Rain Turns Tyrant - Karvy Commodities€¦ · ous year’s output. Chana production is pegged at 8.28 million tonnes against the previous year’s 9.53 million tonnes. The output

An Ordeal on Indian Agri-Economy

Rain Turns Tyrant

Invest & HarvestA Comprehensive English Monthly Magazine on Commodity Futures

Karvy Comtrade’s

Volume 08 Issue 04 Hyderabad May 2015 Pages 36 `25/-

Rain Turns TyrantAn Ordeal on Indian Agri-Economy

May 2015 Karvy Comtrade’s Invest & Harvest 3

EditorSushil Sinha

Managing EditorTR Vivek

Executive EditorVeeresh Hiremath

Research TeamAnup BP

Ginumol MathewJitendra K ParasharRamesh Chenchala

Ravi Shankar PandeyRaj Nawab Singh Kashyap

Ritu Raj JhaSarika R. Agarwal

Sonali PatnaikTapan Trivedi

ProductionVijayendra Kumar Ch.

DistributionShabna R. Iyer

Printed & Published by:Sushil Kumar Sinha

on behalf ofKarvy Consultants Limited.

Karvy House, 46Avenue 4, Street No-1, Banjara Hills

Hyderabad-500034. AP.

Printed at:Harshitha Printers

6-2-985, Yousuf BuildingAdj. Railway Gate,

Khairatabad, Hyderabad-500004

Editor: Sushil Sinha

The May issue of Invest and Harvest has a number of special in-depth features. The Union Steel Minister in his address at a major industry meet announced that the Government

and industry have agreed to work together in research and development through an initiative known as ‘Steel Research Technology Mission for India’. The minister has assured that this collaboration will take care of the areas where technology is still a challenge. And thus has called for a healthy exchange of ideas between the various experts.

Besides, the government will also try to reduce the chances of delays in availing mining leases. The issue also discusses how India is aiming to take a leap and claim the second position in the list of world’s steel producers.

In the cover story, we have highlighted the problems the unseasonal rains have created for Indian agriculture. The unforeseen rains in the month of March had damaged lakhs of acres of standing crops across northern and south central India. Records show that out of 36 meteorological sub-divisions, 29 sub-divisions received excess rainfall, thus contributing considerable damage in various parts across the nation.

Around 107 lakh hectares of cultivated land are estimated to have been damaged that have ultimately affected the prices of various agro commodities. As prices of various crops soared, the highest spike was seen in Guar Seed and Guar Gum. Even prices of jeera and dhaniya shot up. Compensation was granted by the Govt. but this time it came with a relief. As per the recent rules, farmers whose crops damaged to the extent of 33% are eligible for compensation unlike the damage extent of 50% that was considered earlier.

One man’s loss is another’s gain! While farmers had to suffer at the hands of the nature, the Insurance companies took this as an opportunity to promote their crop insurances, even if they are designed to protect the interest of farmers.

In this monthly edition, we have also discussed about the rise in cultivation of the less-marketed Bajra, as it is the staple food of the poor. Even then it is produced largely in India, a large portion of the Bajra grown is not marketed; instead it is consumed by the farmers.

It has been observed that when the production of Bajra increases, the market price falls, thus forcing the farmers to sell produce at the lower price in distress sales. Additionally, due to lack of storage facilities, these farmers often fall prey to the private money lenders. Such situations have now led to urgency for a revised banking system that ensures safety of the interest of the farmers.

EDITORIAL

Note: The data in all charts and tables have been sourced from Bloomberg, KCTL Research, unless otherwise indicated.

The Unkind Rain GodsThe Unkind Rain Gods


CONTENTS

Cover Story

Non-seasonal Rains Weigh Indian Agri-Sector 09

DisclaimerThe technical studies / analysis discussed here can be at odds with our fundamental views / analysis. The report contains the opinions of the author(s) that are not to be construed as invest-ment advice. The author, directors and other employees of Karvy, and its affi liates, cannot be held responsible for the accuracy of the information presented herein or for results of the posi-tions taken based on the opinions expressed within. The opinions are based on the information believed to be accurate, and no assurance can be given for the accuracy of this information. There is risk of loss in trading in derivatives. The author, directors and other employees of Karvy and its affi liates cannot be held responsible for any losses in trading.Commodity derivatives trading involves substantial risk. The valuation of the underlying may fl uctuate, and as a result, clients may lose their entire original investment. In no event should the content of this research report be construed as an express or an implied promise, guarantee or implication by, or from, Karvy Comtrade that you will profi t or that losses can, or will be, limited in any manner whatsoever. The past results are no indication of future performance. The information provided in this report is intended solely for informative purposes and is obtained from sources believed to be reliable. Information is in no way guaranteed. No guarantee of any kind is implied or possible where projections of future conditions are attempted. We do not offer any sort of portfolio advisory, portfolio management, or investment advisory services.

Features & Updates

By Invitation

Special Feature

Cheaper Imports Impact Ferro Alloys Industry 23 - Pramod Shinde, MMR Bureau

Nickel – A Thorny Green Bush 14

Are We In The Era Of Global Risk Aversion? 21

India Aims High In Global Steel Supply 27- Pramod Shinde, MMR Bureau

Online Trading – Revolutionizing Commodity Trading 25 - Shruthi Nagaradona, Project Trainee at KCTL, Student of IFMR, Sri City, AP

Need For Value Addition In Bajra 29 - Hema Yadav, Sayed Kokab, Manjushree Deshpande


43

54

65

76

87

98

109

Apr-14 Jul-14 Oct-14 Jan-15 Apr-151135

1170

1205

1240

1275

1310

1345


370

420

470

520

570

620

670


15175

15850

16525

17200

17875

18550

1-Apr 8-Apr 15-Apr 22-Apr 29-Apr

115.5

118.8

122.0

125.3

128.5

131.8

135.0

1-Apr 8-Apr 15-Apr 22-Apr 29-Apr

STATISTICS

2980

3115

3250

3385

3520

3655

3790

1-Apr 8-Apr 15-Apr 22-Apr 29-Apr205

223

241

259

277

295

313


2500

2725

2950

3175

3400

3625

3850


COMEX Gold (US$/oz) NYMEX Crude (US$/bbl)

Thomson Reuters Jefferies CRB Index MCX Crude Oil Price Movement (Rs/bbl)

Rogers International Commodity Index NCDEX Lead Price Movement (Rs/Kg)

S&P GSCI Commodity Index NCDEX Jeera Price Movement (Rs/quintal)

Major Global Commodity Index Performers Of The Month (MCX/NCDEX)


-2.5-1.00.52.03.55.06.5

Mar

-14

Apr

-14

May

-14

Jun-

14

Jul-

14

Aug

-14

Sep-

14

Oct

-14

Nov

-14

Dec

-14

Jan-

15

Feb-

15

Mar

-15

7.65

7.90

8.15

8.40

8.65

8.90

9.15

Apr-14 Jul-14 Oct-14 Jan-15 Apr-1558.30

59.20

60.10

61.00

61.90

62.80

63.70


STATISTICS

-4

-2

0

2

4

6

Feb-

14

Mar

-14

Apr

-14

May

-14

Jun-

14

Jul-

14

Aug

-14

Sep-

14

Oct

-14

Nov

-14

Dec

-14

Jan-

15

Feb-

15

Rupee Movement 10-year Bond Yield (%)

Infl ation (%) Index of Industrial Production (%)

DoE Inventory Levels (April) Inventory level M/M change (%)

Crude oil 406727 -17.15

Gasoline 238335 4.79

Distillate 28694 7.18

Refi nary Utilization (%) 88 -3.61Note: DoE - Department of Energy; volumes in thousand barrel

LME Inventory Levels (April) Inventory level M/M change (%)

Nickel 444756 2.52Aluminium 3822300 -3.08Copper 337925 1.69Zinc 470975 -8.21Lead 174775 -25.35

Note: LME - London Metal Exchange; volumes in metric tonne

Exchange Rate TrendsApril 30,

2015March 31,

2015% Change 52 Week

High% Change from

52 Week High52 Week

Low% Change for52 Week Low

Indian Rupee 63.423 62.498 1.48% 64.283 -1.34% 58.335 8.72%

Euro 1.122 1.073 4.59% 1.385 -18.93% 1.046 7.32%

Great Britain Pound 1.535 1.482 3.60% 1.719 -10.71% 1.457 5.39%

Japanese Yen 119.380 120.130 -0.62% 122.030 -2.17% 100.820 18.41%

Swiss Franc 0.932 0.973 -4.14% 1.024 -8.95% 0.741 25.90%

Canadian Dollar 1.208 1.269 -4.80% 1.284 -5.91% 1.062 13.71%

Australian Dollar 0.791 0.761 3.92% 0.951 -16.83% 0.753 4.94%

New Zealand Dollar 0.762 0.747 1.97% 0.884 -13.80% 0.718 6.13%

Danish Krone 6.652 6.962 -4.46% 7.135 -6.77% 5.391 23.38%

Norwegian Krone 7.533 8.061 -6.55% 8.419 -10.52% 5.871 28.30%

Swedish Krona 8.333 8.631 -3.46% 8.885 -6.21% 6.510 28.01%Note: All quotes are against the US dollar.


News Digest

Pulses import surges to record 4.1 mtImports of pulses have topped a record 4.1 million tonnes in 2014-15 fi scal as erratic monsoon affected production and the recent unseasonal rains affected the standing rabi crop as well. Pulses imports breached the 2012-13 record high of 3.8

million tonnes during April-January period of the last fi scal valued at Rs.14,978 crore. In the corresponding period of 2013-14 fi scal, pulses imports were 3.17 mil-lion tonnes, valued at Rs. 11,084 crore. Imports are ex-pected to touch 4.5 million tones for 2014-15 and are likely to remain high in the current fi nancial year too. The possibilities of a weak monsoon coupled with ris-ing domestic consumption are expected to aid imports this year. However, the global supply scenario may not support any signifi cant increase in India’s imports from last year levels.

According to the second advance estimates, produc-tion of pulses for 2014-15 is estimated at 18.43 mil-lion tonnes, down by 1.35 million tonnes over previ-ous year’s output. Chana production is pegged at 8.28 million tonnes against the previous year’s 9.53 million tonnes. The output of urad is expected to shrink to 1.61 million tonnes from 1.7 million tonnes. Trade sources said the actual pulses output could turn out to be lower than the Centre’s estimates as the second advance esti-mates, put out on February 18 by the Ministry of Agri-culture, have not factored in the crop losses caused by the unseasonal rain in recent weeks. (Source- Hindu business line)

Global sugar supply glut leaves huge stockpilesAs cane harvests expand in India and Thailand, farmers in Brazil, the world’s largest producer, are ramping up exports to take advantage of a tumble in the exchange rate that has swelled their profi t margins. And crops that were hurt by drought last year have been revived by rain. Global output is set to exceed demand for a fi fth

straight year, leaving the biggest stockpiles on re-cord. Global output in the year ending Septem-ber 30 will exceed de-mand by 620,000 metric tonnes, leaving record stockpiles of 79.89-mil-

lion tonnes, or almost enough to supply the world’s top seven consuming countries. India, the second-largest producer, will have the biggest harvest in three years at 26-million tonnes. A Thai industry group estimated output rose 6.1% this season.

Two decades of uninterrupted consumption growth and four years of slumping prices may leave less sup-ply than forecast. In Europe, people ate on average 37.1kg of sugar in 2013, up from 35.1kg in 2011, while Americans consumed 32.5kg, up from 31kg, the organization estimates. The global average is 23kg. (Source: Bloomberg)

World supply and demand estimates for Wheat and Cotton (USDA)WHEATGlobal wheat sup-plies are projected to rise fractionally from 2014/15 as in-creased beginning stocks more than off-set a slight decline in production from the previous year’s record. Total wheat production is projected at 718.9 million tons, the second highest to-tal on record. Foreign production is down 9.2 million tons with reductions for EU, India, Russia, and Ukraine more than offsetting increases for China, Turkey, Mo-rocco, Australia, Iran, and Syria. Global wheat con-sumption for 2015/16 is projected slightly higher than in 2014/15 with higher food use more than offsetting a reduction in world wheat feeding. Global import de-mand for 2015/16 is lower with the largest reductions coming from Turkey, Iran, Morocco, and Syria all on greatly improved crop prospects. Exports are lower for Canada, India, EU, Russia, and Ukraine, but higher for Argentina and Australia. Global ending stocks for 2014/15 are projected at 203.3 million tons, up 2.4 mil-lion from 2014/15.

COTTONWorld 2015/16 cotton projections show a decline in global stocks for the fi rst time since 2009/10. As with the U.S. estimates, higher beginning stocks compared with last season are about offset by sharply lower world production, as most of the world’s cotton-producing countries respond to lower prices. World consump-tion is raised 3.5 percent due mainly to positive world


News Digest

economic growth and the lagged effect of falling cot-ton prices during 2014/15. World trade is reduced mar-ginally, as a sharp drop of 1.7 million bales in China’s imports is mostly offset by increases in other countries. China’s lower production and imports, combined with

a consumption increase of nearly 3 percent, are project-ed to reduce ending stocks by about 3.0 million bales, accounting for more than three-fourths of the decline in world stocks. Despite this reduction, world stocks of 106.3 million bales would still be the second highest on record. For 2014/15, U.S. production is raised margin-ally, based on lower harvested area and higher yields, refl ecting the season fi nal report. Slightly higher world ending stocks incorporate a number of current and his-torical data adjustments, resulting in increases for Ar-gentina, China, and Benin, partially offset by decreases for India, Malaysia, and Brazil.

Saudi Arabia caps crude supply to Asian refi ners as demand surgesSaudi Arabia has imposed limits on supply volumes since March for Asian buyers who have been fl ock-ing to the kingdom for more oil after it cut offi cial selling prices to record lows, several industry sources said this week. While the cuts to OSPs have had the desired effect of driving up demand for Saudi oil, the move suggests the kingdom may have underesti-mated Asia’s appetite. Alongside the volume restric-tions that came into force last month, the kingdom has also boosted production to over 10 million barrels/day since March as it strives to meet demand. Trad-ers said the restrictions were likely limited to particu-

lar grades including Arab Heavy and Arab Extra Light as demand for these rose in recent weeks on the back of strong fuel oil and naphtha cracks. Supplies of Arab Light were seen to be normal, traders said. The tightening began in March when demand for Saudi oil

surged on record low OSPs. Saudi’s March OSP dif-ferentials for Arab Extra Light and Arab Light were the lowest since at least 1989, according to Platts data, while Arab Medium was priced at its lowest level since mid-2008. By March, a steep contango market structure in Dubai crude was already driving up de-mand from companies looking to store oil in the hopes of selling it later at a higher price(Source: Platts)

OPEC likely to maintain oil output policy at June meeting: Delegates

OPEC countries are set to maintain current produc-tion levels at a meeting next month, three del-egates said, as Gulf states continue to focus on mar-ket share and a rally in crude prices mutes calls

from other members for supply cuts. While the June 5 meeting in Vienna is likely to hear demands from some members of the Organization of the Petroleum Exporting Countries for a reduction in the amount of oil pumped, even offi cials from countries which favor a curb see it as unlikely. A surprise rally driven by ten-sions in the Middle East and signs the supply glut will ease pushed Brent crude to a 2015 high of $68.23 a bar-rel on Tuesday, up from January’s nearly six-year low close to $45. Oil prices more than halved last year after reaching $115 a barrel in June. (Source: CNBC)

EIA Predicts Natural Gas Production Starts Declining In May EIA Drilling Productivity Report for May forecasts natural gas production in the seven largest shale ba-sins will decline overall by 23 million cubic feet per day. According to the EIA, all of the growth in natural gas production in the lower 48 has come from the sev-en shale basins followed in the report. The report is based on the average rig count for the month of March. The rig count has fallen by more than 10% from the March rig count average. (Source: Seeking Alpha)

Please read the Disclaimer carefully on page 4


Non-seasonal Rains Weigh Indian Agri-Sector— KCTL Research

The rain Gods were not kind enough this Rabi season, and according to the Meteorological Department, they are unlikely to be very gener-

ous in the coming monsoon months as well. The agri-cultural distress looks certain to snowball into a major socio-economic crisis for the government. Firstly, the unseasonal rains during the month of March created havoc in Indian agricultural sector. Secondly, the unex-pectedly widespread precipitation took place at a time when the Rabi crop was ready for harvesting. Lakhs of acres of standing crop were damaged across northern and south central India.

The average rainfall in India during March and April is recorded at 56.9 mm. This year, it nearly doubled i.e. 111.8 mm. The division-wise rainfall distribution is presented in the below table. It can be seen from the table that all divisions except East and North East India received excess rainfall with Central India leading the list. Most of the Rabi crops are grown in the areas of Central India and North West India

Normal and actual rainfall during 01.03.2015 to 22.04.2015Divisions Normal

RainfallActual

Rainfall%

Departure

East & North East India 142.7 143.9 1%

North West India 70.4 180.0 156%

Central India 16.5 53.7 226%

South Peninsula 34.1 78.4 130%

Total 56.9 111.8 96%Source: IMD

Out of 36 meteorological sub-divisions, 29 sub-divisions received excess rainfall, which accounts for 82% of area of the country, 6 sub-divisions received normal precipitation (13% of India’s area). Of the 29 sub-division, which had excess precipitation, 9 sub-divisions belonged to North West India, Central India and South Peninsula. All these three regions contrib-ute maximum to India’s acreage and production of various food items.

COVER STORY


Looking into the rainfall map for the period from 01.03.2015 to 22.04.2015, we can see entire Central In-dia, North West India and South Peninsula received ex-cess rainfall, which was not required during this period as most of the Rabi crops were ready for harvesting and in some areas harvesting was also started. The other map – food crops map – indicates the crops grown in these regions. According to our estimates, the crops such as Wheat, Chana, Rabi Oilseeds and seed spices were affected badly.

Rainfall Distribution – Category wise number of subdivisions and % of area (01.03.2015 to 22.04.2015)Category No. Of Sub-

DivisionSub-Divisional % Area of Country

Excess 29 82%

Normal 6 13%

Defi cient 1 5%Source: IMD

Division wise rainfall distributionDivisions Excess Normal Defi cient

East & North East India 2 5 0

North West India 9 0 0

Central India 9 0 1

South Peninsula 9 1 0

Total 29 6 1Source: IMD

Production EstimatesCrop 2013-14 2014-15 % Change

Rice 15.15 13.49 -10.96%

Wheat 95.85 95.76 -0.09%

Jowar 3.15 2.83 -10.16%

Maize 7.11 6.51 -8.44%

Barley 1.83 1.77 -3.28%

Coarse Cereals 12.09 11.1 -8.19%

Cereals 123.09 120.36 -2.22%

Gram 9.53 8.28 -13.12%

Urad 0.55 0.45 -18.18%

Moong 0.65 0.53 -18.46%

Other Rabi Pulses 3.07 3.67 19.54%

Total Pulses 13.79 12.93 -6.24%

Total Food Grains 136.88 133.28 -2.63%

Ground Nut 1.656 1.822 10.02%

Mustard 7.877 7.363 -6.53%

Linseed 0.141 0.149 5.67%

Saffl ower 0.113 0.078 -30.97%

Sunfl ower 0.35 0.322 -8.00%

Total nine oilseeds 10.137 9.734 -3.98%Source: 2nd Advanced Estimates, Ministry of Agriculture, Govt. of India

Crop Damage EstimatesAccording to preliminary estimates released by the Ministry of Agriculture, GoI, around 107 lakh hect-ares of cultivated land was damaged. However, these

COVER STORY


Statewise acreage damageTotal Area in Lakh Ha

# States 1st Report 2nd Report 3rd Report 4th Report 5th Report 6th Report

26th March 2015

31st March 2015

Devia-tion

4th July 2015

Devia-tion

4th October 2015

Devia-tion

16th April 2015

Devia-tion

24th April2015

Devia-tion

1 Gujarat 0.114 1.75 1.636 1.75 1.75 1.75 1.82 0.07

2 Madhya Pradesh 5.7 5.7 5.7 5.7 5.7 5.7

3 Maharashtra 3.95 9.89 5.94 9.89 9.89 9.89 9.89

4 Rajasthan 45.52 45.53 0.01 16.89 -28.64 16.89 16.89 30.57 13.68

5 Haryana 18.75 18.75 18.75 22.24 3.49 22.24 22.24

6 Punjab 2.94 2.94 2.94 2.94 2.94 2.94

7 Uttar Pradesh 26.79 24.65 -2.14 24.65 24.65 29.64 4.99 95.17 65.53

8 Uttarakhand 0.091 0.39 0.299 0.39 0.39 0.39 2.83 2.44

9 Himachal Pradesh 1.52 0.68 -0.84 0.68 0.68 0.68 0.67 -0.01

10 Bihar 1.86 1.86 1.86 1.86 1.86 14.58 12.72

11 J& K 0.85 1.33 0.48 1.33 1.33 1.33 1.33

12 Telengana 0.006 0.006 0.001 -0.005 0.01 0.009 0.01 0.68 0.67

13 Andhra Pradesh 0.002 0.002 -0.002 0.09 0.09

14 Kerela 0.006 0.006 0.01 0.004 0.01 0.01 0.01

15 West Bengal 0.485 0.485 0.49 0.005 0.49 0.49 1.29 0.8

Total 106.724 113.969 7.245 85.331 -28.638 88.83 3.499 93.82 4.99 189.81 95.99

Note-Rain occurred in 4 phases (28th Feb to 2nd March), (7th & 8th March), (14th to 16th March) and 30th March

Remarks Remarks Remarks Remarks Remarks

Figures changed due to addition of Bihar data and many other

states revised data like Gujrat, Maharastra, UP,Uttrakhand,HP

Major Changes due to change in Rajasthan fi gure

Major changes due to change in Haryana

fi gure

Major changes due to change in UP fi gure

Major changes due to change in UP,

Rajasthan and Bihar fi gure.

Source: Ministry of Agriculture, GoINote: Total might not match as all states data have not been included. This data is according to the sixth and the latest revision released on April 24, the revisions were done based on input received from the states.

fi gures were revised later to 189 lakh hectares after consultation with various state governments. The area damages will ultimately lead to food shortage for the current season.

India’s most consumable cereal – wheat – is largely grown in Rabi season. Besides, other crops like Rabi Oilseeds (Mustard Seed, Ground Nut, Sunfl ower Seed, Saffl ower Seed, Sesame Seed and Linseed), Chana and Seed Spices are also grown during this period.

The Ministry of Agriculture, Government of India has released crop damage reports in six phases by up-dating the fi gures every time. Earlier, in the fi rst esti-mates, total crop damaged area was 106.724 lakh hect-ares, which was lowered in second report to 85.331 lakh hectares. However, with the reporting of more damage in the states of Haryana, UP, Rajasthan and Bihar, these fi gures were revised subsequently.

As per latest 6th report, total crop damage was

189.81 million hectares. The largest damage was reported in the state of Uttar Pradesh with 50% of total All India crop damage followed by Rajasthan (16.11%), Haryana (11.72%) and Bihar (7.68%). The Rabi crops such as Wheat, Chana, RM Seed are grown in these states. Hence, the impact on crop damage will be huge on the overall production of these commodities.

According to second advanced estimates released by Ministry of Agriculture, Government of India, the Rabi cereals production is expected to decline by 2.22% to 120.36 million tons. Rabi pulses output is likely to de-cline by 6.24% to 12.93 million tons and Rabi oilseeds production by 3.98% to 9.734 million tons. However, these fi gures will be revised lower in the third advanced estimates report by central government taking into con-sideration the recent crop damage happened due to un-seasonal rains.

COVER STORY


Impact on the priceThe after effect of unseasonal rainfall was seen in the prices of various agro commodities, which shot up within a period of one month. The highest spike was seen in Guar Seed (39.70%) and Guar Gum (49.01%), though it was Kharif crop. This commodity is highly sensitive to the weather deviations and hence, any ru-mor or news related to rainfall will have direct impact on the market. Next major spurt in the prices was wit-nessed in Dhaniya and Jeera prices, which shot up by 26.40% and 21.82% respectively. Among oilseeds, RM Seed prices also rallied by 12.21% but the price rise in Wheat (major rabi crop) was not much as the prices increased by 2.51% only.

Compensation given by central and State governmentThe government, while offering compensation to those affected by natural events, must fi nd a way to tackle the wider farm distress. In the aftermath of the fl ash rains, the government has announced new mea-

sures such as easing the eligibility norms and raising the compensation amount. As per the new guidelines, farmers whose crop damage to the extent of 33% are eligible for compensation against earlier rule of 50%. The amount of compensation has also been increased from Rs. 3600 to Rs. 5400 per acre. Over and above the central government assistance, all the state gov-ernments are chipping in.

The additional fi scal burden on the government’s fi nances on account of this relief package comes to around Rs 11,000 crore. Even though both central and state governments extend their support to the farming community, these measures may not protect the inter-est of the consumers. The production shortfall would directly impact the consumers, which will ultimately lead to greater infl ation. In order to keep the wholesale price of these products, government needs to bring in stringent measures like imposing stock limits, allow-ing duty free imports, and curbing of exports. Whenev-er the country faced food shortage, the central govern-ment sourced grains from the international market and we would expect same kind of measures during current season. However, these decisions will be taken by the government only after assessing the exact amount of crop damage.

The Way ForwardSince the Indian agriculture is largely based on rainfall for its water requirement, weather vagaries like recent unseasonal rainfall will put an impact in a large extent on overall situation. In order to overcome this kind of situation, there is requirement for an alternate kind of agriculture in India.

In order to protect the interests of the farmers from the weather vagaries, various crop insurance schemes were introduced and list is as follows.

Name of Insurance Scheme No. of FarmersCovered (in Lakhs)

Premium Paid (in Rs. Lakhs)

Claim (in Rs. Lakhs)

Coverage till

First Individual Approach Scheme - 1972-1978 0.031 4.54 37.88 1978-79

Pilot Crop Insurance Scheme - 1979-1984 6.230 195.01 155.68 1984-85

Comprehensive Crop Insurance Scheme 1985-1999 763.000 40400.00 230300 1998-99

National Agricultural Insurance Scheme - 1999 2084.780 867121.00 2537558 2012-13

Modifi ed National Agricultural Insurance Scheme – 2010 45.800 108800.00 86400 2012-13

Pilot Weather Based Crop Insurance Scheme - 2007 469.380 751920.00 52860 2012-13

Pilot Coconut Palm Insurance Scheme – 2009 0.511 167.69 214.05 2013-14

COVER STORY



Crop InsuranceAgricultural production and fi rm incomes in India are frequently affected by natural disasters. During such times, the need for crop insurance arises. Though the Indian citizens are well aware of various kinds of insur-ance products like life and general, the Indian govern-ment has also made a provision for crop insurance in order to protect the interest of farmers during the period of natural disasters.

However, the awareness about crop insurance among farming community is very limited. Hence, the govern-ment through various state agricultural universities and crop insurance agency has to create awareness about this product. As per statistical fi gures, crop insurance coverage is low in the states of Punjab, Haryana, Mad-hya Pradesh and Western Uttar Pradesh. And all these states together contribute a major portion to India’s food basket. Any weather aberration during crop har-vesting stage in these states will disturb India’s food chain. Besides, banks, who are lending agriculture loans, are also not considering crop insurance manda-tory norms. Hence, there is need for legalizing of crop insurance to protect the interest of the farmers.

Furthermore, the land holdings in India are frag-mented and distributed in small pieces. Hence, in or-der to make agriculture a profi table venture, there is a need for mechanized agriculture instead of traditional agriculture.

In order to make mechanized agriculture profi table, the land holdings should be bigger so that the eco-nomic viability can be achieved. For this purpose, the methods such as corporate farming and cooperative farming are necessary.

Under cooperative farming, farmers are brought to-gether to pool their fragmented land so that best agri-cultural and mechanized practices are followed. Even-tually, profi tability is increased and economic viability is achieved. To get success in cooperative farming, the evolvement of agricultural universities plays a vital role. Hence, the initiation should be from agricultural universities in coordination with state and central gov-ernment. If these kinds of practices are not followed, India once again will become import dependent nation

Please pay by DD/Cheque (at par) in favour of Karvy Comtrade Ltd., payable at HyderabadPlease fi ll this form and send along with DD/cheque to: Mr. Tapan Trivedi, Karvy Comtrade Ltd, 46, Avenue 4, Street No.1, Banjara Hills, Hyderabad 500 034. Email: [email protected]

Subscription form

I would like to subscribe to Karvy Comtrade’s Invest & Harvest for:

� 6 months � 1 year � 2 years

Name: ________________________________________________________________________

Address:______________________________________________________________________

______________________________________________________________________________

City: ___________________________________ State:_________________________________

Pin: __________________Phone: __________________Mobile: _________________________

Subscription Details

6 months Rs 125

1 year Rs 250

2 years Rs 500

Karvy Comtrade’s Invest & Harvest A Comprehensive English Monthly Magazine on Commodity Futures

Subscribe for

�

COVER STORY


— Sarika R. Agarwal

Nickel – A Thorny Green Bush

From high in the sky whooshed in Nickel this year, heading towards the land but without any fundamentals disguised as parachute to help

the metal land safely without much damage done. The white glittery metal has run down around 5.67% within a span of a four month time frame since the beginning

of this year. The year 2015 began with a healthy price of $15150 MT, however due to the lack of strength in the fundamentals the metal drilled down to the current levels of $14300 MT. The reasons have been many: right from maintaining the highest level of inventories at LME to the impact of the dampening of the market expectations. This ensures Nickel runs into defi cit after the enforcement of the export ban from Indonesia and the bleak global economic scenario. However, of late the supply tightness growing in China has helped the metal to surge and shed off most of its losses earned during the initial part of the year.

Philippines: Unable to satisfy the hunger of the dragon?Post the Indonesian ban on the export of the raw metal ores, Philippines which had been the second largest producer of the metal ramped its production to meet the

FEATURE

Nickel Price Movement

11000

12000

13000

14000

15000

16000

Jan-15 Feb-15 Mar-15 Apr-15 May-15


needs of the hungry NPI producers. As per Bloomberg, while Philippines in 2015 is expected to export around last year’s record highs of 43 Mln MT to China, the raw material will only be enough to make as much as 350,000 tons of NPI, down from about 485,000 before the Indonesia ban.

Moreover, China’s inventories of laterite ore, the type shipped from Indonesia fell to around 120,000 tons of pure nickel at the end of March, 2015 from about 194,000 tons at the start of 2014. According to Antaike, it could be well consumed within a span of three months. With almost negligible stockpiles of the Indonesian nickel ores, China would become solely dependant on Philippines for the supply or will have to purchase the metal from LME, thereby helping the prices to soar in the near term. Antaike forecasts Chi-nese NPI output to 360,000 tons this year.

Overall, despite the raised output from Philippines since 2014, Chinese imports still fell 33% in 2014, to the lowest since 2010. Inbound shipments in the fi rst three months of 2015 are also at the least in fi ve years. This factor could act as a catalyst in the near term and further push the prices of the metal.

Troubles in Nickel SupplyAlthough, the stockpiles of Nickel maintain record highs at LME, various forms of supply disruptions have also backed the optimism in the market senti-ment. As per the recent updates, mine strike at BHP Billiton’s Columbian nickel mine which produces around 165,000 MT in a year, remained closed for al-most half of the month which helped the price of the metal to soar during the month of April.

In addition to it, Nickel miner Agata Mining Ven-tures Inc. announced that it has cancelled three of the four ore shipments due to be exported in May from its mine in the Philippines, which in turn would further push the metal towards the higher side. Agata Mining was the biggest Southeast Asian country supplier of ore in 2014 to Chinese producers of nickel pig iron

As per a report from Citibank, Nickel prices have al-most bottomed out and are likely to move higher in 2H 15 due to NPI curtailments, while tighter ferro-nickel market is likely to boost demand for refi ned nickel.

From the fundamental point of view, the supply for the metal faced a severe blow when Indonesia enforced the export ban on the metal. And with the brewing con-cerns over the availability of the metal, the prices for the metal soared early 2014. However, the anticipated defi cit that had once helped the prices of the metal to

soar as high as $21000 MT in 2014 never saw the light of the day again. The ramped up production from Phil-ippines eroded any signs of the defi cit in 2014 which led to the giant tumbling of the prices.

As per the annual fi gures reported by INSG, the end of 2014 saw a surplus of around 0.12 Mln MT of Nick-el, dampening the prices as the investors felt betrayed with the metal ending in a surplus. World primary nickel production was 1.99 Mln Mt in 2014, which is expected to decline to 1.96 Mln Mt in 2015. While the world primary nickel usage was 1.87 Mln Mt in 2014, the same is expected to increase to1.94 Mln Mt in 2015. Overall, a surplus of 0.03 Mln MT is expected in 2015, keeping the wild card China out of the picture. iI the demand from China picks up during the near term, the metal might even slip into a slight defi cit, further shin-ing the prices on the higher side.

China to play the wild cardAccording to Bloomberg Intelligence, China is the largest producer and consumer of primary nickel and accounted for 34% of global output last year. As per Commerzbank, Germany’s second largest bank, Nick-el inventories at China’s main fi ve ports has declined by around 50% within a span of 12- months.

With the toughening of anti-pollution laws, many low grade NPI producers in China are being forced to shut down due to which the NPI production is likely to be down by around 12% in 2015, as per Commerzbank. While on the other hand, with stainless steel produc-tion growing by around 5% globally, and only by 1% in China, Nickel appears to be poised for a rebound. Having mentioned that, rules limiting the origin of

FEATURE



FEATURE

nickel allowed for delivery in China’s new futures have prompted speculation that prices may extend gains. This gain is due to sellers seeking suffi cient supplies to meet the requirements with metal on the SHFE up 11% since trading started March 27, outpacing the 7.5% ad-vance on the LME.

However, Shanghai Futures Exchange plans to allow delivery of foreign-made nickel into its futures con-tracts as it seeks relief from a shortage of domestic sup-ply to the bourse. If this takes place then it might crack down the current market manipulation otherwise, some ferocious moves in Shanghai nickel market might be seen in the near future.

LME witnesses record levels of inventoriesAmidst the many issues surfacing from the supply side for the metal, the stockpiles at LME surprise many as the inventories continued to climb higher since the later half of 2014. The year 2015 began with the stockpiles close to 0.41 Mln MT, which gradually climbed the lad-der of deposits and reached to new record highs of 0.44 Mln MT. While the inventories were marking a con-stant increase, the cancelled warrants did not hold back and the same also rose to 0.11 Mln MT from 0.087 Mln MT in the initial part of the year.

Though the talks about the rising inventories have maintained a downside pressure on the metal for most part of the year, the rise in cancelled warrants has capped massive losses to take place in the metal. Ad-ditionally, most parts of the stockpiles are stored at the Johor warehouse in Malaysia which in turn lengthens the queue for the immediate delivery of the metal as per the LME exit rules. This factor could add support to the metal in the near term as the supply remains con-strained in the chains of the warehouses.

Backwardation/ ContangoThe most notable factor in case of Nickel is the level of contango of the metal at LME since the beginning of the year. The year 2015 started with Nickel being in contango at $76 MT which over the span of four months came running down to an almost half of $42 MT. This decline in the contango levels for the metal has been a clear indication of the immediate demand for the metal spurring up. And if the same scenario continues in the near term, the prices of the metal are likely to hit new highs in the near term as the sup-ply gets restricted while the demand remains stable to increasing.

OutlookIn the current situation, wherein the demand for the metal is increasing while the Indonesian nickel ore in-ventories with China continue to deplete, probability of the prices further raging forward looks clear in the face. In addition to it, the bleak global economic scenario is likely to deter investment until the prices rebound. Fail-ure of some major greenfi eld projects as well as mas-sive rise in cost of production outside of China has also discouraged fresh investment.

However, the risk factor to our view of optimism is the dent of the shut down of the NPI producers and smelters in China due to the stringent environmental laws in the nation as well as the increase in produc-tion from the existing miners and the smelters as the price of the metal rises. Overall, while the supply side projections point to gradually emerging tight-ness and potential for rising prices, the demand side is tough to gauge. However, if the demand remains tepid then the price for the metal is likely to remain within a range only.

Nickel : Contango

25

35

45

55

65

75

85


CONTANGO

Inventories Vs. Cancelled Warrants

410000

420000

430000

440000

450000

0

30000

60000

90000

120000

150000


Cancelled Warrants Inventories


Are We In The Era Of Global Risk Aversion?— K.P. Jeewan

Over the last one year, the toughest asset to trade globally has been cur-rencies. Whether a trader is using fundamental or technical analysis for trading, the results have always been quite diffi cult. With moves

of 30-40% magnitude overnight becoming norm, even a trader aiming for pips can face potential bankruptcy. The movements in other asset classes have been equally diffi cult to call. Of the lot, Indian Equity markets have given fairly predictable and secular return over last year. However, Indian Equity markets have never been immune to fi ckleness of global fl ows. We have anal-ysed the moves in Indian equity markets and INR co-relation with 10-year US treasury. The chart given below shows INR in Yellow Line, US10Y Treasury (10Y UST) in the Purple line and Sensex in Yellow Candle chart.

FEATURE

The chart here is recorded from 2007 onwards. What we can see is there has been period of both negative co-relation/ Positive Co-relation and also periods of No-correlation. In each of these phases the behaviour of the as-set price (sensex) has been dif-ferent.

The segment from Q3 2007 to Q1 2009 shows a negative co-re-lation apart from INR weakened, Sensex sold off and UST rallied (yield dropped). This period was during extreme risk aversion trig-gered by Subprime contagion.

The period from Q2 2009 to Q3 2011 was a period of random movements with no co-relation between the two (barring Q2 10 to Q4 10 when there was positive Co-rel and Equity rallied).



Period starting Q3 12 shows high degree of co-relation between the two till Q2 14. US treasury yields hard-ened initially in the run up to QE withdrawal specula-tion in Q3 2013, which caused INR to also weaken. UST softened subsequently and INR also strengthened.

I suspect, the moves on other asset classes during these periods should be broadly similar and USD in-

dex moves probably mimics the UST. The purpose of above analysis is to highlight the co-rel of the two post Q3 2014. There has been signifi cant negative co-rel be-tween INR and 10YUST. While the equity market has continued its rally, we have to be alert towards possible shifts in risk appetite globally. The hypothesis would probably hold true for other asset classes as well.

FEATURE


BY INVITE

Cheaper Imports Impact Ferro Alloys Industry— Pramod Shinde, MMR Bureau

Ferro Alloys is one of the major raw materials used in steel making as deoxidant and alloying agent. Ferro Alloys requirement varies widely

depending upon the process of steel making and the product quality envisaged. Thus, Ferro alloys is a vital link to produce larger quantities of basic alloys which are required for the growth of the steel industry.

Ferro alloys is widely used as deoxidizing, desulfur-izing and reinforcing agents. This helps in the removal of sulfur, phosphorus and oxygen impurities that are present in iron ores which are then used in the manu-facturing of steel. Thus, growth in the steel industry will boost the overall Ferro alloys market.

In the business of Ferro alloys industry, the principal challenge lies in the management of heterogeneous raw materials from diverse geographies into a stable, consistent and uniform product quality at all times. Rising power cost is another cause of concern to be-come competitive amidst a weak downstream sector.

The global steel industry data compiled by World Steel Association indicates growth forecast for steel usage down to 2 per cent in 2015. Such a slower growth projection of steel industry dampens Ferro-alloy markets. As a result, Ferro alloys prices are sliding on the back of declining fi nished steel product prices.

In the short term, price recovery is very doubtful until demand picks up substantially and surplus sup-ply is absorbed. If steel demand slump continues in the second quarter of the current year then there will be inevitably more downward pricing pressure on both the medium term and spot market.

India enjoys a natural advantage as it has the fi fth-largest chrome ore with a 100 million tonne estimated reserves and the sixth-largest in manganese ore with an estimated 176 million tonne reserves.

While interacting with the domestic industry players, Mr. Pagag Rajda, Managing Director, Moldex, who has

been in the Ferro alloys business for nearly 50 years, ex-pressed his concern regarding oversupply of the material. As per him the oversupply hardly leaves any margins for the industry players. Imports are exceeding domestic de-mand. He further stressed that GST is a must for the do-mestic Ferro alloys industry to become more competitive.

Among the trading community, Kumarpal Jain from J Poonamchand also expressed cautious views towards Make-in-India mission which is yet to execute the de-mand for Ferro alloys exports due to oversupply in the global market.

As a result of the various problems faced by the ferro alloys units, the workers and their families are virtually suffering economically. While Facor, the major ferro al-

loys unit at Garividi, was shut down 10 months ago due to unrest in its loading and unloading wing and

inadequate supply of raw material, three more units - Andhra Ferroalloys, Swastik Ferroal-

loys, and Jayalaskhmi Ferroalloys – also closed down for various reasons.

Debt-ridden units opt for mergersBalasore Alloys Ltd (for-merly Ispat Alloys Limit-ed), which is part of the Is-pat Group has inked a deal to

acquire Rohit Ferro-Tech’s Jaj-pur-based manufacturing unit for an enterprise value

of $164.5 million (approximately Rs 1,025 crore) as a going concern on a slump sale basis.

Balasore Alloys is one of the largest ferro alloys producers and suppliers in India. The company has captive mines in different locations like chromite ore mines in Sukinda Valley at Jajpur Road (Odisha), manganese ore mines in Hathoda (Madhya Pradesh). Rohit Ferro-Tech, which is into ferro alloy manufac-turing, has been facing several problems like non-availability of adequate quantities of raw materials, lower capacity utilisation and low absorption of over-heads besides high debt exposure.

Considering the prevalent unfavourable business environment and with no sign of improvement in the

Ferro Alloy Metal



short term, the company decided to dispose of the Jaj-pur unit so as to ease its fi nancial burden and improve cash fl ow requirement.

Similarly, Balasore Alloys Ltd (formerly Ispat Alloys Limited), which is part of the Ispat Group, has inked a deal to acquire Rohit Ferro-Tech’s Jajpur-based manu-facturing unit for an enterprise value of $164.5 million (approximately Rs 1,025 crore). The company has fi nal-ised a business transfer agreement with Rohit Ferro for acquisition of its alloys plant at Jajpur district in Odisha as a going concern on a slump sale basis.

Balasore Alloys is one of the largest ferro alloys pro-ducers and suppliers in India. The company has captive mines in different locations like chromite ore mines in Sukinda Valley at Jajpur Road (Odisha), manganese ore nines in Hathoda (Madhya Pradesh).

Similarly, Jindal Stainless has recently obtained ap-proval from stock exchanges to restructure its business-

es, a move aimed at boosting profi tability and paring debt. The company’s rejig plan includes demerger and listing of a subsidiary on domestic bourses. Under the scheme, Jindal Stainless proposes to demerge its ferro alloys and mining divisions and vest them with Jindal Stainless (Hisar). It will also transfer stainless steel making facilities in Hisar to Jindal Stainless (Hisar) for a lump sum consideration of over Rs 2,809 crore. Once the rejig scheme becomes effective, Jindal Stainless (Hisar) would seek listing of its equity shares on both the exchanges and its global depository receipts (GDR) at the Luxembourg Stock Exchange.

In addition to above, Monnet Ispat & Energy (MIEL) is in talks with investors for a stake sale in subsidiary Monnet Power Company. The company, which manu-factures sponge iron, steel and ferro alloys, is in dis-cussions with three to four players, including interna-tional companies.

BY INVITE

ANYA LAXMI - QUIZ SERIES 2

Q1: C – explana� on - MCX features amongst the world’s top three bullion exchanges and top four energy exchanges.Q2: C – explana� on - An ini� al margin is the minimum amount of money which you need in your account for trading. Q3: B – explana� on - Stop loss plays very important role in trading. Some� me market is very vola� le at that � me stop loss is very important for

minimizing the loss. Q4: – to be given by the readers. (Contest)Q5: D – explana� on - All of the above is required for opening Demat account.

By - Priya

ANSWERS

ContestAnswer of Q. No. 4 to be given by the readers. Plz mail answer to [email protected] by mentioning “Anya Laxmi Quiz Series 2” in the subject along with your name

and mobile no. One winner will be selected based on lottery system from the received correct nominations. KCTL Research is not eligible to participate in this contest.

Q.1

Which one is the world’s top three bullion exchanges and top four energy exchanges…

A) COMEX B) NCDEX C) MCX D) NYMEX

Q.2

Which type of margin we have to pay for trading ……

A) Special margin B) Additional marginC) Initial margin D) Mark to market margin

Q.3 What is the important trading strategy to minimize the risk in trading and can prevent losses….

A) Target B) Stop lossC) Both D) None of the above

Q.4

An auction market in which participants buy and sell commodity future contracts for delivery on a specifi ed future date…

A) Forward market B) Futures marketC) Spot market D) None of the above

Q.5 What are the document require for opening Demat account in commodity...

A) Id proof B) Address proofC) Photograph D) All of the above


Online Trading – Revolutionizing Commodity Trading — Shruthi Nagaradona, Project Trainee at KCTL, Student of IFMR, Sri City, AP

Internet usage has increased tremendously from 1995 to 2015 so much that no part of

our lives are without touch of this marvelous piece of technology which binds people across the globe. In 1995, only 0.8% of the world population was using the Internet. Now more than 40% of the world population use Internet i.e. more than 3 billion people use Internet today. With more than 243 million users, India now ranks 3rd in the list of Internet users in the world. The number of people using Internet in India is growing at a rate of 14% every year. Every product can be sold online today and has helped many businesses in achieving a great deal of success. Nowadays most of the people prefer doing everything online right from shopping to paying bills online and this trend will only intensify in the coming years.

The Smartphone has started an-other revolution. India has about 159 million mobile Internet users as per October 2014. Mobile technol-ogy allows people to get any infor-mation they require without being routed to a single location. It has also boosted both large and small scale businesses. With the usage of mobile technology, many busi-nesses have increased their produc-tivity and profi tability. Most of the marketing is also done using mobile internet as it is cost effective. Internet and mobile technology have become an integral part of every person’s day to day life. As India has second largest tele-

com market in the world, mobile trading would be one of the big-gest opportunities for the broker-age fi rms. Online Trading is also gaining a lot of attention. The number of investors using online trading through Internet has in-creased by 17% and the number of users using online trading on mobile has increased by 101% in 2014 (http://eprahaar.in/mobile-based-trades-grow-nearly-3-fold-at-nse/). Many brokerage fi rms are introducing applications on the android platform thereby encour-aging people to use online trading.

What exactly is online trading?Online Trading is buying and sell-ing of fi nancial securities over the Internet with the assistance of brokerage fi rm. The commodity futures can be traded from any-where and at anytime with the help of online trading. Investors do not have to make calls to the

brokerage fi rm to buy or sell com-modities as they can simply trade by the click of the mouse. This also gives ample opportunities for the people to trade on whichever commodity they like and get the desired results.

Commodity trading start-ed in 17th century in Japan with futures trading in rice.Even though commodity trading started early, online trading had begun in 1990’s where online bro-kerage fi rms became a new way to conduct business by the collision of the Internet and trading. Digi-tal trading system known as elec-tronic communications networks were used by the brokerage fi rms for in-house bids. Over the years, online trading developed slowly and crippled temporarily during recession and Gulf war. In India, a Commodity future trading is regu-lated by Forward Market Com-mission. There are 24 exchanges

BY INVITE



where commodities can be traded in India. The three exchanges where all commodities are permit-ted to trade include Multi Com-modity Exchange of India (MCX), National Commodity and Deriva-tive Exchange (NCDEX), Nation-al Multi Commodity Exchange of India (NMCE).

Why to trade online?Online trading is easy to access and use. And all that the custom-ers need to have is Internet con-nection and investments to trade. Cost of transactions is very less in Online Trading of commodity futures as compared to traditional trading, as it is automated and the customer does not have to pay any extra amount for placing the trade. This will also help the investor to buy or sell his commodity futures without any interactions with the middle man. Online Trading for commodity futures enables the in-vestor with the ownership over the commodities they trade, as they can buy or sell commodities and also change their order as per their preference. The investors can eas-ily learn about trading commodity futures online in long run than they can under the guidance of the bro-kerage fi rm. This platform is more benefi cial for the investors who want quick money than those who trade for long term.

How to trade online? The most important thing about trading commodity futures on-line is to have certain capital. For the new traders, it is advisable to invest less and see how the mar-ket functions. If they invest more, since they do not know how the market fl uctuates, they may end

up losing all their money. For the existing trader, he may choose capital based upon his interest. The trader then has to choose from which brokerage he wants to trade. The brokerage fi rm will provide the trader with all the necessary guidance. If the new trader gets any kind of query on commodity futures, he may call the brokerage fi rm and the fi rm’s technical team will clarify all his queries on com-modity trading. The brokerage fi rm also sends research reports to their customers, letting them know how the commodities are working and how the future events will have an impact on the commodity market. The trader then has to familiarize with the trading platform in order to avoid errors. After investing on commodities, he has to watch the market constantly before buying or selling commodities.

What are the tools available to trade online?ODIN Diet- This is the most widely used application based on trading platform used by investors to connect to their broker’s server via Internet. Most of the broker-age companies use Diet for trad-ing online. MVM- MVM stands for Market View Mobile; it is a real time Inter-net based application for viewing market from smart phones. This gives continuous access to market while on move. Mobile Trading- The brokerage fi rm provides a link for download-ing this trading platform on mobile phone. With this, we can buy or sell commodities from anywhere and anytime with just one click. Applications- Many brokerage fi rms have applications available

on Android where research papers and information on how commod-ity futures have performed in the previous years can be accessed.

Michael Marcus had once stated, “Every trader has strengths and weakness. Some are good hold-ers of winners, but may hold their losers a little too long. Others may cut their winners a little short, but are quick to take their losses. As long as you stick to your own style, you get the good and bad in your own approach.” While trading commodity futures online, every trader should take few precautions. Impulsive trading is a Big No for any trader. Online trading should be done only based on the correct market information. If the trader does not have a proper knowledge on the commodities, he/she is trad-ing then it will lead to big losses. If the traders are trading for the fi rst time then they may get so en-grossed into all the technology that they may forget that they are trad-ing with real money. As it is easy to buy commodities futures online, the traders may get over committed i.e. the traders may think the com-modity is available at cheap price and may end up buying a huge vol-ume. It is always advisable to take guidance from brokerage fi rms be-fore taking a vital decision. Trad-ers can overcome any problems in Online Trading by gaining knowl-edge on commodities futures and by taking proper guidance from the sources available.

As Online Trading is going to be next big thing in the coming years, it would be better for the traders to open an online account now and start Commodity futures Online Trading and be part of changing revolution.

BY INVITE


Union Steel Minister Mr Narendra Singh Tomar at the augural session of the India Steel 2015, a biannual event organised by Federation of

Indian Chambers of Commerce and Industry (FICCI) in Mumbai. In his inaugural address, the minister announced that the Government and industry have agreed to work together in research and development. An initiative called ‘Steel Research Technology Mission for India’ has been launched, through which R&D in the sector will be increased. “We need research and work in areas where we don’t have the technology,” said the minister, calling for a healthy exchange of ideas between the various experts.

Discussing the importance of steel for the mining industry, the minister announced that the Mines and Minerals Development and Regulation (MMDR) Act has been passed by Parliament. This will provide a level playing fi eld for all participants. Through this Act, the Government has tried to reduce delays in obtaining min-ing leases. Approvals can be obtained at the state level when possible, and there is no need to reapply with the Central Government. “Due to your contribution,” he told

the industry barons present, “today India is the world’s third largest producer of steel. I hope you will continue to extend the same cooperation so that by 2020 India ranks second in the world.” He assured all cooperation and support from his ministry to achieve this objective.

Mr Rakesh Singh, Secretary, Ministry of Steel, Gov-ernment of India, delivered the keynote address at the inaugural session. “The steel industry forms the basic pillar for any country’s economic development,” he said, and went on to add that it assumes far greater im-portance for emerging economies like India. However, he cautioned that globally the steel industry is facing tough times with slow growth and signifi cantly excess capacity. “Over 25 percent of the capacity in Europe is surplus, and China alone is reported to be having over 200 million tonne of excess capacity.” He expressed happiness that despite this, India’s steel market ex-panded during the last fi nancial year.

Mr Singh also expressed concern over the undue surge of imports this year. Some imports did not conform to the country’s quality parameters, he disclosed. He made it clear that while welcoming competition, the Govern-ment would not tolerate dumping of sub-standard steel, and received loud applause from the gathering.

A special address was presented by Mr Edwin Bas-son, Director General, World Steel Association. “In In-dia, we are honoured to have the largest steel producers as members,” he declared, describing his organisation as representing steel makers around the world. The WSA works together with national and regional associations. “India is in the steel and the world spotlight at the mo-ment. The reason is fast becoming clear: that China has reached the upper end of its growth curve and its growth will be substantially slower in the future than it has been until now.” He also observed that globally the industry foresees a fl at demand for steel. Yet, he was of the view that capacity does not “go away.” Industry must fi nd out how to deal with the excess capacity.

“With India’s economic growth slated to overtake that of China, the steel industry will get a new fi llip in usage and requirements,” said Mr S K Roongta, Chair-man, BALCO and Chair, FICCI Steel and Non Ferrous Metals Committee, in his opening address. He lauded

India Aims High In Global Steel Supply— Pramod Shinde, MMR Bureau

SPECIAL FEATURE


SPECIAL FEATURE

the industry members for their role in bringing the country to this stage. He appealed to the Government to continue to provide support to the industry, especially when it faced unfair competition.

Earlier, Mr A Didar Singh, Secretary General, FICCI, welcomed the gathering.

The inaugural session was followed by a panel dis-cussion comprising CEOs of key companies in the steel sector. Some of the challenges that they highlighted included raw material security, diffi culty in obtain-ing funds, and the need for iron ore, coal and power. They called upon the Government to support them in embracing new technology. Lastly, they appealed that the MMDR Bill should have a provision that iron ore mines should be given only to those who have end use plans, and not to anyone who applies.

The panellists included Mr C S Verma, Chairman, Steel Authority of India Ltd; Mr Narendra Kothari, Chairman-cum-Managing Director, National Mineral Development Corporation; Mr T V Narendran, Chief Executive Offi cer, Tata Steel Ltd; Mr Naveen Jindal, Chairman and Managing Director, Jindal Steel and

Power Ltd; Ms Rita Singh, Chairperson and Managing Director, MESCO Steel; and Mr Sheshagiri Rao, CFO, JSW Steel Ltd.

“There cannot be two opinions that there is a lot of potential in the steel industry in India,” stated Mr Ver-ma. With its GDP of USD 7.47 trillion, India is poised to become the third largest economy of the world by 2025. Mr Jindal observed that India’s per capita con-sumption of steel is quite low. There is a huge popula-tion with increasing needs, but the people fi nd steel ex-pensive. “How do we make steel more economical, so that more people can afford steel? It cannot happen if the price of raw materials stays high,” was his view. He expressed dismay at the large number of iron ore mines under litigation. Earlier, India was exporting 100 mil-lion tonne of coal, and now we are importing it, even into Odisha. “It is like bringing coal to Newcastle.”

India Steel 2015 is a biannual event that was fi rst held in 2013. This year, the event has drawn participation from 180 companies and 20 countries. A number of countries have sent powerful delegations to participate, refl ecting the resurgence in the Indian economy.



— Hema Yadav, Sayed Kokab, Manjushree Deshpande**

In India Bajra (Pearl Millet) is grown in the states of Rajasthan, Gujrat, Haryana and Uttar Pradesh. In 2012-13, 8.741 million tonnes of Bajra was

produced in India, under acreage of 7.297 million hectares of land. Among all the states, Rajasthan accounts for its maximum acreage (54%) and production (44.33%). Bajra has a wide acceptance among the poor and small land farmers. This is for the reason that Bajra is a hardy crop and can be grown in areas with defi cit moisture. It can tolerate a wide range of temperature and does not need heavy fertilizers to grow. Therefore, farmers with insuffi cient capital and credits, living in moisture defi cit and poor soil conditions have adopted this crop.

The rise in cultivation of BajraThe area under cultivation of Bajra had increased from 9.02 million hectares in 1951 to 13.29 million hectares in 1973-74. However, from 1974 onwards, the area under Bajra cultivation continuously declined, coming down to 7.29 million hectares in 2012-13. Despite the fall in the land under acreage, the production of Ba-jra has continuously increased. It increased from 2.90 million tonnes in 1951-52 to 11.97 million tonnes in 2012-13. Before 1973 the increase was due to the con-tinuous increase in the cultivable land area. Post 1973 the increase was due to the introduction of new High Yielding Varieties under the Green Revolution.

Crop like Bajra is grown mainly in under-developed or developing nations. As the economy and per capita income of the citizen increase, the consumption of such crops goes down. This trend was observed in In-

dia too. In rural areas the consumption reduced from 11.5 kg per person to 3.1 kg and in urban areas it re-duced from 4.0 to 1.1 kg. This shift was observed due to affordable availability of rice and wheat under the PDS system, increased urbanisation and per capita in-come and changing tastes and preferences. In-spite of high nutrient content of iron, calcium, zinc, high fi bre and fat content, it is considered as a poor man’s crop because it is grown and consumed by poor farmers and this trend still follows. Farmers, who do not have enough capital and monetary credits, have accepted this crop as their main cultivable crop.

Need For Value Addition In Bajra

BY INVITE


Marketable surplus and PriceA large portion of the Bajra grown is not marketed; instead it is consumed by the farmers. In 2008-09 the marketed surplus of India was 57.78%. The highest marketed surplus was 82.20% for Haryana and low-est 42.90% for Rajasthan. Haryana had the highest marketed surplus. Reason being only 0.610 million hectares of land was cultivated for Bajra, thereby producing 1.079 million tonnes of grain. However, in Rajasthan 5.174 million hectares was cultivated pro-ducing 4.283 million tonnes of grain. Because of high production and decreased consumption of Bajra all over the nation, supply has exceeded the demand most of the times. As a result, the market price for Bajra usually remains low. In the past 10 years the market price for Bajra has remained lower than the Minimum Support Price.

The graph shows MSP versus average market price. The instances when the price remained higher than the MSP was when the production was drastically low and the supply had fallen below the demand. In 2006-07 and 2009-10 the price was higher than the MSP be-cause of exceptionally low production due to drought.

Lack of Storage and CreditIn case of Bajra, it is observed that when the production increases the market price falls and the farmer is forced to sell hid produce at the lower price under distress sales. Though the MSP exists, the procedures are slow and cumbersome. It takes time for the farmers to sell its produce to the government. As these farmers are poor, they lack the storage facilities and are often clutched into the hands of the private money lenders. Therefore they are forced to sell their produce to the local traders under distress sales.

There is a need to strengthen credit and banking sys-tem to enable the timely availability of the credit to the farmers. The loans available before the season of sow-

ing will provide monetary security to the farmers. The bank accounts can be linked to the government agro-input outlets electronically. The farmers can go to these outlets for the purchase of inputs like seeds, fertilizers and chemicals.

Need for Value additionAs Bajra is a nutrient rich crop, it can be introduced as a part of the mid-day meals in the schools. Biscuits and sweets made out of Millet and Jaggery not only prove to be nutrient rich food for children, but they also support the local bakeries in the villages and towns. In this way, it provides a consistent fl ow of the grains from the farm to the consumers, thus providing income to the farmers and bakers and nutrition to the children. Including Bajra in the public distribution system will benefi t the below poverty line people with the nutrient rich food.

However, as the economy grows, certain crops lose their contribution in the consumption and economy. In India, where more than 60% of the population is en-gaged in agriculture we need to look at the interest of the farmers from the point of view of food security.

References1. ICRISAT policy paper number 2, titled Product, Diversifi cation, Marketing

and Price Discovery of Pearl Millet in India. 2012

2. www.agmarknet.nic.in

3. www.eands.dacnet.nic.in

4. www.recipeclout.india-server.com


**Authors are associated with National Institute of Agricultural Marketing, (NIAM) Jaipur. Contact email [email protected]

BY INVITE


STATISTICS

Soy Oil- 0.2%

Wheat 2.1%

Turmeric 9.9%

Rm Seed 12.1%

Barley 13.4%

Soybean 18.3%

Jeera 21.4%

Nickel 12.0%

Zinc 15.2%

Mentha Oil 16.4%

Lead 19.4%

Crude Oil 25.3%

Soy Oil- 0.2%

Wheat 2.1%

Turmeric 9.9%

Rm Seed 12.1%

Barley 13.4%

Soybean 18.3%

Jeera 21.4%

April International Commodity Price TrendsApril 30,

2015March 31,

2015% Change 52 Week

High% Change from

52 Week High52 Week

Low% Change from

52 Week Low

ICE Sugar (cents/lb) 12.98 11.93 8.8% 18.28 -28.99% 11.91 8.98%

LME Nickel 3 Month ($/t) 13950.00 12395.00 12.5% 21625.00 -35.49% 12205.00 14.30%

CBOT Soy Meal ($/t) 318.90 326.80 -2.4% 509.40 -37.40% 302.00 5.60%

CBOT Soy Oil (cents/lb) 31.51 30.39 3.7% 41.58 -24.22% 29.32 7.47%

CBOT Soybean (cents/bushel) 978.50 973.25 0.5% 1536.75 -36.33% 904.00 8.24%

LIFFE Sugar (S/t) 376.70 355.40 6.0% 495.90 -24.04% 355.00 6.11%

Nymex Crude Oil (S/bbl) 59.63 47.60 25.3% 107.73 -44.65% 42.03 41.87%

Nymex Natural Gas ($/mmbtu) 2.75 2.64 4.2% 4.89 -43.70% 2.44 12.61%

ICE Coffee (cents/lb) 136.55 132.90 2.7% 225.50 -39.45% 127.85 6.80%

ICE Cotton (cents/lb) 68.12 63.10 8.0% 94.27 -27.74% 57.05 19.40%

Comex Gold (S/oz) 1182.40 1183.10 -0.1% 1346.80 -12.21% 1130.40 4.60%

CBOT Corn (cents/bushel) 362.50 376.25 -3.7% 519.50 -30.22% 318.25 13.90%

LME Aluminium 3 Month ($/t) 1925.00 1785.00 7.8% 2119.50 -9.18% 1744.85 10.32%

CBOT Wheat (cents/bushel) 467.00 511.75 -8.7% 729.00 -35.94% 460.00 1.52%

Comex Silver (S.oz) 16.12 16.60 -2.9% 21.53 -25.09% 14.10 14.35%

LME Zinc 3 Month ($/t) 2345.00 2081.00 12.7% 2416.00 -2.94% 1981.00 18.37%

LME Copper 3 Month ($/t) 6335.00 6041.00 4.9% 7212.00 -12.16% 5339.50 18.64%

LME Lead 3 Month ($/t) 2110.00 1820.00 15.9% 2307.00 -8.54% 1676.50 25.86%

April Gainers and Losers (M/M%)MCX NCDEX


STATISTICS

Source: Bloomberg ; EC: European Union; IN: India; US: United States; CH: China; GE: Germany; UK: United Kingdom; JN: Japan

Economic Events In May 2015Date Time Region Event Period Survey (M) Prior

05/01/15 05:00 JN Natl CPI YoY Mar 2.20% 2.20%

05/01/15 06:30 CH Manufacturing PMI Apr 50 50.1

05/01/15 14:00 UK Net Consumer Credit Mar 0.8B 0.7B

05/01/15 14:00 UK Markit UK PMI Manufacturing SA Apr 54.6 54.4

05/01/15 19:30 US ISM Manufacturing Apr 52 51.5

05/01/15 19:30 US U. of Mich. Sentiment Apr F 96 95.9

05/04/15 07:15 CH HSBC China Manufacturing PMI Apr F 49.4 49.2

05/04/15 13:30 EC Markit Eurozone Manufacturing PMI Apr F 51.9 51.9

05/04/15 14:00 EC Sentix Investor Confi dence May 19.1 20

05/04/15 19:30 US Factory Orders Mar 2.00% 0.20%

05/05/15 14:30 EC PPI MoM Mar 0.30% 0.50%

05/05/15 14:30 EC European Commission Economic Forecasts

05/05/15 18:00 US Trade Balance Mar -$41.7B -$35.4B

05/05/15 19:30 US ISM Non-Manf. Composite Apr 56.2 56.5

05/06/15 14:30 EC Retail Sales MoM Mar -0.70% -0.20%

05/06/15 17:45 US ADP Employment Change Apr 200K 189K

05/06/15 18:00 US Nonfarm Productivity 1Q P -1.90% -2.20%

05/07/15 11:30 GE Factory Orders MoM Mar 1.50% -0.90%

05/08/15 07:40 CH Trade Balance Apr $39.60B $3.08B

05/08/15 11:30 GE Industrial Production SA MoM Mar 0.40% 0.20%

05/08/15 14:00 UK Trade Balance Mar -Â£2400 -Â£2859

05/08/15 18:00 US Change in Nonfarm Payrolls Apr 228K 126K

05/08/15 18:00 US Unemployment Rate Apr 5.40% 5.50%

05/09/15 07:00 CH CPI YoY Apr 1.60% 1.40%

05/09/15 07:00 CH PPI YoY Apr -4.50% -4.60%

05/11/15 16:30 UK Bank of England Bank Rate May-11 0.50% 0.50%

05/12/15 14:00 UK Industrial Production MoM Mar 0.00% 0.10%

05/12/15 17:30 IN Industrial Production YoY Mar 3.00% 5.00%

05/12/15 17:30 IN CPI YoY Apr 4.90% 5.17%

05/13/15 11:00 CH Industrial Production YoY Apr 6.00% 5.60%

05/13/15 11:30 GE GDP SA QoQ 1Q P 0.50% 0.70%

05/13/15 11:30 GE CPI YoY Apr F 0.40% 0.40%

05/13/15 14:00 UK ILO Unemployment Rate 3Mths Mar 5.50% 5.60%

05/13/15 14:30 EC Industrial Production SA MoM Mar 0.00% 1.10%

05/13/15 14:30 EC GDP SA QoQ 1Q A 0.40% 0.30%

05/13/15 15:00 UK BOE Governor Carney Speaks to Press on Infl ation Report


Date Time Region Event Period Survey (M) Prior

05/13/15 18:00 US Retail Sales Advance MoM Apr 0.20% 0.90%

05/13/15 19:30 US Business Inventories Mar 0.20% 0.30%

05/14/15-05/18/15 IN Trade Balance Apr -$10.8B -$11.8B

05/14/15 18:00 US PPI Final Demand MoM Apr 0.10% 0.20%

05/15/15 05:20 JN PPI MoM Apr 0.10% 0.30%

05/15/15 10:30 JN Consumer Confi dence Index Apr 41.8 41.7

05/15/15 18:45 US Industrial Production MoM Apr 0.00% -0.60%

05/18/15 10:00 JN Industrial Production MoM Mar F -- -0.30%

05/19/15 14:00 UK CPI MoM Apr -- 0.20%

05/19/15 14:30 EC Trade Balance SA Mar -- 22.0B

05/19/15 14:30 EC ZEW Survey Expectations May -- 64.8

05/19/15 14:30 EC CPI YoY Apr F -- 0.00%

05/19/15 14:30 EC CPI Core YoY Apr F -- 0.60%

05/19/15 18:00 US Housing Starts Apr 1020K 926K

05/19/15 18:00 US Building Permits Apr 1057K 1039K

05/20/15 05:20 JN GDP SA QoQ 1Q P 0.40% 0.40%

05/20/15 11:30 JN Machine Tool Orders YoY Apr F -- --

05/21/15 19:30 EC Consumer Confi dence May A -- -4.6

05/21/15 19:30 US Existing Home Sales Apr 5.22M 5.19M

05/22/15 11:30 GE GDP SA QoQ 1Q F -- 0.30%

05/22/15 13:30 GE IFO Business Climate May -- 108.6

05/22/15 13:30 GE IFO Expectations May -- 103.5

05/22/15 18:00 US CPI YoY Apr -0.20% -0.10%

05/22/15 JN Bank of Japan Monetary Policy Statement

05/25/15 05:20 JN Trade Balance Apr -- Â¥229.3B

05/26/15 18:00 US Durable Goods Orders Apr -- 4.00%

05/26/15 19:30 US New Home Sales Apr -- 481K

05/26/15 19:30 US Consumer Confi dence Index May -- 95.2

05/28/15 14:30 EC Economic Confi dence May -- 103.7

05/28/15 14:30 EC Business Climate Indicator May -- 0.32

05/29/15 05:00 JN Natl CPI YoY Apr -- 2.30%

05/29/15 14:00 UK GDP QoQ 1Q P -- 0.30%

05/29/15 17:30 IN GDP YoY 1Q -- 7.50%

05/29/15 18:00 US GDP Annualized QoQ 1Q S -- 0.20%

05/29/15 19:15 US Chicago Purchasing Manager May -- 52.3

05/31/15 16:00 IN Fiscal Defi cit INR Crore Mar -- 34395

Economic Events In May 2015 (Continued)

Source: Bloomberg ; EC: European Union; IN: India; US: United States; CH: China; GE: Germany; UK: United Kingdom; JN: Japan

STATISTICS


SUNAHARE PAL

Cross Word On Commodities - 21 2 6 7 11

12 13

23 27

35

50

62

69

84

89

102

116 120

124

133

146

159

Fill this Cross Word and test your commodity knowledge

By - Priya

Answer of Sunahre Pal series 1.

M A R G I N O T I O N

A L G O P R I C E I

R S O L O N G U M N

K Y C D E L I V E R Y

T L O S S M

O R A N G E J U I C E

M E N T H A O I L R X

A R B I T R A G E U L

R M O S A K A D I D E

K C T T R A D E E A

E X P I R Y E N D

T U R M E R I C E S S

Across1. A fi nancial tool which gives the right or obligation to

buy or sell any thing (6)

6. An exchange which deals with spot market (5)

13. Delivery centre of Jeera (5)

23. A tax like CTT on securities (3)

35. A delivery centre of turmeric in Andhra Pradesh (9)

50. An international exchange known for agri trades (4)

69. A commodity mostly grown in Kerala (8)

89. This basic characteristics attract speculators in the market (10)

102. A product which you can buy or sell and having some value is called (9)

116. A delivery centre of Soya bean (6)

124. A place known for spices (6)

133. Futures have got standardised format of a commodity which is called as (8)

146. An exchange based in Japan and is known for silver trading apart from MCX (5)

159. A trading type in which customization is the feature (7)

Down7. Commodity which is mostly grown in MP (8)

11. This characteristics differentiates commodity from equity (8)

23. A place known for turmeric in maharashtra (6)

27. A type of options in which buyer has the rights either transacts or not

120. A commodity which is used in cooking and MP is the major centre (3)

Karvy Comtrade’s Invest & HarvestMay 2015

RNI No.APENG/2008/24815

Documents

Rain Turns Tyrant - Karvy Commodities€¦ · ous year’s output. Chana production is pegged at 8.28 million tonnes against the previous year’s 9.53 million tonnes. The output