”. The cumulative rainfall in the country during the post-monsoon season i.e. 01st October, 2018 to 31st December, 2018 has been 44 per cent lower than LPA. Rainfall in the four broad geographical divisions of the country during the above period have been lower than LPA by 51 per cent each in Central India & East & North East India, 45 per cent in North West India and 36 per cent in South Peninsula. This coupled with the drought in some parts have impacted Rabi sowing and could aggravate the distress in the farm sector. The southwest monsoon was almost 22 per cent below normal in the Marathwada region of Maharashtra, while in north interior Karnataka, the deficit was almost 29 per cent and 37 per cent below normal in Rayalseema. In Maharashtra, Vidarbha reported 88 per cent post-monsoon rainfall deficiency, which is the highest in the state. Similarly, drought affected regions like Marathwada received 84 per cent less rainfall, followed by central Maharashtra at 64 per cent deficiency and Konkan and Goa at 56 per cent rainfall deficiency in the post-monsoon period. Keeping in consideration the large scale post monsoon deficiency and the sowing reports from various parts of the country, NBHC Pvt. Ltd. Has come up with its 1st Rabi Crop Estimates for 2018-19. 

As per our study, the total Rabi Cereals production for the year 2018-19 is expected to be lower by 9.91 per cent to 115.49 Million MT and Wheat is expected to show a decline in area by 2.54 per cent to 29.66 Million Ha and production by 4.99 per cent to 94.72 Million MT owing to scanty and inequitable distribution of rainfall in major growing areas. Rabi Rice acreage is recorded lower by 14.17 per cent and its production is expected to decrease significantly by 28.91 per cent due to major rice-growing states West Bengal, Odisha, Tamil Nadu, Karnataka and Andhra Pradesh are lagging sowing area. Total coarse cereals are expected to fall by 6.9 per cent to 12.1 million MT in 2018-19. This is due to a fall in production of Jowar, maize and barley. Jowar has seen the biggest fall in sowing, with around 2.52 million hectares, a fall of 18.82 per cent over last year. Area sown under maize and barley fell by 5.67 per cent and 2.62 per cent, respectively.

The most affected is the cultivation of pulses, particularly Gram or Chana. The acreage under Gram is down in major growing States of Maharashtra, Madhya Pradesh and Karnataka, which is reeling a drought. The Gram acreage has decrease by 9.92 per cent to 9.70 million hectares from 10.76 million hectares in last year. Overall, the pulses have shown decrease by 6.75 per cent and the production is expected at 14.48 Million MT despite Kulthi acreage and production increase significantly by 29.84 per cent and 31.23 per cent respectively. Masoor production is estimated 1.76 per cent lower at 1.71 Million MT as against 1.74 during 2017-18.

However oilseeds are the only crop which managed to retain last year’s level in terms of acreage with less than one per cent increase. A surge in mustard cultivation in Rajasthan has been critical in taking the total oilseeds sowing area to about 8.04 million hectares, which was 0.71 per cent higher than that in 2017-18. Mustard acreage is expected to increase by 5.03 per cent at 7.02 million hectares likewise production is expected to increase by 4.46 per cent to 8.69 million MT. Groundnut, Sunflower and safflower production for 2018-19 has been estimated to be lower at 0.97 million MT.

Copper’s Strong Fundamentals Finally Gives in to Bulls

Copper’s dramatic price slide began from about mid-year of 2018. The strong dollar, rising US interest rates and concern over the escalating trade dispute between the USA and China weighed heavily on copper. Currently, the dollar has started showing signs of cooling, the FED rate hikes have been stabilised and both parties have agreed to enter a period of negotiation that would normalise trade deal within 90 days from the beginning of 2019. An on-going trade dispute between the U.S. and China could send the global economy into a recession, therefore the odds favour a trade deal between the nations, as it is in the best interests of both countries. The global copper demand is expected to continue on the rise in 2019. According to the latest analysis the market is under supplied with demand set to increase from 23.6 million MT in 2018 to 29.8 million MT by 2027 - at 2.6 per cent annual growth. Thus, we can see the increased positivity in the various factors as 2019 continues to roll on. 

Global copper mine production is expected to process with steady growth over the next few years, supported by markets with low operating costs and improving copper prices. In terms of tonnage, global copper output is likely to climb from 20.4 million MT in 2018 to 28.1 million MT by 2027, thus depicting a marginal shortfall in supplies over the years. Moreover, Declining ore grades for copper, continued lack of investment in new mines and the time required to bring new discoveries to production will constrain metal availability and, ultimately, the metal sector’s ability to meet growing demand from automakers for battery electric vehicle production. World mine production is estimated to have increased by about 2.4 per cent in the first ten months of 2018, with concentrate production rising by 2.3 per cent and solvent extraction-electro-winning (SX-EW) by 2.6 per cent. The increase in world mine production of about 390,000 MT copper was principally due to constrained output in 2017 (mainly in Chile, Indonesia and the DRC). Production in Chile, the world’s biggest copper mine producing country; increased by 6 per cent primarily because production in February/March 2017 was restricted by a strike at Escondida (the world’s biggest copper mine). Indonesian output increased by 19 per cent due to the fact that comparative output in 2017 was negatively affected by a temporary ban on concentrate exports that started in January and ended in April. SX-EW production in the Democratic Republic of Congo (DRC) increased by 12 per cent and Zambian mine output increased by 8 per cent as a result of the restart of temporarily closed capacity in both countries. Although no major supply disruptions occurred in the first ten months of this year, overall growth was partially offset by lower output in Canada (-11 per cent) and the United States (-3.5 per cent). After a strong increase over the last few years due to new and expanded capacity, output in Peru (the world’s second largest copper mine producing country) stabilized. On a regional basis, mine production is estimated to have increased by around 8 per cent in Africa, 3.5 per cent in Latin America, 2 per cent in Asia and 10 per cent in Oceania but declined by 5 per cent in North America and remained essentially unchanged in Europe. For the year 2019, The Grasberg mine production is forecast to drop nearly 40 per cent as the operation is retooled from open-pit to underground and the overall normalisation of supply is expected only by 2022. Copper output growth from Australia is decelerating as no major new mine is expected till 2020.

World refined production is estimated to have increased by 1.2 per cent in the first ten months of 2018 with primary production (electrolytic and electro-winning) remaining essentially unchanged and secondary production (from scrap) increasing by 5 per cent. World growth was constrained by an unusually high frequency of smelter disruptions and temporary shutdowns for technical upgrades/modernizations. The main contributor to the growth in world refined production was China due to its continued expansion of capacity. A rise of 2 per cent in Chile was a consequence of a recovery from 2017 when output was negatively impacted by a series of smelter maintenance shutdowns. However, despite this increase, Chilean output over the first ten months of 2018 was 6 per cent lower than the same period of 2016. Production in Indonesia and Japan was also higher in the first ten months of 2018, recovering from reduced output in 2017. Increases in electro-winning (SX-EW) output in the DRC and Zambia also contributed to world refined production growth. Overall growth was partially offset by a 34 per cent decline in India’s output due to the shutdown of Vedanta’s Tuticorin smelter in April and declines in Australia, the Philippines, Poland, and the United States as a consequence of maintenance shutdowns and operational issues. On a regional basis, refined output is estimated to have increased in Africa (10 per cent), Asia (1 per cent) and Latin America (2 per cent) whilst remaining essentially unchanged in Europe and Oceania and declining in North America (-4 per cent).

Amidst all, the development in Vedanta is also a crucial happening as far as Indian market is concerned. The National Green Tribunal in India ruled in December that the local government’s closing of Vedanta’s Tuticorin copper smelter in the southern Indian province of Tamil Nadu was invalid. Tamil Nadu’s Pollution Control Board was called on to provide relevant permit for the smelter’s continued operation within three weeks. Tuticorin has a capacity of about 400,000 MT per year.

In terms of demand, China in 2018 consumed 12,262 TMFT of copper up 4 per cent from 2017 and now representing 52 per cent of world supplies. China’s expansive; multi-billion-dollar Belt and Road Initiative (BRI) traverses several continents – Southeast Asia to Eastern Europe and Africa – and encompasses major projects in 71 countries. In their pursuit for a global network, it is thought that Chinese firms have secured more than $340 Billion in construction contracts. China remains the world’s biggest copper consumer as it continues its massive infrastructure build. The health of its economy therefore remains an important factor in the outlook for copper. This is why all eyes are currently on progress with respect to trade negotiations underway between the U.S. and China. Global demand increased 0.9 per cent in 2018. Excluding China, global demand would have actually been down about 1 per cent. India is the other rapidly growing copper consumer with demand forecast to grow 12 per cent in 2019 and expected to double by 2026, to a still relatively modest 5 per cent of global demand. Other important countries and regions for copper demand including Europe, U.S., Japan, and South Korea are expected to have relatively flat growth in the coming years.

In the recent positive development, China and the US said this month progress had been made in resolving some of the thorniest issues in their trade war, prompting optimism that the stand-off may be ended. The inventories of copper are at a 10-year low and are set to fall further in the second quarter of this year which is enough to keep the copper market in a deficit of 200,000 MT in 2019 and 2020. Furthermore, an import ban for copper scrap with high impurity levels (called category 7 scrap) will go into effect in 2019 leading to a roughly 250,000 MT (copper content) decrease in Chinese copper scrap imports of this quality. All these factors are keenly reiterating the fact that fundamentals are highly stalked in favour of bulls and long term investors should stay invested for the entire year of 2019 as well as 2020.

NBHC’s Final Kharif Crop Estimates for 2018-19

The year 2018-19 has indicated that below average and erratic distribution of monsoon rains. The season (June-September) rainfall over the country as a whole was 91 per cent of its long period average (LPA). Seasonal rainfalls over Northwest India, Central India, South Peninsula and Northeast (NE) India were 98 per cent, 93 per cent, 98 per cent and 76 per cent of respective LPA. Out of the total 36 meteorological subdivisions, 23 subdivisions constituting 68 per cent of the total area of the country received normal season rainfall, 1 subdivision received excess rainfall (1per cent of the total area), and 12 subdivisions (31 per cent of the total area) received deficient season rainfall. Monthly rainfall over the country as a whole was 95 per cent of LPA in June, 94 per cent of LPA in July, 92 per cent of LPA in August, and 76 per cent of LPA in September. Major states affected by this monsoon pattern were Bihar, Gujarat, Uttar Pradesh (West), Madhya Pradesh, Jharkhand , Telangana, Karnataka and Maharashtra.

In our first estimate (First Kharif Crop Estimates for 2018-19 – 25^th September 2018) we had broadly concluded that in the year 2018-19, the production of coarse grains, pulses and cotton are expected to decline by 9.78 per cent, 2.68 per cent and 4.57 per cent over 2017-18. In the current assessment, the Pulses and oil seed have marginally pushed themselves further in the negative region with an expected decline of 2.68 per cent and 5.36 per cent over the last estimate.

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 2018-19, rice production has expected to decline marginally by 0.73 per cent over last year and decline marginally by 1.91 per cent over last estimate. It is to be noted that the Basmati rice production is expected to fall decline by about 9.24 per cent but this short fall is being compensated by the increase in the Non-Basmati rice. Maize is expected to decline significantly by about 10.41 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 6.15 per cent, 18.40 per cent and 6.29 per cent respectively while Jowar is expected to decline by 10.59 per cent over last year.

Pulses production is projected to drop marginally to 9.10 million MT from 9.35 million MT last year due to the fall in Urad output by 10.11 per cent mainly due to the shift in acreage towards soybean in some parts of Madhya Pradesh and Maharashtra.

Total oilseeds production is estimated to be 19.87 million MT, which is 5.36 per cent declined than the last year production 21.00 million MT mainly due to falling groundnut (22.11 per cent), castor (27.16 per cent) and sesame (3.21 per cent) production in major producing states. Other oilseed such as Niger expected to increase by 11.83 per cent.

In the cash crop section, cotton is been seriously affected fluctuating weather conditions. The annual cotton output in India might drop 4.57 per cent due to inadequate rainfall in the top two producing states Maharashtra and Gujarat has cut crop yields, potentially reducing exports from the world's leading producer.

Sugarcane is expected to increase marginally by 3.25 per cent on increased sowing and lastly Jute & Mesta is expected to improve marginally by 5.11 per cent amidst favourable weather conditions.

The table below shows the details of the final estimate for the 2018-19 Kharif crop:

Increased Positivity in Economic Scenario likely to Boost Copper in 2019

Between January 2016 and the end of 2017, prices soared 72 per cent as China’s pace of growth picked up and the rest of the world economy boomed. For 2018, however, copper prices had fallen 18 per cent by late November amid concerns over trade wars, U.S. fiscal and monetary policy, Brexit, the Italian debt situation and a possible slowdown in China. The first half of the year faired positive and stable but once the trade war burst onto the scene it smothered all positive expectations and market witnessed significant slump. The slowing of the Chinese demand is adding pressure on the copper market. Copper Market is currently feeling the pressure of increased economic uncertainty and lack of concrete demand direction. The supply of copper in 2018 is ever on the rise as the copper majors’ smoothly negotiated wages at large scale mines putting the large scale disruptions at bay for the entire year and the repeat of 2017’s supply disruption was averted. An increasing flow of copper emanating from the world’s mines makes copper especially sensitive to any slowdown in demand growth. The coming year of 2019 is expected to be more promising with expected supply increase of over 1.5 per cent and increased demand of scrap in the global market. 

The global supply of copper is expected to slowdown in 2019, as production at the Grasberg Copper Mine in Indonesia, operated by Freeport McMoran and Rio Tinto is expected to fall by more than 50 per cent next year as the transitions in underground operations is likely to happen. The transition is expected to reduce copper supply in the market by about 300,000 metric tons, or 1.5 per cent of annual copper mine production. BHP Billiton Ltd’s Escondida Copper Mine in Chile is also expected to produce less copper this year. Currently, the World mine production is estimated to have increased by about 2.8 per cent in the first nine month of 2018, with concentrate production rising by 2.7 per cent and solvent extraction-electro-winning (SX-EW) by 3 per cent. The increase in world mine production of about 410,000 MT copper was mainly due to constrained output in 2017 (mainly in Chile, Indonesia and the DRC). The production in Chile, the world’s biggest copper mine producing country, increased by 7 per cent primarily because production in February/March 2017 was restricted by a strike at Escondida (the world’s biggest copper mine) and also because there has been an improvement in Codelco’s production levels in 2018. The Indonesian output increased by 23 per cent because comparative output in 2017 was negatively affected by a temporary ban on concentrate exports that started in January and ended in April. The SX-EW production in the Democratic Republic of Congo (DRC) increased by 11 per cent and Zambian mine output increased by 9 per cent due to the restart of temporarily closed capacity in both countries. Although no major supply disruptions occurred in the first nine months of this year, overall growth was partially offset by lower output in Canada (-11 per cent) and in the United States (-4.5 per cent). After a strong increase over the last few years due to new and expanded capacity, output in Peru (the world’s second largest copper mine producing country) has stabilized. On a regional basis, mine production is estimated to have increased by around 7.5 per cent in Africa, 4 per cent in Latin America, 3 per cent in Asia and 8 per cent in Oceania but declined by 5 per cent in North America and remained essentially unchanged in Europe. World refined production is estimated to have increased by 1 per cent in the first nine months of 2018 with primary production (electrolytic and electro-winning) declining by 1.3 per cent and secondary production (from scrap) increasing by 12 per cent. The main contributor to growth in world refined production was China due to its continued expansion of capacity. Production in Chile was up by 3.5 per cent mainly supported by a 9 per cent increase in primary electrolytic production as output was constrained in the comparative period of 2017 due to a series of smelter maintenance shutdowns. Production in Indonesia and Japan was also substantially higher, recovering from reduced output last year. Increases in electro-winning (SX-EW) output in the DRC and Zambia also contributed to world refined production growth. However, overall growth was partially offset by a 32 per cent decline in India’s output due to the shutdown of Vedanta’s Tuticorin smelter in April and declines in production in Australia, the Philippines, Poland, and the United States as a consequence of maintenance shutdowns and operational issues. On a regional basis, refined output is estimated to have increased in Africa (10 per cent), Asia (1 per cent) and Latin America (2.5 per cent) whilst remaining essentially unchanged in Europe and declining in North America (-5 per cent) and Oceania (-8 per cent). 

On the demand side, China consumes 40-50 per cent of the world’s copper supply, making it by far the world’s dominant consumer. China’s economy did well in 2018, growing at 6.5 per cent though; the strength of China’s current demand for copper is faced with concerns about the future. The trade dispute between the US and China might impact the Chinese economy, shaving a few tenths of one per cent off the country’s growth going forward. So long as China’s growth remains strong, copper prices can probably remain near their current levels. But any signs of slowing in China, and copper prices would have a long way to fall. For the world market, China is a particularly difficult source of demand to replace in the event of its slowdown. While India continues to grow at around 7-8 per cent, its economy is only one-fifth the size of China’s. Meanwhile, the other BRICs (Brazil and Russia) are likely to struggle. The recent selloff in oil could be bad news for copper demand from Russia, Brazil and other oil producers. 

The other factor vastly affecting the copper prices is the strengthening dollar. If the U.S. economy is sufficiently robust to support continued monetary tightening, USD might strengthen considerably to the probable detriment of copper prices. However, it is also possible, perhaps even likely, that the Fed will soon pause or significantly slow its tightening pace, depriving the dollar of the upward pull of rising short-term interest rates. Moreover, if over-tightening of dollar unintentionally produces an economic slowdown or recession that could have unpredictable effects on copper. Any dollar weakness would most likely be bullish for copper prices. The weakness in European market is also expected to affect the copper trade. In 2019, Europe is likely to face two key tests that may influence copper price - Brexit and the Italian debt situation. If Brexit turns out badly for the British pound (a no-deal exit) this could pull the euro down to the benefit of USD. The same could happen if the Italian debt situation spirals out of control. The Italian debt situation is particularly worrisome given that the European Central Bank has bought European debt up to its legal limit and a second European debt crisis would be of much greater economic consequence than Brexit.

Dynamics of Agri Warehousing in India

https://www.ciltindiaexpo.com/presentations/22-Nov-2018/Warehousing-Packaging/Mr.-Sauarh-Sood.pdf

My View On Kharif Crop Estimates- Live on CNBC Awaaz

https://hindi.moneycontrol.com/tv/cnbc-awaaz-shows/commodity-roundup_2018-10-16.html

Copper Bulls Cramped by Chinese Shrinking Demand

The long-term firm demand of copper from China has excessively been down played by the recent trade war between China and US. It is clear from the metals prices that the Chinese economy is slowing down. Trump threw his tariff tantrums as the Chinese government was getting tough on unregulated lending. This declining demand pattern was well reflected in the decelerating growth numbers of Chinese manufacturing sector which has raised immense pressure on policymakers as U.S. tariffs appear to be inflicting a heavier toll on the Chinese economy. A private survey has reflected that the growth in the Chinese factory sector stalled after 15 months of expansion and the export orders are falling sharply. Tensions between the world’s two largest economies have battered prices of resources across the board, but the move in copper is notable because of its heavy use in construction and manufacturing. Further, a weaker global growth outlook caused by an escalating trade dispute is likely to significantly dent the demand. It's not entirely clear how that pans out — the idea that we're going to see a resolution in October or November looks unlikely as US has reiterated that it was “too soon” for Washington to talk to Beijing about working out a deal on trade, suggesting U.S. tariffs have yet to exert enough pressure to force Beijing into making concessions at the negotiating table, so a protracted battle means again as we look into 2019, the growth trajectory looks uncertain, so that growth would need to be upgraded before more investors gets meaningfully associated.

Investors also need to keen monitor the swings in the dollar, as for much of the year, a stronger dollar has made copper and other commodities denominated in the U.S. currency more expensive for overseas buyers. The dollar climbed to a 15-month high in August but has since come down 0.8 per cent, relieving some pressure on commodities. While US-China trade tensions are unlikely to fade, China’s growth-supportive policy response will likely spur a year-end rally in some of the weakest performing commodities sectors. Copper, often considered a bellwether of global growth, gained 5 per cent in September, helped by optimism that broader US tariffs would prompt China to invest more heavily in areas like infrastructure to support its domestic economy.

Amidst, the increased uncertainties in the global economic scenario, the supply and demand has also changed marginally. The supply of copper has improved while the demand has slowed down. On the demand side, World mine production is estimated to have increased by 5 per cent in the first half of 2018, with concentrate production rising by 5 per cent and solvent extraction-electro-winning (SX-EW) by 6 per cent: The increase in world mine production of about 485,000 t copper was mainly due to constrained output in the comparative period of 2017 namely in Chile and Indonesia, production in Chile, the world’s biggest copper mine producing country, increased by 12 per cent primarily because production in February/March 2017 was restricted by a strike at Escondida (the world’s biggest copper mine) and because there is an improvement in Codelco’s production levels in 2018, Indonesian output increased by 40 per cent because comparative output in 2017 was negatively affected by a temporary ban on concentrate exports that started in January and ended in April. and a 16 per cent increase in SX-EW production in the Democratic Republic of Congo (DRC) and a 12 per cent rise in Zambian mine output due to the restart of temporarily closed capacity. Although no major supply disruptions occurred in the first half of this year, overall growth was partially offset by lower output at some mines in Canada (-7 per cent) and in the United States (-8 per cent). After a strong increase in the last few years due to new and expanded capacity, output in Peru (the world’s second largest copper mine producing country) has levelled off. On a regional basis, mine production is estimated to have increased by around 10 per cent in Africa, 8 per cent in Latin America, 5.5 per cent in Asia, 3 per cent in Europe and 8 per cent in Oceania and declined by 6 per cent in North America.

World refined production is estimated to have increased by 2 per cent in the first half of 2018 with primary production (electrolytic and electro-winning) rising by 0.3 per cent and secondary production (from scrap) increasing by 9 per cent. In tonnage terms, the main contributor to growth in world refined production was China due to its continued expansion of capacity. Production in Chile was up by 6.5 per cent supported by a 4.7 per cent increase in electro-winning (SX-EW) production mainly because comparative output in 2017 was constrained by the strike at Escondida referred to previously. In addition, primary electrolytic production increased by 10 per cent mainly due to improved production at Codelco. Production in Indonesia and Japan was also substantially higher, recovering from reduced output last year as a consequence of a strike and maintenance shutdown. Increases in electro-winning (SX-EW) output in the DRC and Zambia also contributed to world refined production growth. However, overall growth was partially offset by a 20 per cent decline in India’s output due to the shutdown of Vedanta’s Tuticorin smelter in April and declines in production in Poland and the United States as a consequence of maintenance shutdowns. On a regional basis, refined output is estimated to have increased in Africa (11 per cent), Asia (2 per cent) and Latin America (5 per cent) while remaining essentially unchanged in Europe and declining in North America (2.5 per cent) and Oceania (5 per cent).

On the demand side, world apparent refined usage is estimated to have increased by about 1 per cent in the first half of 2018. China was the biggest contributor to growth with apparent usage (excluding changes in unreported stocks) increasing by 4 per cent, driven by a 17 per cent increase in net refined copper imports (as Chinese customs have temporarily suspended the publication of copper trade data since March, exports are calculated based on reversed trade and are likely to be revised). Preliminary data indicates that world ex-China usage declined by 1.5 per cent. Among other major copper using countries, demand increased in India and the EU but declined in the United States and remained essentially unchanged in Japan.

Over recent weeks and months, new trade agreements have calmed the waters for international commerce. The U.S. and European Union have come close to an agreement. The most significant issue facing the copper market, industrial commodities, and the companies that produce them has been the trade dispute between the U.S. and China. Commodities are on the front lines of the conflict which creates barriers for the flow of the raw materials around the world, and copper is no exception. China is the leading consumer of these commodities, and the trade issues have weighed on the Chinese economy. The escalation of the trade dispute over recent weeks continues to stand in front of any substantial comeback in the price of copper. I continue to believe that the solution to the current dispute will come from an economic summit between China's President Xi and U.S. President Trump in the coming weeks or months and the copper would re-embark on positive trend.

NBHC’s First Kharif Crop Estimates for 2018-19

With the Kharif Sowing almost on the verge of completion we at NBHC are releasing our 1^st Kharif Crop Estimate - 2018-19. On the Monsoon front, India's monsoon, which irrigates more than half of the country's farmland, is below an earlier forecast of normal showers. Backed by good monsoon rainfall last year India had produced record 284.83 MT of food grains in the 2017-18, this year highly erratic monsoon and its obscure spread may reduce food grain output in the ongoing Kharif season. 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 1.71 per cent. Despite heavy rains after the second half of August and first week of September, which caused floods across Bihar, Kerala, Assam Gujarat, and Himachal Pradesh, as many as 254 districts (total 640 districts ~ 40%) are faced with drought like situation this monsoon. 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 2018-19 would turn out to be as explained in table given below.  

Total Rice is expected to show a marginal improvement in area and production by 4.67 per cent and 1.21 per cent. Within the rice segment, Basmati Rice area and production is expected to decrease by 2.25 per cent and 7.15 per cent respectively, whereas the Non-Basmati rice is expected to increase marginally by 4.96 per cent and 1.73 per cent. Maize is expected marginal lower in area at 1.66 per cent and significant decline in production at 9.64 per cent, as many farmers shifted to other remunerative crops, few districts in Karnataka and Maharashtra, major growers of the crop, got less rains and experienced pest infestation which would have result in yield loss. Maximum Decline is expected in Ragi whose production is expected to fall by 23.88 per cent while its area is likely to shrink by 18.90 per cent. Lack of remunerative income has led Jowar & Bajra farmers to shift their cropping pattern to other cash crops.   

In the pulses sector, we expect the area under Moong to increase by 7.95 per cent whereas the production is expected to rise sharply by 26.07 per cent. Arhar area is expected to increase by 5.10 per cent and the production is expected to experience an increase of 3.06 per cent. Urad area and production is expected to be low by 9.52 per cent and 1.89 per cent respectively. Overall, the total Kharif pulses area and production is likely to decline marginally by 3.75 per cent and 1.80 per cent respectively over last year.

The oil seed sector is likely to see a marginal decline in production by 3.92 per cent. The decline in production is expected to the tune of 50.67 per cent, 28.49 per cent, 21.84 per cent and 17.36 per cent for Niger, Castor, Groundnut and Sunflower respectively. Soybean is the only oilseed crop where area is expected to be up by 6.57 per cent and the production is expected to increase by 12.20 per cent for the coming season.

In this current monsoon season, the cash crop section is likely to show an overall neutral scenario as only the area for Sugarcane is expected up by 4.06 per cent whereas Jute & Mesta and Cotton is down by 0.70 per cent and 2.46 per cent respectively. In terms of production significant rise of 10.11 per cent is expected in sugarcane while marginal decline of 0.15 per cent and 4.84 per cent is expected in Jute & Mesta and Cotton respectively.

Trade War Continues to Take Its Toll on Copper Market

The indecisive sentiment of copper market continues to rule the market over the continued escalation of trade tensions between the United States and China. The supply-demand statistics have for the meantime taken a back seat and the trade directions with regards to the fallout of the trade war have gained impetus. The Global manufacturing activity has already taken a hit from weak orders in August, as a survey showed, a sign that companies are feeling the pinch from the intensifying Sino-U.S. trade war that could derail global growth. Currently, the falling inventories at London Metal Exchange and Shanghai Futures Exchange-approved warehouses are keeping physical prices high in China, as copper premiums are currently at $91 a tonne, close to a near two-year high of $86 (as on November 2016). But, the absence of fresh inflows into warehouses projects a very nervous and twitchy market situation, as there is no real direction to follow and investors, in particular, seem to be trading metals on the basis of influences from other markets. In spite of the strong fundamentals, the copper market may for the short term, embark on a bearish dive if the global currencies continue to weaken significantly following the Turkish route. 

The weakness in the red metals is also been accredited to the increasing uncertainty in the currency market as investors are fleeing to the relative safety of the dollar amid Turkey's financial woes and as concern grows that a U.S.-China trade spat will curb economic growth and put more countries under pressure of the steep rising of global debt. Argentina is already feeling the pressure as its peso crashed to a historic low. While previous debt crises involved U.S. households and, later, profligate European governments such as Greece, this time the concerned center's on companies in emerging markets that have borrowed heavily in dollars and euros. The Global debt loads have exploded since the Great Recession in 2008. From $97 trillion in 2007, total household, corporate and government debt grew to $169 trillion last year. The crises are likely to deepen further if FED continues to raise its interest rate in the midst of a healthier U.S. (U.S. dollar, now at its highest level in 13 months). For emerging markets that borrowed in dollars and euros, rising interest rates will make it more expensive to borrow new money or refinance existing debt. That could trigger a wave of defaults by corporate borrowers, with problems spreading far beyond Turkey and ultimately big debt bubble for the United States which can lead to a global financial crisis.

As per the basic fundamentals of copper trade are concerned, the supply continues to improve amidst lesser strikes compared to last year. World mine production is estimated to have increased by 5.7 per cent in the first five months of 2018, with concentrate production rising by 5.5 per cent and solvent extraction-electro-winning (SX-EW) by 6 per cent. The increase in world mine production of about 450,000 t copper was mainly due to constrained output in the comparative period of 2017 namely in Chile and Indonesia, production in Chile, the world's biggest copper mine producing country, increased by 13.5 per cent primarily because production in February/March 2017 was restricted by a strike at Escondida (the world's biggest copper mine) and also because there was an improvement in Codelco's production levels in 2018, Indonesian output increased by 43 per cent because comparative output in 2017 was negatively affected by a temporary ban on concentrate exports that started in January and ended in April and a 12.5 per cent increase in SX-EW production in the Democratic Republic of Congo (DRC) and a 13 per cent rise in Zambian mine output due to the restart of temporarily closed capacity. Although no major supply disruptions occurred in the first five months of this year, overall growth was partially offset by lower output at some mines in Canada (-8.5 per cent) and in the United States (-10 per cent). After a strong increase in the last few years due to new and expanded capacity, output in Peru (the world's second largest copper mine producing country) has levelled off. On a regional basis, mine production is estimated to have increased by around 11 per cent in Africa, 8.5 per cent in Latin America, 6 per cent in Asia, 3.5 per cent in Europe and 10 per cent in Oceania and declined by 7.5 per cent in North America. World refined production is estimated to have increased by 2 per cent in the first five months of 2018 with primary production (electrolytic and electro-winning) rising by 0.5 per cent and secondary production (from scrap) increasing by 9 per cent. In tonnage terms, the main contributor to growth in world refined production was China due to its continued expansion of capacity. Production in Chile was up by 6.5 per cent supported by a 5.5 per cent increase in electro-winning (SX-EW) production mainly because comparative output in 2017 was constrained by the strike at Escondida referred to previously. In addition, primary electrolytic production increased by 9 per cent mainly due to improved production at Codelco. Production in Indonesia and Japan was also substantially higher, recovering from reduced output last year that was due to a strike and maintenance shutdown respectively. Increases in electro-winning (SX-EW) output in the DRC and Zambia also contributed to world refined production growth. However, overall growth was partially offset by declines in India (shutdown of Vedanta's Tuticorin smelter/refinery in April), in Peru, Poland and the United States. On a regional basis, the refined output is estimated to have increased in Africa (11 per cent), Asia (2 per cent) and Latin America (4.5 per cent) while remaining essentially unchanged in Europe and Oceania and declining in North America (3 per cent). In a major development in India, the refined production in Tuticorin has been stopped which is costing the company around US$ 100 million annually. The smelter has been at a standstill since late March and was sealed by government authorities in May following public, fatal protests against the operation and expansion of the smelter. Vedanta is currently trying to counter the closure and gain access to its facilities using legal means and side by side wants to carry out necessary maintenance work on a leak in the sulphuric acid facility.

On the demand side, the buying spree took off after Beijing announced two weeks ago it would hit $16 billion worth of U.S. imports, including scrap metal (the United States is one of China's biggest copper scrap suppliers), with duties of 25 per cent from Aug. 23 in retaliation for a similar move by Washington. World Copper consumption between January-June 2018 was 11.57 million MT as against 11.53 million MT in 2017. WBMS estimates that imports of refined copper into China were about 350000 MT in June bringing it to 1.86 million MT. Chinese estimated demand for January to June 2018 was 5981 kt which is 5% above the previous year's total and represented over 51% of the global total. Thus, we can see that China's Demand can alone support the global copper market and is nothing to fear for the long-term investors in copper.

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