Wheat prices Caught in a Web of Abundance

Domestic Scenario

India is the second largest producer of wheat in the world after China, contributing to about 13.02 per cent of the world’s production. According to the 4th advance estimates, wheat production for 2012-13 is estimated at a record 92.46 million tonnes. Since the last three years, production has increased owing to good yields across production tracks, supported by good monsoon rains and increase in the Minimum Support Price. Over 94.54 per cent of the total production for the country was contributed by 6 states. The top wheat producing states of the country are Uttar Pradesh (31.93 per cent), Punjab (18.21 per cent), Haryana (13.37 per cent), Madhya Pradesh (12.16 per cent), Rajasthan (9.82 per cent) and Bihar (4.98 per cent). The domestic consumption is estimated at 85 to 90 million MT. India holds the third position in the major wheat consumer’s list after China and European Union.

International Scenario

World wheat production is projected at a record 708.9 million MT, up 3.5 million MT. Higher production in Canada, the European Union (EU), and the FSU-12 more than offsets reductions in Iran and Paraguay. Black Sea production is expected to rebound to 108 million MT due to more favorable weather conditions, compared to 77.2 million MT in 2012-13. Consumption is expected to reach new record at 707 million MT, up 4 per cent from 2012-13 and World feed use is expected to rise 3 percent to 141 million MT.

Price Trend Analysis

The wheat Spot market price variation study indicates that the prices volatility remains steady for most of the year and a spurt is witnessed in the period between June and August. Reports of Black Sea exporters re-entering the export market at competitive prices is likely to keep the global price volatility under check. There are reports that Black Sea production is likely to rebound by 40 per cent to 108 million MT due to improved weather and higher yields, Russian production is expected to increase by 16.3 million MT from 2012-13 to 54.0 million MT and Black Sea exports are expected to reach 37.1 million MT and represent 24 per cent of world market, compared to 19 per cent in 2012-13. In the domestic market, as per the trend, the spurt in the volatility was noticed in the July – August 2013 period (from an average of around 20 per cent to over 40 per cent) and since then the prices have been consolidating in a tight range.

The major development in the global market which has supported the global market is the demand from China which is expected to import 9.5 million MT, compared to the 5-year average of 1.74 million MT with its production remaining unchanged at 121 million MT. The spot prices at Delhi sharply declined from March onwards due to record wheat production estimation of 92.46 million MT. The Indian market is marginally stable on the higher level amidst expectation of export of 5.5 million MT of wheat in the current marketing year.

Production Trends & Price Forecast

Wheat being a Rabi crop, sown during October to December, is highly dependent on good monsoon. This year, good rainfall received during the current monsoon season in major producing regions will certainly provide the required soil moisture during the sowing period. The upcoming season is likely to see production of around 90 to 95 million MT. the Indian market is currently pegged around Rs. 1650 a quintal, which is likely to hold on for the coming season without much fluctuation. I expect the 2014 prices to be range bound with the upper cap of Rs. 1780 a quintal & lower firm support at Rs. 1420 a quintal.

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Barley Prices to Shoot Up in Coming Months

Domestic Scenario

Indian barley production during the year 2012-13 is estimated at around 1.74 million MT, marginally higher compared to 1.62 million MT during the preceding year, owing to good rains in kharif season improving the crop yield. Since last three years, production has been increasing owing to good yields across production tracks, supported by good monsoon rains and increase in the Minimum Support Price. Over 91.71 per cent of the total production for the country was contributed by 4 states. The top barley producing states of the country are Rajasthan (48.75 per cent), Uttar Pradesh (24.96 per cent), Haryana (9.45 per cent) and Madhya Pradesh (8.54 per cent). The domestic consumption is estimated at 1.5 to 1.75 million MT. India holds 14th position in the major barley consumer’s list, with the leaders being European Union (37.91 per cent) and China (9.57 per cent).

International Scenario

The International Grain Council revised upward its global 2013-14 barley production forecast to 142.3 (previous figure 142.0; 2012-13 129.5) million MT, and that for the EU-28 to 59.1 (58.4; 54.5) million MT and for Canada to 9.0 (8.8; 8.0) million MT, while in Ukraine output is seen lower at 7.4 (7.7; 6.9) million MT and in Argentina at 4.8 (5.0; 5.2) million MT. Production is seen unchanged in Russia at 16.5 (16.5; 13.9) million MT and in Australia at 7.5 (7.5; 6.8) million MT. Global use is forecast at 138.4 (138.1; 132.8) million MT, including 91.9 (91.7; 87.5) million MT for feed, 6.6 (6.6; 6.6) million MT for food and 30.0 (29.7; 29.2) million MT for industrial use. Global trade is projected to reach 18.8 (18.7; 19.5) million MT and ending stocks are seen to be at 26.5 (26.3; 22.5) million MT. 

Price Trend Analysis

The barley spot market price variation study indicates that the prices have been on the rise since January 2006 owing to reports of higher export demand. In the current year World barley stocks are likely to end 2012-13 at a five-year low of 22.5 million MT, with the drop in inventories in major exporting countries being particularly severe, of 14% to 12.5m tonnes, the lowest in 17 years. Moreover, Chinese imports of barley, which are essentially all for use by maltsters rather than as livestock, feed, nearly halved to 566,000 tonnes in the first four months of 2013. Owing to increased participation of India in the global export market over the years and declining demand, the prices are consolidating at lower levels.

As per the study, the prices have been weakening since the peak in April 2012. Prices had shown marginal recovery after September 2012 for the quarter ending December and since then the prices have maintained a lower trajectory in the domestic market. The key factor in the global market supporting the prices would be the demand from China and Saudi Arabia. Saudi Arabia, the world’s foremost barley-importing country, accounts for over 40 percent of world barley trade through the coming decade. Saudi Arabia’s barley imports are used primarily as feed for sheep, goats, and camels. Australia’s barley exports are projected to rise slowly, and the country is expected to maintain its role as the world’s third-largest exporter. The spot prices in barley are expected to improve due to support from the increased export demand. 

Production Estimates & Price Forecast

Barley being a Rabi crop, sown during October to December is highly dependent on good monsoon. This year, good rainfall received during the current monsoon season in major producing regions will certainly provide the required soil moisture during the sowing period. The upcoming season is likely to see production of around 1.7 to 1.8 million MT. Barley is all set to gain momentum in the coming days owing to expected production shortfall in the global market. India markets can expect a prices of over INR 1800 / quintal from current levels of about INR 1400 / qunital.

Copper : A Base Metal for Assured Investment in 2014

Domestic Scenario

India is among the top 20 major producers of copper globally. Over 30 per cent of India’s copper demand comes from the telecom sector and 26 per cent from the electrical sector in India. In addition, the building and construction, engineering, transport and consumer durables sectors are major consumers of copper in India. These sectors stand to benefit the most from lower prices of copper. During the last few years, India’s switch from net importer to exporter is due to a rise in production by three companies: Sterlite Industries, Hindalco, and Hindustan Copper. Hindalco and Sterlite industries account for more than 80 per cent of India’s total copper production. The Indian industry imports raw copper from Chile, Indonesia, Australia, and Canada and exports finished products to various destinations.

International Scenario

Mine production rose 715,000 MT or 4.5 per cent to 16.023 million MT in 2012 from the previous year, according to the ICSG. There were increases in China (26 per cent) Democratic Republic of Congo (DRC) (21 per cent), Mexico (18 per cent), Peru (five per cent) and Chile (three per cent), which more than offset declining output in Indonesia (26 per cent) and Australia (four per cent). The average world mine capacity utilisation rate climbed to 82 per cent in 2012 from 80.6 per cent in 2011. Refined output increased 485,000 MT or 2.5 percent to 20.132 million MT in 2012 compared with 2011, with primary output up 2.3 percent and secondary output up 3.3 per cent. The main increases came from China (11 per cent) via new capacity; Japan (14 per cent), where the industry recovered from the 2011 earthquake and tsunami, and the DRC (28 per cent), where new capacity was brought on line. Output declined six percent in Chile, three percent in the US and 45 per cent in the Philippines after a fire at the country’s sole smelter. Capacity utilisation dropped to 79 per cent from 80.6 per cent in 2011.

Stocks & Price Trend Analysis

In late 2012 and early 2013, optimism was running high that the US economic recovery would continue and that China would move into recovery mode too. On the strength of that, metal prices ran higher while investment interest picked up. Although US data has tended to remain upbeat, Chinese data has been less constructive and a recovery in demand during the first quarter has proved to be fairly elusive. This forced a reappraisal of the outlook for commodity demand and a corresponding correction in prices. The market was in a deficit of 3,40,000 MT in 2012, according to preliminary data from the International Copper Study Group (ICSG), but it had swung into a surplus in October and remained in one for the whole of the fourth quarter – totaling 2,37,000 MT.

How 2013 turns out is likely to be determined by the extent to which consumers feel the need to restock. Manufacturing PMIs have become quite mixed – the US ISM number climbed to 54.2 in February from 53.1 in January and 50.7 in December but then dropped to 51.3 in March, which suggest the US recovery is still stop/start. Copper has had some of the tightest fundamentals of all the metals in recent years, which is no doubt why prices have managed to hold so far above the marginal cost of production. On paper, the market looks set to move into a supply surplus in 2013, which should in theory put downward pressure on prices; indeed, that seems to have been unfolding in recent months.

The trends in global refined copper consumption are also progressing to an alarming state. Industrial production is not keeping up with copper consumption and recent indications have pointed to estimates in Chinese consumption to be very conservative. It now appears that in the next 25 years, the world will need to produce as much copper as has been produced in the history of humanity.

The outlook for copper is greatly focused on China. Copper consumption will grow as a consequence of overall economic growth. China has been a shining example of overall economic growth, growing at an annual rate of 9.9% between 1980 and 2010. Most forecasts do not have China slowing down anytime soon; the IMF predicts China's economy will expand at an annual rate of 9.7% over the next 5 years. One of the largest drivers of copper will be the growth of the Chinese consumer. Now one billion Chinese have become consumers, salaries have increased, and domestic consumption will continue growing faster than GDP (which in itself is projected to grow 500% by 2025).

China's consumption of refined copper is expected to grow more quickly in 2014, though not fast enough to boost imports significantly as production increases more quickly. China is the world's top producer and consumer of the metal and imports have been dropping in line with weaker economic activity, dragging international prices down nearly 10 per cent so far this year in the international market. China's consumption of refined copper is forecast to grow 6.5 per cent to 8.7 million tonnes in 2014, as Beijing continues to invest heavily in the power sector. The rate is slightly up from the 6.4 per cent growth rate expected for 2013 and 4.8 per cent increase recorded in 2012.

Other supporting news coming from US, where The Fed trimmed the pace of its monthly asset purchases by $10 billion to $75 billion, and sought to tamper the long-awaited move by suggesting its key interest rate would stay at rock bottom even longer than previously promised. Prices managed to gain around 3 percent by the end of the year as U.S. GDP grew at a solid 4.1 per cent annual rate from July through September, the fastest pace since late 2011 and significantly higher than previously believed, boosting the market sentiments.

Estimates & Price Forecast

China runs a structural copper deficit, with refined consumption of around 8.8 million MT and refined production of around 5.6 million MT; it seems unlikely that much of the Chinese stockpile will leave the country. Asia is accounting for 87 per cent of the increase in capacity – the China, India, Indonesia and Iran totals with all increase. Refined capacity would reach 30 million MT per year by the end of 2016, a rise of 18 per cent from 2012. In spite of projection o sharp hike in the production capacity, the huge demand from the Chinese power sector and emerging demand from European Union is likely to drive the prices on the higher side. Currently, Copper was one of the best performing commodities in December as it reacted to rising growth prospects in the US and sustained growth prospects in China, the world's two largest consumers. Supporting the move has been the continued drop in inventories at warehouses monitored by the two major futures exchanges in London and Shanghai. The range of the Indian MCX would be INR 380 on the lower side with possibility of its surging to INR 540 & above in 2014.

Investments Prospects for Gold in 2014

Demand for gold is one thing to look at but the other essential part of the equation with metals is supply - mines are expensive and time consuming to build. When it comes to the precious metals there is also monetary demand as some Central banks look to increase their gold reserves............................

Chinese gold buying unless it suits them for us to know. What's clear is that they have managed to acquire between 2,000 and 2,800 tonnes of gold in 2013, while........................

The best time to buy gold is when the market hates it. As per my analysis the global market is having a very firm support a $1168 a troy ounce and has good potential...............................

(Snippets form the interview )

http://www.youtube.com/watch?v=6i25ybDKe7o

Crude Palm Oil Destined to Climb Higher on Increased Demand Prospects

Domestic Scenario

India is the largest consumer of palm oil with a 16 per cent share, followed by Indonesia and China, with 13 per cent share each. In the total global imports, India has a share of 19 per cent per cent. However, India's share in the global production of palm oil is minuscule at around 0.2 per cent. Under the 12th Five Year Plan, the Agriculture Ministry plans to raise palm oil production by 0.3 million MT in five years. India consumes 17-18 million MT of edible oil annually, of which palm oil and soy oil account for over 45 per cent and 16 per cent share, respectively. Nearly 50-55 per cent of the consumption demand in the country is met by imports. In 2010-11, crude and refined palm oil accounted for over 74 per cent share, followed by soy oil with a 12 per cent share, in the total edible oil imports. This may surpass 10 million MT in 2012-13, compared to 9.98 million MT in 2011-12.

International Scenario

Global production of palm oil for 2013/14 is projected up 5 per cent to 58.1 million MT. Almost all of the increase could come from output growth in Indonesia, which is expected to rise to 31 million MT from 28.5 million MT in 2012/13. As a result, next season Indonesia is expected to expand its palm oil exports to 21 million MT from 20.1 million MT in 2012/13. Indonesia’s share of global palm oil exports could grow to nearly half. 

Price Trend Analysis

With the rising energy prices in the global market the prices of palm oil have moved up since November 2008. For the oil year 2010-11 the upswing in the prices started in the month of June and it continued till January amidst increased import demand from India, European Union and China. Since then the downward movement has been noticed amidst increased supplies from Indonesia and Malaysia and slowing of demand from China. The market is expected to witness another upswing in the coming months owing to the rising demand coupled with the new push toward bio-fuel use as geo-political unrest threatens crude oil supplies, and increased off take from European Union.

Looking at the price trends in palm oil, prices start the down trend during the month of May as the seasonal increase in oil palm fruit production and increased crushing activities lead to increase in supplies. Also the same coincides with the start of oilseed (especially soybean) plantings in US and China along with arrival of new crop oilseeds at the South American front. This down trend continues up to Sep-Oct, during which palm oil production peaks and also it is the period which signals the start of festive season buying across Asian countries. This uptrend continues till May, as the supplies remain tight. 

Production & Price Forecast

Low palm oil prices have made imports quite attractive, especially for India—the top import market. In January 2013, India imposed a 2.5 per cent duty on imports of CPO, effectively narrowing the duty gap between crude and refined products to 5 per cent. That is encouraging importers to buy cheaper refined palm oil instead of CPO. India's palm oil imports in the year starting Nov. 1, 2013 are likely to climb to 8.9 million MT from 8.7 million MT estimated for the current year. In spite of the surging production the increased demand is likely to keep supporting the prices and Malaysian CPO futures is likely to test the levels of 3200 to 3600 in the year 2014.

Cotton: A Steep Revival on Cards amidst Global Shortage

Domestic Scenario

The Cotton Association of India (CAI) estimated the 2012-13 seasons’ cotton production to be 35.3 million bales (170 kg each). The biggest producer of Cotton in the country is Gujarat (34.09 per cent) followed by Maharashtra (20.45 per cent). Other major producers of Cotton in the country are Andhra Pradesh (13.92 per cent), Haryana (7.53 per cent) and Punjab (6.53 per cent). The opening stock for the next season will be 4.25 million bales while the total supply is estimated to be 43.2 million bales. 

International Scenario

Global cotton production is estimated at 25.6 million MT for 2013-14 while consumption is forecast at 24 million MT leaving a surplus of 1.6 million MT, according to International Cotton Advisory Committee (ICAC). Based on China’s 2012-13 cotton estimates, consumption at 8.3 million MT, ending stocks at 9.4 million MT, of which 7.8 million MT are in the national reserve. Production in the United States is falling because of dry weather in some states and high prices of maize and soybeans. Pakistan, Brazil, Uzbekistan and most other countries are expected to produce about as much cotton in 2013-14 as they did in 2012-13. Cotton is expected to continue to lose market share this season to polyester. Despite the loss of market share, world cotton consumption is rising in absolute terms and is estimated at 23.7 million MT in 2013-14. 

Price Trend Analysis

The cotton spot market price variation study indicates that the prices have always been rising in the month of April, all the way till June; thereafter a drop in the prices takes place owing to onset of the sowing season. The demand for cotton improves from the month of September which initiates the upswing in the prices which continues till January owing to increased export demand. World cotton mill use is projected to decrease from 23.8 million MT in 2012-13 to 23.4 million MT in 2013-14. However, world cotton production is likely to exceed mill use for the fourth consecutive season in 2013-14. Consequently, ending stocks are expected to increase from 17.9 million MT to 18.7 million MT. As of June 2013, 9.2 million MT of cotton are estimated to be held by the Chinese national reserve. World trade in cotton is forecast to decline by approximately a million MT to less than 9 million MT. This decline is almost entirely accounted for by reduced imports into China. Shipments from all major exporters are expected to fall, except from the CFA zone where producers are increasing production in 2013-14, and thus exports, in response to higher cotton prices.

As per the study, the prices have been subdued till April 2013. The prices have recovered since then amidst reports of increased demand. However, the prices have again taken a back seat amidst weakening European Demand which has eaten away the comparative advantage enjoyed by the Indian exporters. The retail and stockists are growing up and is expected to improve with the advent of the winter season. In the 2013-14 cotton season, the natural fibre exports from India are expected to remain strong. Seeing the improving trading outlook, the prices are expected to continue on the bullish with few short term dips. 

Production & Price Forecast 

The current year's cotton production is estimated to be 35.3 million bales as against the increased estimate for the next year (Oct 13-Sept 14). The current estimates by CAI for next year’s crop show an overall increase of 1.83 million bales. The State of Gujarat is estimated to produce 11.15 million bales putting it at the number one spot. Maharashtra’s production is estimated at 7.5 million bales and Andhra Pradesh comes third at 6.75 million bales. The market is expected to remain bullish for the year 2014 and the NCDEX Kapas is likely to test INR 1400 from the current levels of INR 950 per 20 Kg.

India Commodity Year Book 2014

The India Commodity Year Book 2014 is a landmark initiative of NCML and is the country’s benchmark reference volume in the commodity sector. The articles cover various aspects of agricultural investment, market reform, warehousing and warehouse receipt finance as well as agro-industry and trade dynamics. The authors are an excellent mix of policy makers, market practitioners, academicians and experts. The Commodity Review and Statistical Appendix have been put together by NCML’s expert in house research team. These sections, along with the authoritative Papers, make this unique publication the country’s most comprehensive reference Book in the commodity space.

The Book would be useful to all commodity participants, especially those connected to the agriculture sector, as well as to the general reader interested in gaining insights into the vast commodity space. The Book has special interest and relevance to policy makers, agricultural researchers and students, economic analysts, commodity and finance professionals, commodity processors, manufacturers, importers and exporters, logistics providers, risk managers and all those engaged along the entire value chain.

Highlights:

Agri Commodity Markets – Quo Vadis - R. Ramaseshan points to the gaps in the commodity eco system and suggests the steps required to bring about the necessary changes.

Indian Sugar: Industry Overview & Prospects Ahead - Asitava Sen gives a comprehensive view of both global as well as domestic trends in the sector.

Enhancing Competitiveness in Indian Agriculture through Grading and Standardisation - Rajesh Sinha and Ranjit Kumar deals with major challenge facing Indian agriculture in absence of grading and standardisation of agricultural produce

Futures Market as an Early Warning System for a Sustainable Food Security Programme - Pallavi Oak proposes an innovative solution through the futures market .

Right to Food Legislation: an Objective Evaluation - Sanjay Kaul notes pros and cons of the right to food legislation.

Warehouse Receipt Finance – A win-win Game for All - Subramanian M.V., Ashish Kumar and Yatharth Dhoot details the importance of WHR finance in the commodity market eco-system.

Commodity Markets in India: Immediate Need to Restore Credibility - Shyamal Gupta points to the need to restore the confidence in the market through regulatory measures so that there is no repeat of NSEL.

Risks: Classification, Measurement & Mitigation - Girish Aivalli identifies the various types of risks prevalent in the commodity market and indicates the mitigation measures.

Gold – Changing Perceptions, Changing Tides - Naveen Mathur explores the changing demand perceptions, especially in the context of the financial crisis that has gripped the world economy since 2007. The Paper traces the evolution of the gold trade, the functioning of the gold standard and the rise of the US $ as the de facto world currency.

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Sugar Tastes Bitter as Demand Slackens

Domestic Scenario
Indian Sugar production during the year 2012-13 is estimated at around 24.5 million MT, lower by 2.00 per cent, compared to 25.00 million MT during the preceding year, owing to lower sugar realization and decrease in area for sugarcane production. Since last couple of years, the production has been declining owing to consistently lower prices and lack of support from the millers in spite of the government’s initiatives. Sugar is a derived product of sugarcane. The biggest producer of sugarcane in the country is Uttar Pradesh (37.2 per cent) followed by Maharashtra (23.5 per cent). Other major producers of sugarcane in the country are Karnataka (11.2 per cent), Tamil Nadu (10.6 per cent) and Andhra Pradesh (4.4 per cent). In terms of sugar production, Maharashtra is the biggest producer (36.5 per cent) followed by Uttar Pradesh (26.0 per cent). This is due to the high recovery rate in Maharashtra as the sugarcane crop in the state is of a longer duration than that in Uttar Pradesh.

International Scenario
Global sugar production for 2013/14 is forecast at 174.85 million MT, narrowly setting a record with growth in Brazil and Thailand more than offsetting sharply lower production in India. International raw sugar prices are at levels not seen in nearly three years with prices less than half the peak set in February 2011. Brazil continues to be the leading producer of sugar (22.12 per cent) followed majorly by EU -27 (10.08 per cent), China (8.01 per cent), Thailand (5.67 per cent) & US (4.69 per cent). Global sugar consumption is projected at 167.35 million MT in 2013-14. The global ending stock for sugar is on the high at 38.23 million MT.

Price Trend Analysis
The Sugar spot market price variation study indicates that the prices have been subdued since October 2012 owing to reports of lower demand and lack of support initiatives from the government. In the global market, sugar fell 39 per cent in the last two years and is down 8.5 per cent this year. The sweetener is thus, the worst performing commodity in the Standard & Poor’s gauge of 24 raw materials in 2013. On the other hand, global import demand is likely fall to 50.7 million MT in 2012-13 from 53.2 million MT a year earlier, while export availability will be little changed at 53.9 million MT compared with 54 million MT. Thus, the lower global trade estimates are still hinting at the weakness in the prices.

As per the study, the prices have been weakening since the peak in October 2012. The prices have maintained a lower trajectory amidst lower export demand and lack of focus for the crop from the industries. In the Indian market, retail and stockists demand continues to be weak. Market is oversupplied. Many mills in Maharashtra and Uttar Pradesh are floating tenders as they need money to make cane payments. India's carry-forward stocks of sugar on October 1st 2013 are estimated at 8 million MT, up from 6.2 million MT a year earlier. India could export as much as 3 million tonnes of sugar in 2013-14 to get rid of excess supply, capitalizing on rising demand from Southeast Asia, the Middle East and Africa.

Production Price Forecast
Sugar production in India is estimated to touch 25 million MT in the sugar season 2013-14 starting from October. As per the estimate by industry body ISMA (Indian Sugar Mills Association), the availability of cane acreage for crushing in sugar season 2013-14, will be around 52.89 lakh hectares. This year, in spite of good rainfall received during the current monsoon season in major producing regions, the lack of possibility of getting remunerative prices for the crop is likely to lower the overall production. The upcoming season is likely to see sugarcane production of around 335-340 million MT. the Indian market is likely to trade between Rs. 2650 per quintal on the lower side and to the max of Rs. 3400 per quintal on the up.

Silver on Brink of Steep Revival: Invest Fresh for Assured Returns

 Domestic Scenario

In India the silver demand and imports fell 80 per cent in 2012. The fall in demand has a direct reflection on import, though India produces sizable silver, unlike gold where the country is totally import-dependent. In 2012, India's silver demand for investment was just 300 MT, against 1,549 MT in 2011. India's total demand for silver was 3,234 MT in 2012 against 4,437 MT in 2011. The import was 1,900 MT in 2012, against 4,087 MT in 2011. Silver prices peaked in April 2011, at a global $48.4 an ounce. India has been producing silver as a byproduct of refining zinc and copper. In recent years, Hindustan Zinc Ltd (HZL) has emerged as the largest silver refiner. In 2012-13, it produced 408 MT and taking into account production by other metal refiners, total production is estimated at a little over 500 MT. In 2011, India was 17^th among global silver producers, with 7.5 million ounces. It was 13^th in 2012, with production of 12.7 million ounces.  

International Scenario

Global silver mine production grew last year, by 4 per cent, rising to a new record of 787.0 Moz (24,478 MT). By-product output from the lead/zinc sector provided much of the growth, up by 9 per cent, with strong growth in China, Mexico and India. Primary silver mine supply grew only slightly in 2012, by 1 per cent. Primary silver total cash costs rose by 9 per cent, to $8.88/oz, as credits from base metal by-product revenues fell, coupled with lower grades and higher input cost inflation. Total fabrication in 2012 dropped by 6.6 per cent to 846.8 Moz (26,339 MT), reflecting losses in all areas. Industrial fabrication fell the second year in a row, easing by 4.5 per cent to 465.9 Moz (14,490 MT), due mainly to patchy GDP growth and thrifting. Implied net investment surged by 21 per cent to a fresh all-time high of 160.0 Moz (4,976 MT).

Price Trend Analysis

The annual average silver price decreased by 11 per cent in 2012, to $31.15, the first retracement since 2009. This is in contrast to the trend in the gold price, which increased by 6 per cent to reach a fresh (nominal) high.  Silver traded in a narrower range in 2012 than in 2011, with a range:average ratio of 34 per cent versus 64 per cent, while silver’s volatility in 2012 was 29 per cent, compared to 61 per cent in 2011. Meanwhile, the annual average gold:silver ratio increased from 45 in 2011 to 54 in 2012, indicating a degree of underperformance from silver. Silver opened 2012 with a fix of $28.78 and rallied smartly, wiping out December losses before the end of January and moving on rapidly to post what proved to be the year’s high on February 29th at $37.23. The reversal at the start of March was triggered by the reaction to Federal Reserve Chairman Bernanke’s testimony to Congress, where his lack of reference to QE3 was taken by some to mean that the likelihood of more easing was receding. The weakness from current levels is limited and prices are expected to move northward after minimal correction. 

Production & Price Forecast

Supply of silver from above-ground stocks fell by 7.5 per cent to 261.3 Moz in 2012, driven by a continued decline in government stock sales, a drop in scrap supply, and the absence of net-producer hedging. Producer de-hedging added 41.5 Moz to the demand equation in 2012. Government stock sales fell a staggering 39 per cent to a 15-year low of 7.4 Moz. A continued decline in disposals from Russia and an absence of government stock sales from China and India were the primary factors. A drop in western supplies of recycled jewellery and silverware, combined with further falls from photographic sources, drove silver scrap supply down further by 1.6 per cent to 253.9 Moz. Silver in international market is expected to move up beyond 22 USD / Oz by end 2014 with firm support at 18.24 USD / Oz.