Annual Review and Outlook

					    Annual Review and Outlook
    Saturday | December 24, 2011




 Content
 Overview -Global Economy and Currencies

 Asset Class Returns

 Precious Metals

 Base Metals

 Energy

 Overview- Agri Commodities

 Pulses

 Guar

 Oilseeds

 Spices

 Softs


Research Team




Angel Commodities Broking Pvt. Ltd.
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  Annual Review and Outlook
  Saturday | December 24, 2011



Overview                                                                                      Table 1: World Economic Growth (%)
                                                                     Column1                                                2009              2010          2011E            2012E
Global Economy                                                       World Output                                           (0.7)             5.1               4.0           4.0
The year 2011 has been witness to a host of factors from the         Advanced Economies                                     (3.7)             3.1               1.6           1.9
macroeconomic to the geo-political front, which affected global      Emerging and Developing Economies                      2.8               7.3               6.4           6.1
financial markets. The debt crisis in the Euro Zone has been the     Source: IMF, Angel Research
highlight of this year as policymakers continue to battle with the
crisis. No final solution for the lingering debt issues has been                       Table 2: World Economic Growth (%)
churned out yet and the whole year has passed-by with bouts of
optimism every now and then, that the leaders will chalk out a       Column1                                   2009              2010                2011E                  2012E
one-point strategy that will not only help the Euro Area recover,    United States                             (3.5)              3.0                 1.5                   1.8
but will also help ease weak market sentiments.                      Euro Area                                 (4.3)              1.8                 1.6                   1.1
                                                                     Germany                                   (5.1)              3.6                 2.7                   1.3
Taking cues from the current state of affairs in the global          France                                    (2.6)              1.4                 1.7                   1.4
economy, the International Monetary Fund (IMF) has lowered
                                                                     Italy                                     (5.2)              1.3                 0.6                   0.3
growth forecasts for 2011 and 2012 (Table 1). World output is
expected to grow at a pace of 4 percent in 2011 and 2012 as          Spain                                     (3.7)              (0.1)               0.8                   1.1
against 5.1 percent in 2010. Growth in the advanced economies is     Japan                                     (6.3)              4.0                 (0.5)                 2.3
forecast to witness sharp slowdown from 3.1 percent in 2010 to       United Kingdom                            (4.9)              1.4                 1.1                   1.6
an expected 1.6 percent in 2011 and 1.9 percent in 2012. The         China                                     9.2               10.3                 9.5                   9.0
emerging and developing economies are expected to grow at 6.4
                                                                     India                                     8.0                8.5                 7.8                   7.5
percent in 2011, slowing from a pace of 7.3 percent in 2010.
                                                                     Brazil                                    (0.6)              7.5                     3.8                3.6
Country-specific growth forecasts by the IMF show that the           Russia                                    (7.8)              4.0                     4.3                4.1
European countries and Japan will show poor economic                 Source: IMF, Angel Research
performance for the year 2011, with Japanese GDP growth for the
current year expected to decline by 0.5 percent. The US, world’s
                                                                                                               Fig 1: World GDP (%)
largest economy witnessed growth of 3 percent in 2010, and 2011
                                                                       6.0
forecasts indicate a slowdown in growth at 1.5 percent. Germany,
                                                                                                                                             5.4
Euro Zone’s largest economy is forecast to grow at 2.7 percent in      5.0
                                                                                 4.8
                                                                                                                    4.9
                                                                                                                                  5.3
                                                                                                                                                                      5.1

2011, as compared to 3.6 percent in 2010.                                                                                  4.6
                                                                       4.0                                                                                                          4.0
                                                                                                              3.6                                                           4.0
As far as the emerging and developing economies are concerned,         3.0
                                                                                                                                                    2.8
                                                                                                  2.9
it is inflation which has become a major economic problem this                            2.3
                                                                       2.0
year around. World inflation grew at 3.7 percent in 2010 and for
the whole of 2011; estimates by the IMF indicate a sharp increase      1.0

to 5 percent (Fig 2). However, for 2012, the IMF expects world         0.0
inflation to fall to 3.7 percent. Central banks in China and India            2000 2001       2002 2003        2004 2005 2006         2007 2008       2009 2010 2011E 2012E
                                                                                                                                                          (0.7)
have tightened monetary policy during the year in order to keep a     (1.0)

check on inflation. This increase in borrowing costs at a time
when input costs are high, has affected profitability margins of     Source: Reuters, Angel Research
companies. Economic growth in China and India has also seen
slow growth, thus showing the impact of the global crisis and a                                          Fig 2: World Inflation (%)
tight monetary policy.                                                6.5                                                                                    Rising inflation, a major
                                                                                                                                                            concern for emerging and
                                                                      6.0                                                                           6.0
                                                                                                                                                             developing economies
Performance of equities this year has been grim as investors
                                                                      5.5
become risk averse. Expectations of the Euro Zone debt crisis
                                                                      5.0                                                                                                    5.0
worsening further has led to investors moving away from riskier                  4.6
                                                                      4.5
and higher-yielding investments. Major global equities have given                       4.2
                                                                      4.0                                                 3.8             4.0
negative returns of an average of more than 17 percent on a year-                                            3.7
                                                                                                                                                                      3.7           3.7
                                                                      3.5                                                           3.7
to-date basis. The Nifty and Sensex have given negative returns to                              3.5                 3.6
                                                                      3.0
the tune of 27 percent in 2011, showing the impact of the weak
economic scenario and poor risk sentiments. The only exception        2.5                                                                                   2.5

amongst major global equities is the Dow Jones, which has given       2.0
                                                                              2000 2001 2002          2003     2004 2005     2006     2007     2008 2009        2010 2011E 2012E
positive year-to-date returns of more than 4 percent, as
improving economic indicators in the US have helped uplift
                                                                     Source: Reuters, Angel Research
sentiments.

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Overview                                                                           Table 3: Yearly Performance - Major Currencies
Currencies                                                             Column1                     Open              High              Low              MRV              % Chg
                                                                       US Dollar Index             79.31            81.64          72.86            80.19                1.1
The Indian economy is dealing with various issues on the
                                                                       USDINR                      44.61            54.32          43.85            52.94                18.4
economic front such as – fall in growth, weakening Rupee,
                                                                       Euro                       1.3345           1.4939         1.2871            1.3066               (2.3)
inflation and capital outflows. The Indian Rupee has been the
                                                                       Pound                      1.5568           1.6745          1.527            1.5519               (0.5)
worst performing Asian currency in this year as it has weakened
                                                                       Yen                         81.18            85.54          75.55            77.77                (4.2)
more than 18 percent on a year-to-date basis. The currency
touched an all-time low of 54.32 as FII outflows coupled with          Source: Reuters and Angel Research

choppy domestic equities led to increased pressure on the
currency (Table 3 and Fig 3).                                                                      Fig 3: Average Monthly Spot Rupee
                                                                        54.00
Sentiments in the domestic markets remained tuned with the                                                                                                                52.12
                                                                        52.00
global market scenario and as risk aversion heightened, so did                                                                                                   50.71
strength in the US Dollar Index (DX). This factor too led to            50.00                                                                            49.22
pressure on the Rupee. As the currency depreciated above 54-                                                                                    47.65
                                                                        48.00
levels, the Reserve Bank of India (RBI) intervened in the forex
market by curbing currency forwards and cut banks forex trading         46.00     45.37 45.35
                                                                                                  44.89           44.91 44.83
                                                                                                                                        45.34
                                                                                                          44.32                 44.40
limits in order to curb further volatility in the Rupee. The central    44.00
bank said that once cancelled, forward contracts could not be
                                                                        42.00
bought again.

In its mid-quarter policy review, the RBI left the repo and reverse
repo rates unchanged at 8.5 percent and 7.5 percent respectively.
                                                                       Source: Reuters, Angel Research
The cash reserve ratio, which was expected to witness a
reduction, was also kept at the same level of 6 percent by the
central bank. The RBI indicated that risks to the Indian economy                                Fig 4: Average Monthly US Dollar Index
on account of heightening global concerns have increased over           80      79.36                                                                                     79.30

time and that inflation continued to remain a major concern.            79
                                                                                                                                                                 78.14
                                                                                        77.85
                                                                        78                                                                              77.46
                                                                                                                                                77.21
On a year-to-date basis, the DX has strengthened more than 1            77                      76.44

percent (Table 3) as rising European economic concerns and              76
                                                                                                        74.93 75.09 74.96 75.01
improving US economic growth supported gains in the currency.           75                                                              74.35

After touching a high of 81.64 this year, the DX slipped below the      74
crucial 80-mark as sentiments turned mixed.                             73

                                                                        72
Credit rating cuts, bearish future forecasts and risk aversion have
become the order of the day in the current context globally.
Global financial markets are dealing with a dilemma, with upbeat
US economic indicators on one hand and the worsening Euro              Source: Reuters, Angel Research
Zone debt crisis on the other. In the month of December, the Euro
came under sharp downside pressure and slipped below the 1.3                                            Fig 5: Average Monthly Euro
mark (Table 3) on the back of increase in Italy’s borrowing costs.      1.50
Worries over the lingering debt crisis have intensified as Fitch
                                                                                                          1.45
Ratings downgraded credit ratings of five major European                1.45                                      1.43
                                                                                                                         1.44
                                                                                                                                1.43     1.43
commercial banks and cooperative banking groups.                                                 1.40
                                                                        1.40
                                                                                                                                                 1.38    1.37
                                                                                         1.37
In the coming year too, we expect worries with respect to the                                                                                                    1.36
                                                                        1.35     1.34
Euro Zone to continue to dominate the global economy and                                                                                                                  1.32
financial markets. The Economic Intelligence Unit (EIU) has
                                                                        1.30
attached a probability of 40 percent to the break-up of the Euro
Zone in the next two years. With this concern looming, the Euro         1.25
could witness further declines, thus forcing European leaders to
take aggressive steps to save the future of 17 countries that are
attached to a single currency.                                         Source: Reuters, Angel Research




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     Annual (2012) Technical Levels - Currencies

           Dollar Index Technical Levels               GBPUSD Technical Levels
         CMP                      80               CMP                   1.567
         Support 1               74.70             Support 1             1.50
         Support 2               69.50             Support 2             1.44
         Resistance 1            85.00             Resistance 1          1.65
         Resistance 2            90.00             Resistance 2          1.73




               USDINR Technical Levels                 GBPINR Technical Levels
         CMP                     52.75             CMP                   82.8
         Support 1               50.30             Support 1             74.35
         Support 2               46.30             Support 2             66.00
         Resistande 1            56.75             Resistance 1          87.20
         Resistance 2            60.80             Resistance 2          92.70




            EUROUSD Technical Levels                   USDJPY Technical Levels
         CMP                     1.307             CMP                    78
         Support 1               1.23              Support 1             73.50
         Support 2               1.15              Support 2             69.00
         Resistance 1            1.43              Resistance 1          84.00
         Resistance 2            1.56              Resistance 2          90.00




              EUROINR Technical Levels                  JPYINR Technical Levels
        CMP                     69.00              CMP                   67.7
        Support 1               63.10              Support 1             56.00
        Support 2               67.20              Support 2             45.00
        Resistande 1            73.10              Resistance 1          74.35
        Resistance 2            77.20              Resistance 2          81.00




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                                                                                                     Table 4: Yearly Performance - Gold
Gold                                                                    Column1                                      Open        High             Low             MRV                 % Chg
Gold has marked its eleventh annual consecutive rise this year,         Spot Gold $/oz                           1420.8         1920.3           1308            1597.49              12.5
despite falling sharply from its all-time high of $1920/oz (Table 4).   Spot Gold Mumbai Rs/10gm                  20650          29150           19600            27200               32.7
The usually considered safe-haven investment witnessed a                Comex Gold Futures $/oz                  1415.6         1911.6           1307.7           1595                12.2
change in course, as investors moved away from gold on account          MCX Gold Futures Rs/10gm                  20740          29433           19515            27636               33.3
of rising economic uncertainty. With caution over European              Source: Reuters and Angel Research
economic status doing rounds in the air, investors prefer holding
dollar-denominated cash rather than any other financial asset.
                                                                                                            Fig 6: Gold Daily P rice C hart
Also, downside pressure in the risky assets segment led to               Com e x G old                                                                                                M CX Gold

increased selling pressure in gold as investors sold the yellow         1 ,9 5 0
                                                                                                                                                                         2 7 ,5 3 1
                                                                                                                                                                                       3 1 ,0 00

metal in order to cover-up losses in other segments.                    1 ,8 5 0                                                                                                       2 9 ,0 00
                                                                        1 ,7 5 0
                                                                                                                                                                                       2 7 ,0 00
Since gold remains the favorite of global investors, its movement       1 ,6 5 0
                                                                                                                                                                                       2 5 ,0 00
is a crucial indicator of sentiments in the markets. But for the        1 ,5 5 0                                                                                          1 ,5 8 4
time-being, it is gold which is taking cues from risk sentiments in     1 ,4 5 0
                                                                                                                                                                                       2 3 ,0 00
                                                                                       1 ,4 2 3
the financial markets. In the current month, i.e. December’11,          1 ,3 5 0                                                                                                       2 1 ,0 00

Spot Gold prices slipped to a low of $1560/oz, indicating that poor     1 ,2 5 0
                                                                                   2 0 ,7 8 8
                                                                                                                                                                                       1 9 ,0 00
risk appetite is acting as a deterrent to upside in the yellow metal.

Over the year, prices have witnessed a volatile movement, with
                                                                                                  Com ex Gold Futures ($ /oz)            M CX G old Future s (Rs/1 0gm )
Spot Gold prices rising 12.5 percent and Spot Gold prices in
Mumbai gaining 32.7 percent (Table 4). Gold futures on the              Source: Reuters, Angel Research
Comex and the MCX gained 12.2 percent and 33.3 percent
respectively on a year-to-date basis. Prices on the Indian platform
                                                                                            Fig 7: Average Monthly MCX Gold Prices (Rs/10gm)
have increased more than that in the international markets on
                                                                         31,000                           Sharp downside in Indian
account of Rupee depreciation (Fig 9). Figures 7 and 8 show that,
                                                                                                          markets cushioned due to
average monthly MCX gold prices fell only 0.4 percent in                 29,000                         Rupee factor. MCX prices fell                                     28,567 28,668

December’11 as against a decline of 3.5 percent in the same                                             0.4% and Comex futrues gold                     27,285
                                                                                                                                                                 26,796
                                                                         27,000                           prices fell 3.5% in Dec'11
period on the Comex, as a weaker Rupee protected sharp decline.                                                                                25,943

                                                                         25,000
In the past three years, gold prices have risen sharply on the back                                                                   22,771
of the global financial market crash and the recession post 2007.        23,000                                       22,147 22,418
                                                                                                             21,551
The rally in gold prices from around $1625/oz levels at the end of       21,000 20,258 20,447
                                                                                                    20,866

July to $1920/oz in September was mainly backed by safe-haven
demand as uncertainties over the European economic front                 19,000

increased. In the first-quarter of this year, episodes from Mubarak
to Gaddafi were also supportive of the gold price rally.
                                                                        Source: Reuters, Angel Research

World Gold Council data indicates that in the third-quarter 2011,
gold demand increased 6 percent to 1053.9 tonnes on a year-on-                         Fig 8: Average Monthly Comex Gold Futures Prices ($/oz)
year basis. Rise in investment demand helped offset the                  1,850

slowdown in jewelry demand, which slumped by 10 percent in                                                                                     1,759 1,762                1,743
                                                                         1,750
the third-quarter to 465.6 tonnes. Demand was 5 percent below                                                                                                    1,670                1,682
the quarterly average 490 tonnes since fourth-quarter 2008.              1,650
                                                                                                                                      1,577
India, which is the world’s largest gold jewelry market, witnessed
                                                                         1,550                                        1,511 1,528
a 26 percent decline in tonnage demand. Globally too, jewelry                                                1,482
demand saw a slump but China is an exception as the country              1,450                      1,422
witnessed growth even in this category.                                              1,363 1,374
                                                                         1,350

During the year, investment demand has been phenomenal when              1,250
compared year-on-year. During the third-quarter itself,
investment demand in gold increased a whopping 33 percent
year-on-year to 468.1 tonnes, marking the third highest quarter         Source: Reuters, Angel Research
for investment demand on record.



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Gold                                                                   M CX Gold Futures
                                                                                        Fig 9: Correlation Gold MCX Futures vs. Spot Rupee
                                                                                                                                                                          Spot Rupee
With Europe being the epicenter of economic troubles in the            31,000                                                                                                    56

current year, the region saw increase in demand for gold bars and      29,000
                                                                                                              Year-to-date, Gold and
                                                                                                                                                                                      54

coins, while demand in India, Japan and the US witnessed a             27,000
                                                                                                               Rupee show 80% +ve                                                     52
                                                                                                                    correlation
contraction. Total world bar and coin demand grew by 79 percent        25,000
                                                                                                                                                                                      50

year-on-year, marking a quarterly record of $21.4bn.                                                                                                                                  48
                                                                       23,000
                                                                                                                                                                                      46
                                                                       21,000
As far as movement in gold ETF’s is concerned, SPDR Gold Trust,                                                                                                                       44

                                                                       19,000                                                                                                         42
the world’s largest gold ETF saw an increase in average holdings
from around 1257 tonnes in January’11 to 1290 tonnes in
December’11 (Fig 11). But holdings have fallen from a yearly high
                                                                                                           M CX Gold Futures             Spot Rupee
of 1310 tonnes in early August to 1268 tonnes currently.
                                                                      Source: Reuters, Angel Research
An important part of this year’s trend in gold prices in India has
been the movement in the Rupee. Year-to-date, gold MCX futures                                  Fig 10: Spot Gold v/s Dollar Index
                                                                         Spot Gold                                                                                   Dollar Inde x (DX)
have shown an 80 percent positive correlation to the Rupee (Fig         1 ,90 0                                                                                                       82
9). Although, internationally gold prices have taken cues from                                                                                                                        81
                                                                        1 ,80 0
dollar strength, prices in the domestic markets have received                                                                                                                         80
                                                                        1 ,70 0                                                                                                       79
cushion to the downside on account of Rupee depreciation. Spot                                                                                                                        78
                                                                        1 ,60 0
Gold prices which are traded in dollar terms show an inverse                                                                                                                          77

relationship against the DX (Fig 10).                                   1 ,50 0                                                                                                       76
                                                                                                                                                                                      75
                                                                        1 ,40 0
                                                                                                                                                                                      74
Movement in the DX is a very important factor for dollar-               1 ,30 0                                                                                                       73

denominated commodities. Figure 10 clearly shows the inverse
relationship between gold and the DX. July onwards, Spot Gold
                                                                                                            Spot Gold             Dollar Inde x (D X)
prices have moved in the opposite direction as against the DX. In
the month of September’11, the DX had strengthened around 6.5         Source: Reuters, Angel Research
percent and Spot Gold prices slipped 11 percent during the same
period.                                                                                      Fig 11: SP DR Ho ld in gs o f Go ld (to n n es)
                                                                       1 ,3 20
                                                                                                                                            1 ,3 1 0                       1 ,2 9 9
From a low of 31.53 in April’11, the gold-silver ratio is currently    1 ,3 00

hovering around 55, indicating that silver is getting cheaper when     1 ,2 80    1,2 8 1

compared to gold (Fig 12). One ounce of gold can buy 55 ounces         1 ,2 60                                          1 ,24 9
                                                                                                                                                                                1 ,2 6 8
of silver in the current context. But when compared to levels in       1 ,2 40
                                                                                               1 ,2 2 6
June 2010 when the ratio was around 70, it has declined                1 ,2 20                                                                            1 ,2 2 8
considerably, suggesting that silver prices have increased over a      1 ,2 00
period of time. During the year, the gold-silver ratio had             1 ,1 80
witnessed a decline since January’11. On a year-to-date basis, the
ratio has averaged 45, marking the lowest since 2000.
                                                                      Source: Reuters, Angel Research
Outlook
In the first-half of the coming year, we expect gold prices to                                            Fig 12: Gold-Silver Ratio
witness consolidation as sharp upside will be restricted on               60
account of the ongoing economic uncertainty. However, by the                                                                                            56.8
                                                                          55
second-half of the year prices could witness a bounce back as by
                                                                                     49.0
then, the global economy will receive clarity over the lingering          50
                                                                                                               45.8
                                                                                                                                                                                55.1

European debt crisis and an improving US economy, thus helping            45
investors allocate investments with the caution button taking a
                                                                          40
back seat.                                                                                                                                   42.1

                                                                          35
                                                                                                              31 .5
                  Go ld Tech n ical Lev els                               30

CM P                    MCX: 2 7 7 5 0         Spot : 1 6 1 1
Support 1                  25000                  1480
Support 2                  24000                  1420                Source: Reuters, Angel Research
Re sist ance 1             31500                  1920
Re sist ance 2             34500                  2000

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                                                                                                                Tab le 5: Yearly P erfo rm an ce - S ilv er
Silver                                                                 Colum n1                                                       Ope n                     High                  Low                  M RV                    % Chg
Although the rally in silver halted in May’11, the white metal         Spot Silve r $ / oz                                            3 0 .8 4               4 9 .5 1                2 6 .0 4              2 9 .0 8                 (5 .8 )
gave an excellent performance between February’11 to                   Spot Silve r M um bai Rs/ kg                                   4755 0                742 50                  4 2175                5214 0                    1 1 .1
                                                                       Com e x Silve r Fu tur e s $ / oz                              3 0 .9 3               4 9 .8 2                2 6 .1 5              2 9 .0 3                 (6 .1 )
March’11 (Fig 13 and 14). During this period, silver proved to be
                                                                       MC X Silve r Fu tur e s Rs/1 0 gm                              4601 0                736 00                  4 1280                5288 6                    1 4 .4
the best bet for all classes of investors – from those seeking a       Sou r ce : Re ut e rs a n d An ge l Re s e a rc h
safe-haven investment refuge to those who were riding on
expectations of silver’s increasing industrial application in the
emerging economies. Between February’11 and March’11, the
phenomenal surge in silver prices can be attributed to a host of
factors, chief among them being safe-haven demand, European
debt concerns, downgrade of US credit rating and also a hedge
against inflation. Also, it is important to note that in the first-
half of this year, silver looked more attractive than gold as it has
the same characteristics of the yellow metal but is yet a cheaper
option as gold becomes increasingly unaffordable. This factor
mainly boosted investments in favor of silver in the bullion pack
in the first-half of this year.                                        Source: Reuters, Angel Research


But the rally in silver came to a pause after global economic                                   Fig 1 4 : A v e r a g e M o n t h ly S ilv e r M C X P ric e s (R s/ k g )
concerns heightened and led to re-emergence of worries over             6 5 ,0 0 0                                           6 2 ,9 0 7
                                                                                                                                                                                 6 0 ,5 0 9 6 0 ,7 8 5
demand for the industrial metal. The white metal also took cues         6 0 ,0 0 0
                                                                                                                                                                    5 6 ,6 3 1
from movement in copper prices. Figure 16 shows that at the                                                                               5 6 ,2 2 4                                                                  5 6 ,2 3 0
                                                                                                                                                                                                                                   5 5 ,1 5 7
                                                                        5 5 ,0 0 0                              5 3 ,6 6 3                             5 3 ,6 3 7                                        5 3 ,4 9 8
start of the year, silver prices increased sharply while copper
prices largely remained flat. Post the decline in silver prices in      5 0 ,0 0 0
                                                                                                   4 6 ,8 2 6
May, movement in silver was largely correlated to copper, this          4 5 ,0 0 0    4 3 ,9 3 9

was noticed especially from early September.
                                                                        4 0 ,0 0 0


On a year-to-date basis, Spot and Comex Silver prices have
declined around 6 percent as against rise in prices on the             Source: Reuters, Angel Research
domestic platform by 11 percent in the Spot Mumbai market
and by more than 14 percent on the futures platform (Table 5).                                  F ig 1 5 : A v e r a g e M o n t h ly S ilv e r C o m e x P r i c e s ( $ / o z)
If we take a look at average monthly silver prices in the Indian        4 5 .0
                                                                                                                             4 2 .6
markets, we can seen that from an average of Rs43,939/kg in             4 3 .0
                                                                        4 1 .0                                                                                                   4 0 .2

January’11, prices peaked to an average of Rs62,907/kg in April         3 9 .0
                                                                                                                                          3 6 .9
                                                                                                                                                                    3 8 .3                  3 7 .7
                                                                                                                3 5 .8
(Fig 14). In the international markets, average Spot Silver prices      3 7 .0
                                                                        3 5 .0
                                                                                                                                                       3 5 .8

                                                                                                                                                                                                                       3 3 .2
have slipped from $40/oz in August’11 to $31.2/oz in                    3 3 .0
                                                                                                  3 0 .9
                                                                                                                                                                                                          3 2 .1
                                                                                                                                                                                                                                    3 1 .2
                                                                        3 1 .0
December’11 (Fig 15).                                                   2 9 .0
                                                                                     2 8 .5

                                                                        2 7 .0
                                                                        2 5 .0
Outlook
Movement in silver is expected to be driven by a cautious tone
in the first-half of the year as market sentiments remain mixed.       Source: Reuters, Angel Research
Thereafter (second-half), prices are expected to trade higher on
the back of improvement on the US economic front; although                                                                   Fig 1 6: Spot Silver v/s LME C opper
                                                                       Spot Silve r                                                                                                                                             L M E Coppe r
downside risks remain in the form of any negative development
on the European front.                                                  50
                                                                                                                                  4 8 .4 1
                                                                                                                                                                                                                                       1 0 ,0 0 0
                                                                                                                                                                                                                                        9 ,5 0 0
                                                                        45
                                                                                                                                                                                                                                        9 ,0 0 0
                   Silver Technical Levels                              40
                                                                                                                                                                                                                                        8 ,5 0 0
                                                                                                                                                                                                                                        8 ,0 0 0
CMP                       MCX:53200              Spot : 29.45           35
                                                                                                                                                                                                                                        7 ,5 0 0
Support 1                    45800                   25.4               30
                                                                                                                                                                                                                                        7 ,0 0 0
                                                                                              2 6 .8 2                                                                                                                   2 8 .7 5
Support 2                    41250                   22.5               25                                                                                                                                                              6 ,5 0 0


Resistance 1                 67000                    38
Resistance 2                 73600                    41                                                                                  Spot Silve r                   L M E Coppe r


                                                                       Source: Reuters, Angel Research




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  Annual Review and Outlook
  Saturday | December 24, 2011



Copper                                                                                             Table 6: Yearly Performance - Copper
                                                                                                                   Open             High             Low          MRV                % Chg
                                                                       Column1
Copper which is regarded as an indicator of economic growth is         LME Copper ($/tonne)                        9,685          10,190            6,635         7,363              (24.0)
also called as the leader of the base metals pack. Its performance     MCX Copper Futures (Rs/kg)                  444.55         469.90           336.80         395.50             (10.6)
during the year has been very volatile, as on one hand it tested an    Source: Reuters and Angel Research
all-time high of $10,190/tonne, supported by supply-side worries;
and on the other hand the red metal slipped to a low of
                                                                                             Fig 17: LME and MCX Copper Price Performance MCX Copper
$6635/tonne (Table 6) on account of global economic concerns            LME Copper
                                                                        10,500                                                                                                           480
and its impact on consumption growth of industrial metals.
                                                                        10,000    9,568
                                                                                                                                                                                         460
                                                                         9,500
Estimates by the EIU indicate that world copper consumption                                                                                                                              440
                                                                         9,000 442                                                                                             416
growth slowed to 2.8 percent in 2011 as a result of weak demand          8,500
                                                                                                                                                                                         420

in the EU and the US coupled with the impact of monetary policy          8,000
                                                                                                                                                                                         400

tightening in China, the country that accounts for 47 percent of         7,500
                                                                                                                                                                                         380

world copper consumption. High borrowing costs in China led to           7,000                                                                                                 7,836     360

slowdown in manufacturing and construction activities. Lack of           6,500                                                                                                           340

access to credit had a major impact on copper fabricators as they
struggled to finance working inventories. Since the start of the
third-quarter this year, there has been an improvement in                                                 LME Copper ($/tonne)                MCX Copper (Rs/kg)

Chinese demand, but this does not indicates real consumption as        Source: Reuters, Angel Research
it is backed by restocking at lower price levels.

Fabricators in China continue to rely on hand-to-mouth strategies                      Fig 18: Average Monthly Copper MCX Prices (Rs/kg)
in the current market scenario as borrowing costs have become a         470
                                                                                           455
big concern. EIU expects a bounce back in world copper                  450      442                                                                        Lowest Annual
                                                                                                    437                               439
consumption growth by 3.2 percent in 2012 on account of                                                      431
                                                                                                                                                              Average in
                                                                                                                                                                2011
                                                                        430
expected loose monetary policy in China and the restocking cycle.                                                             412                  414
                                                                                                                      412                                                             409
In 2010, it has been seen that Chinese copper buyers did not            410                                                                                403
venture into restocking activity despite a decline in inventories as                                                                                                       392
                                                                        390
manufacturers adopted hand-to-mouth strategies. On the back of                                                                                                    372
this, imports which usually rise in the second-quarter (April to        370

June) witnessed slow growth. But increase in copper imports has
                                                                        350
been seen in the second-half of this year in China as it touched
275,499 tonnes in September, marking the highest level in 16
months.                                                                Source: Reuters, Angel Research

After a sharp fall in copper prices in August and September,
copper prices on the London Metal Exchange (LME) slipped more                        Fig 19: Average Monthly Copper LME Prices vs. LME
                                                                                                       Inventories
than that on the Shanghai Futures Exchange (SHFE). This resulted
                                                                        10,500                                                                                                       490,000
in price differential, thus making copper imports more viable into                         9,877                                  9,675
                                                                        10,000                                                                                                       470,000
China. But this increase in imports cannot be regarded as a rise in              9,537             9,508 9,514
                                                                         9,500                                                                                                       450,000
direct consumption as the current rise in Chinese copper imports                                                   8,953 9,081             9,030
                                                                         9,000                                                                                                       430,000
is more of bargain hunting, where Chinese merchants basically            8,500                                                                     8,308                             410,000
exploit price decline and arbitrage opportunities.                       8,000                                                                                                       390,000
                                                                                                                                                                 7,609 7,652
                                                                                                                                                           7,409
                                                                         7,500                                                                                                       370,000
Apparent demand for refined copper in China stood at 5.82m               7,000                                                                                                       350,000
tonnes in January’11 to September’11. The EIU expects Chinese
refined copper consumption to increase 6 percent in 2012 and
around 8 percent in 2013. In the coming year, China is expected                          Average Monthly LME Copper Prices ($/tonne)                        Avg. LME Inventories

to loosen its monetary policy, thus leading to a return of credit to   Source: Reuters, Angel Research
fabricators. Although demand in the Euro Area is expected to
witness slowdown, China may not necessarily get impacted from           Table 7: Refined Copper: World Total Production and Consumption '000 Tonnes
the same as a major part of China’s copper demand is mainly            Column1                     2007        2008         2009           2010          2011E      2012E            2013E
driven by the domestic economy.                                           Production             18,029       18,496        18,581        19,164         19,599     20,310           21,001
                                                                         Consumption             18,107       18,139        18,142        19,166         19,712     20,343           21,283
                                                                         Surplus/Deficit           (78)        357          439             (2)          (113)          (33)          (282)
                                                                       Source: EIU, Factiva, Angel Research



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  Saturday | December 24, 2011


Copper                                                                          Fig 20(a): Top Copper Consuming Countries (% world
Although economic growth in Japan is expected to contract this                                     consumption)
                                                                                                           Taiwan
year, data on the copper front has been on the positive side. The                          Latin America     4%
country accounts for 7 percent share (Fig 20a) in total world                      South Korea
                                                                                                3%

consumption and copper-specific data shows indications of a                            6%

swift recovery post the devastating earthquake and tsunami.                                     Japan
Many copper fabricators in Japan have returned to full production                                7%

by the end of March. World Bureau of Metal Statistics (WBMS)                                  US
                                                                                                                               China
                                                                                                                                47%
data suggests that in the first eight months of the year,                                    11%

consumption growth was down 1.7 percent year-on-year. EIU
estimates copper consumption growth in Japan at 1.2 percent in
                                                                                                         EU
2011 and expects it to accelerate in 2012-13 by an average 2.5                                          22%
percent, backed by reconstruction spending.
                                                                    Source: Reuters, Angel Research
The Euro Area accounts for 22 percent (Fig 20a) of world copper
consumption but demand growth in copper has witnessed a
                                                                             Fig 20(b): Top Copper Producing Countries (% of world
slowdown in this year due to escalating economic concerns.
                                                                                                  production)
WBMS data indicates that copper consumption growth in the EU
rose at 1.4 percent in the first eight months of 2011. The month
                                                                                                           Russia
of August alone saw an increase in demand growth by 2.7                                               US    6%
                                                                                                      8%
percent. But for the whole of 2011, EIU expects refined copper                                                              China
consumption growth of just 0.8 percent as confidence across the                               Japan
                                                                                                                             33%

Euro region falls and as reports indicate that since September                                 11%

consumers have postponed orders of cathode from refineries.

                                                                                                 EU
On the supply front, world production of refined copper increased                               19%
3.1 percent in 2010, but issues such as tightness in the global                                                     Chile
concentrate market due to lower ore grades and ageing mines                                                         23%

capped production increases. Production growth is expected to
                                                                    Source: Reuters, Angel Research
be slower than rise in consumption on account of rise in labor
disputes in the world’s largest copper mines in Chile, Indonesia
and Peru. For 2011, EIU expects world copper supply to increase     Outlook
2.3 percent. Since risks associated with supply of concentrates     Concerns over the supply front in case of copper remain and this
has increased, smelters and refineries have now increased their     factor coupled with an improving economic scenario in the US will
dependence on scrap as the raw material.                            be supportive for copper prices after the second-quarter of 2012.
                                                                    China is expected to loosen its monetary policy in the coming year
China is not only a major consumer of copper but also accounts      and the return of credit in the market will also help support
for a whopping 33 percent in world copper production (Fig 20b).     demand from the end of fabricators. But until then, we cannot
Data by the China Nonferrous Metals Industry Association (CNIA)     ignore developments on the Euro Zone front, which have been a
for September showed that the country’s output for refined          major influence to prices in 2011. Any further negativity with
copper remained at a high of 457,595 tonnes, but lower than its     respect to the same can act as a deterrent to upside in prices in
record high achieved in August. For 2011, the EIU expects Chinese   the next 3-4 months.
copper production to grow by 10.4 percent, down from growth of
almost 13 percent seen in 2010. For 2012-13, EIU forecasts a                              Copper Technical Levels
further slowdown in growth to 8 percent.                                        CMP                                         399
It has been noted that the global production of copper scrap has                Support 1                                   340
increased sharply and secondary refined copper production is                    Support 2                                   300
growing at a faster pace that primary production. Data from the
                                                                                Resistance 1                                465
International Copper Study Group (ICSG) indicates that global
secondary production rose by 18.3 percent year-on-year in 2010.                 Resistance 2                                500
For the first six months of the year, secondary copper smelters
witnessed growth in output by 8.1 percent to 1.76m tonnes, while
primary smelters recorded growth of just 1.3 percent to 7.36m
tonnes. Copper production from secondary sources accounts for
around 19 percent of total copper production, which is up from
17.6 percent in 2010.


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 Saturday | December 24, 2011



Aluminum                                                             Column1
                                                                                               Table 8: Yearly Performance - Aluminium
                                                                                                                Open           High            Low          MRV           % Chg
On a year-to-date basis, aluminum prices on the LME have             LME Aluminium ($/tonne)                    2,475          2,803          1,955         1,979            (20.3)
slumped more than 20 percent, with major downside pressure           MCX Aluminium Futures (Rs/kg)              111.00         124.00         102.00       104.35            (5.6)
seen in the month of October and November (Table 8). Average         Source: Reuters and Angel Research
monthly aluminum prices on the LME have slipped from
$2687/tonne in April’11 to an average of $2058/tonne in                                 Fig 21: LME and MCX Aluminium Price Performance
                                                                                                                                                                       MCX Aluminium
December’11 (Fig 23). Growing economic concerns, rising               LME Aluminium
                                                                       2,840                                                                                                   125
aluminum inventories coupled with low risk appetite added to           2,740
                                                                                                                                                                                120
pressure on prices. Average monthly aluminum prices in India           2,640
                                                                                2470
                                                                       2,540
have declined to Rs108/kg in December’11 from Rs119/kg in              2,440
                                                                                                                                                                                115

April’11 (Fig 22).                                                     2,340                                                                                           110
                                                                                                                                                                                110
                                                                               112
                                                                       2,240
                                                                       2,140                                                                                                    105
Economic concerns have increased over time and debt woes in            2,040
                                                                                                                                                                1967
the Euro Zone remain a major cause of concern. Prices are not          1,940                                                                                                    100

being influenced by demand-supply factors alone and are mainly
taking cues from the macroeconomic scenario.
                                                                                                   LME Aluminium ($/tonne)              MCX Aluminium (Rs/kg)


Size of the global aluminum market stands at $97bn and is            Source: Reuters, Angel Research
expected to touch $100bn by end of 2011. Average demand
growth in India between 2001-2010 was 12 percent pa. At a                            Fig 22: Average Monthly Aluminium MCX Prices (Rs/kg)
global level demand growth was 5 percent pa between 2001-
                                                                      121
2010. Major producers of aluminum are China, Russia and                                                   119
                                                                      119
Canada, while major consuming countries are China, US, Europe
                                                                      117                                       116
and Japan. Per capita use of aluminum stands at 1.15 kg in India,                                116                     115
                                                                                         115
12.4 kg in US, 10.6 kg in China and the world average stands at       115
                                                                                                                                 113
11.2 kg.                                                              113
                                                                                 112
                                                                      111                                                                          110
                                                                                                                                           109
In 2010, world aluminum consumption rose 14.1 percent,                109                                                                                  108                108
reaching pre-crisis levels (Table 9). For 2011, the EIU expects       107                                                                                           106
global aluminum consumption to grow at a slow pace of 4.8
                                                                      105
percent as compared to 2010. According to the WBMS, between
January-August’11, global primary aluminum consumption rose
5.2 percent year-on-year to 28.1m tonnes. Apparent consumption
                                                                     Source: Reuters, Angel Research
in China during the first eight months of this year rose by 6.2
percent while growth in Germany during the same period rose by
a whopping 15 percent.                                                               Fig 23: Average Monthly Aluminium LME Prices vs. LME
                                                                                                         Inventories
Led by expansion in Germany’s automotive sector, year-on-year         2,800
                                                                                              2,687
                                                                                                                                                                          4,700,000
                                                                      2,700                               2,582                                                           4,650,000
apparent consumption growth in the EU rose 11.4 percent year-                     2,538 2,585       2,593       2,554
                                                                      2,600                                           2,421                                               4,600,000
on-year in the first eight months of the year. But for the year       2,500
                                                                            2,462
                                                                                                                                                                          4,550,000
2012, the EIU has revised down aluminum consumption growth            2,400                                                 2,328                                         4,500,000
                                                                      2,300                                                                                               4,450,000
for the EU to below 1 percent. This expectation is on the basis of                                                                2,208
                                                                      2,200                                                             2,103                             4,400,000
weak regional GDP growth, grim property market scenario and           2,100                                                                   2,058                       4,350,000
the end of the restocking cycle.                                      2,000                                                                                               4,300,000
                                                                      1,900                                                                                               4,250,000

China accounts for a whopping 40 percent share (Fig 24) in global
aluminum consumption and the EIU expects growth in the
                                                                                       Average Monthly LME Aluminium Prices ($/tonne)                  Avg. LME Inventories
country to slow to 6 percent in 2011 as compared with a rise of
10.5 percent in 2010. Economic prospects for China look weak         Source: Reuters, Angel Research
considering the tight lending market scenario, weak demand for
cars and a grim global economic scenario.                              Table 9: Primary Aluminium : World Total Production-Consumption '000 Tonnes
                                                                     Column1                      2008           2009           2010          2011          2012             2013
                                                                            Production           39,670         37,199         41,169         43,219       44,927         46,777
                                                                         Consumption             36,905         34,764         39,662         41,548       43,410         45,670
                                                                        Surplus/Deficit          2,765          2,435          1,507          1,671        1,517             1,107
                                                                     Source: EIU, Factiva, Angel Research




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  Annual Review and Outlook
  Saturday | December 24, 2011


Aluminum                                                                        Fig 24: Top Aluminum Consuming Countries (% Share
Japan which accounts for 5 percent of world aluminum                                            World Consumption)
consumption (Fig 24) is expected to witness a slowdown in
aluminum demand growth in 2011 on the back of problems in the                              Canada             Others
                                                                                             1%                15%
manufacturing supply chain after the earthquake and tsunami                          Russia
                                                                                       2%
                                                                                           Brazil
that struck the nation in March’11. For 2011, the EIU expects                               2%
                                                                                                                                        China
                                                                                South Korea                                             40%
aluminum consumption in Japan to fall by 5 percent. In the first                    3%
                                                                                          India
eight months of the year, apparent consumption fell by 8.2                                 4%
percent year-on-year. But for 2012, the country is expected to
                                                                                          Japan
witness an increase in aluminum demand by 7.5 percent on the                               5%                US
back of a base effect coupled with increased demand from                                                    11%
                                                                                                                            EU
reconstruction activity after the earthquake.                                                                              17%


The US accounts for 11 percent of global aluminum consumption         Source: Reuters, Angel Research
(Fig 24) but apparent demand during the first eight months of the
year remained dull, rising just 2.1 percent year-on-year. One of
                                                                               Fig 25: Top World Production Countries (% Share World
the major factors that affected demand was the decline in                                           Production)
production of cars by Japanese carmakers in the US.
                                                                                                    India
                                                                                                     4%           Others
                                                                                         Africa
India, which accounts for 4 percent of global aluminum demand                             4% US                     7%
                                                                                               4%
(Fig 24), witnessed a decline of 10.5 percent year-on-year in
                                                                                                                                       China
apparent consumption between January-August’11. For the                               Australasia
                                                                                                                                        39%
                                                                                         5%
whole of 2011, the EIU expects a decline in Indian aluminum
                                                                                   Latin America
consumption by around 5 percent. But in 2012 and 2013, demand                            6%
is forecasted to rise around 9 percent a year.                                                         EU
                                                                                                       6%

                                                                                                                             Russia
World primary aluminum production witnessed a sharp increase                                                      Canada
                                                                                                                              10%
                                                                                              Middle East           7%
of 10.7 percent in 2010 but for the year 2011 the EIU expects                                    8%
production is expected to grow at a slow pace of 5 percent.
                                                                      Source: Reuters, Angel Research
Increase in production is mainly driven by restart of idle capacity
at Chinese smelters coupled with production from large smelters
in the Middle East, mainly in the Gulf Co-operation Council (GCC)                          AluminiumTechnical Levels
countries.                                                                           CMP                                         104.15
                                                                                     Support 1                                        92
China accounts for around 40 percent of world aluminum
                                                                                     Support 2                                        85
production (Fig 25) and the country is expected to witness 7
percent growth in 2011, after a whopping 25.6 percent rise in                        Resistance 1                                     125
2010. Environmental concerns and restriction on power                                Resistance 2                                     132
utilization could lead to slowdown in manufacturing activity, thus
affecting demand for aluminum.

Outlook
Rising inventories coupled with a comfortable supply-side
scenario is expected to act as a negative factor for aluminum in
the coming year. But with improvement in the US economic
scenario and expected decline in interest rates in China, sharp
downside in prices will be cushioned in the second-half of the
year.




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 Annual Review and Outlook
 Saturday | December 24, 2011


Nickel                                                                                          Table 10: Yearly Performance - Nickel
                                                                      Column1                                    Open               High              Low               MRV             % Chg
In the current year, nickel prices have remained volatile, taking
                                                                      LME Nickel ($/tonne)                    24,850              29,425            16,550              18,377           (26.3)
cues from movement in other base metals. Although prices have         MCX Nickel Futures (Rs/kg)             1131.80              1327.80           845.30              977.00           (12.1)
declined more than 26 percent on a year-to-date basis on the          Source: Reuters and Angel Research
LME, the first two months of the year witnessed a sharp rise in
prices, when nickel hit a high of $29,425/tonne in February’11
(Table 10). On the other hand, the month of November’11 saw                              Fig 26: LME and MCX Nickel Price Performance
                                                                      LME Nickel                                                                                                        MCX Nickel
prices touching a low of $16,550/tonne on the back of rising          31,000
                                                                                                                                                                                             1,300
global economic concerns coupled with the end of the restocking       29,000

cycle.                                                                27,000 25000                                                                                                           1,200
                                                                      25,000
                                                                                                                                                                                             1,100
Average monthly LME prices had slipped to a low of                    23,000
                                                                                1119
$17,880/tonne in November’11 (Fig 28) and in the same period          21,000                                                                                                         970     1,000
prices on the MCX fell to an average of Rs912/kg, the lowest          19,000
                                                                                                                                                                                             900
during the year (Fig 27).                                             17,000
                                                                                                                                                                                  17470
                                                                      15,000                                                                                                                 800

World consumption of nickel rose at a healthy pace in the early
part of the year. Chinese nickel consumption saw a rise from an
average of 45,500 tonnes per month in the first-quarter to 76,400                                        LME Nickel ($/tonne)                   MCX Nickel (Rs/kg)

tonnes in July. This increase in Chinese consumption helped
                                                                      Source: Reuters, Angel Research
cover-up slow growth in the other consuming nations. The EIU
expects world nickel consumption to grow 7.4 percent in 2011, a
slowdown from 8.9 percent growth in 2010.                                              Fig 27: Average Monthly Nickel MCX Prices (Rs/kg)
                                                                       1,350
 China accounts for 41 percent of global nickel consumption and                           1,291
                                                                       1,300
for 2011, the EIU expects demand to grow sharply by 17.6               1,250
                                                                                                  1,203
percent. European Union, which accounts for 25 percent of world        1,200     1,167                     1,175

consumption, is expected to witness consumption growth to the          1,150
                                                                                                                     1,091
tune of 1.7 percent. Japan on the other hand is forecast to show a     1,100                                                            1,061
                                                                       1,050
decline of 1.7 percent in demand in 2011 after witnessing a rise of                                                            1,010                  999
                                                                       1,000                                                                                   974
almost 20 percent in 2010.                                               950
                                                                                                                                                                         942               948
                                                                                                                                                                                  912
                                                                         900
Global nickel production is expected to witness an increase of 7.5
                                                                         850
percent in 2011, from a rise of 14 percent in 2010 (Table 11).
Increase in production is backed by a rise in output from Japan,
China and the EU.
                                                                      Source: Reuters, Angel Research
Outlook
Nickel prices in the coming year are expected to trade largely on a                      Fig 28: Average Monthly Nickel LME Prices vs. LME
negative note on expectations of surplus on account of increase                                            Inventories
in output from new projects. But prices are expected to stabilize                      28,440                                                                                             150,000
                                                                       29,000
in the second-half of the year on improvement in the US                                         26,647                                                                                    140,000
                                                                       27,000 25,620                     26,404
economic scenario and an expected easing of Chinese monetary                                                      24,177
                                                                                                                                                                                          130,000
                                                                       25,000                                                       23,886
policy.                                                                                                                    22,479
                                                                                                                                                                                          120,000
                                                                       23,000                                                                21,991                                       110,000
                                                                       21,000                                                                         20,397
                    N ic k el Tech n ic al Lev els                                                                                                             19,099            18,041 100,000
                                                                       19,000                                                                                           17,883            90,000
            CM P                          995
                                                                       17,000                                                                                                             80,000
            Su p p o rt 1                 800
            Su p p o rt 2                 745
            Re sistan ce 1               1270                                             Average Monthly LME Nickel Prices ($/tonne)                          Avg. LME Inventories
            Re sistan ce 2               1330
                                                                      Source: Reuters, Angel Research

                                                                        Table 11: Refined Nickel World Total Production-Consumption '000 Tonnes
                                                                      Column1                              2008             2009             2010           2011E         2012E           2013E
                                                                                Production                 1,352           1,328         1,509              1,623          1,695          1,730
                                                                               Consumption                 1,292           1,305         1,511              1,623          1,675          1,720
                                                                            Surplus/Deficit                 60               23              (2)               0            20             10
                                                                      Source: EIU, Factiva, Angel Research


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 Annual Review and Outlook
 Saturday | December 24, 2011


                                                                                                Tab le 12: Yearly P erfo rm an ce - Lead an d Zin c
Lead and Zinc                                                        C olum n1                                                 Ope n                  High                    Low                  M RV                 % Chg
Surplus in the global lead and zinc markets is acting as a major         L ME L ead ($/t onne)                             2 56 5 .00                29 04 .00              17 72 .0 0            1 95 1.0 0                (2 4.0 )
negative factor for prices. Also, weak global economic prospects      MCX L e ad Fut ure s (Rs/kg)                             11 6.05               1 30 .90                8 8.5 0              1 03 .2 0                 (1 0.8 )
                                                                           L ME Zinc ($ /t onne )                          2 43 0 .00                25 99 .00              17 18 .0 0            1 85 9.0 0                (2 4.0 )
have led to concerns over demand growth for commodities. On a
                                                                      MCX Zinc F ut ure s (Rs/kg)                              11 0.90               1 15 .90                8 6.1 0               9 8 .60                  (9 .4)
year-to-date basis, lead and zinc prices have slipped 24 percent     Sourc e : R e ute rs a nd Ange l Re s e a rc h
each (Table 12). Inventories on the LME have also increased
simultaneously by 72 percent and 16 percent for lead and zinc.
                                                                                              F ig 2 9 : A v e r a g e M o n t h ly L e a d L M E P r ic e s v s. L M E
                                                                                                                          In v e n t o r ie s
Rising economic concerns have also impacted prices to a great         2 ,8 0 0
                                                                                                                    2 ,6 6 7                          2 ,6 9 4                                                              4 0 0 ,0 0 0
                                                                                                         2 ,6 1 2                                                                                                           3 8 0 ,0 0 0
extent. Average monthly lead LME prices slipped to a low of           2 ,6 0 0
                                                                                   2 ,5 5 5 2 ,5 6 7                                      2 ,5 3 8
                                                                                                                                                                                                                            3 6 0 ,0 0 0
                                                                                                                               2 ,4 0 3                          2 ,3 9 7
$1968/tonne in October’11 (Fig 29) and prices on the MCX during       2 ,4 0 0
                                                                                                                                                                                                                            3 4 0 ,0 0 0
                                                                                                                                                                                                                            3 2 0 ,0 0 0
                                                                                                                                                                            2 ,2 3 8
the same period declined to Rs97/kg. While average zinc LME           2 ,2 0 0
                                                                                                                                                                                                             2 ,0 7 6
                                                                                                                                                                                                                            3 0 0 ,0 0 0
                                                                                                                                                                                                                            2 8 0 ,0 0 0
                                                                                                                                                                                                  2 ,0 2 2
prices slipped to a low of $1893/tonne in October’11 (Fig 30) and     2 ,0 0 0
                                                                                                                                                                                       1 ,9 6 8                             2 6 0 ,0 0 0
                                                                                                                                                                                                                            2 4 0 ,0 0 0
in the same period prices on the MCX fell to a low of Rs93/kg.        1 ,8 0 0                                                                                                                                              2 2 0 ,0 0 0




The EIU expects world lead consumption to grow 6.1 percent in                                   A ve r ag e M o n t h l y L M E L ea d P r i ce s ($ / to n n e )                      A v g . L M E In v e n t o r i e s

2011, as against 4.5 percent in the previous year. Data by the
                                                                     Source: Reuters, Angel Research
International Lead and Zinc Study Group (ILZSG) indicates Chinese
demand increased 13.7 percent year-on-year in the first eight
                                                                                              Fig 3 0: A v er a g e M o n t h ly Z in c L M E P r ic es v s. L M E
months of 2011 to 2.49m tonnes. World lead production is                                                              In v e n t o r ie s
expected to increase 5.5 percent to 10.1m tones in 2011 from          2 ,6 0 0                2 ,4 9 3                                                                                                                      9 0 0 ,0 0 0
9.6m tonnes in 2010.                                                  2 ,5 0 0
                                                                      2 ,4 0 0
                                                                                   2 ,3 9 2              2 ,3 6 3 2 ,3 9 2                            2 ,4 2 6
                                                                                                                                                                                                                            8 5 0 ,0 0 0
                                                                      2 ,3 0 0                                                            2 ,2 5 5               2 ,2 3 5
                                                                                                                               2 ,1 8 3                                                                                     8 0 0 ,0 0 0
                                                                      2 ,2 0 0
As far as the consumption scenario in lead is concerned, it is        2 ,1 0 0
                                                                                                                                                                            2 ,0 9 9
                                                                                                                                                                                                                            7 5 0 ,0 0 0
mainly dominated by China which accounts for 50 percent of            2 ,0 0 0
                                                                      1 ,9 0 0
                                                                                                                                                                                       1 ,8 9 3 1 ,9 3 8
                                                                                                                                                                                                         1 ,9 7 1
                                                                                                                                                                                                                            7 0 0 ,0 0 0
world lead consumption, followed by European Union at 18              1 ,8 0 0
                                                                      1 ,7 0 0                                                                                                                                              6 5 0 ,0 0 0
percent, US at 17 percent and South Korea, India and Japan at 5
percent, 4 percent and 3 percent respectively. Production of lead
on the global front is also dominated by China with a 50 percent                                A v e rage M o n t h ly L M E Zin c P rice s ($ / to n n e)                            A v g. L M E In ve n t o ries

share. Hence, this shows that apart from the macroeconomic           Source: Reuters, Angel Research
concerns, lead prices also took negative cues from monetary
policy tightening in China.                                          Table 13: Refined Lead World Total Production and Consumption '000 Tonnes
                                                                     Column1                                            2008               2009                  2010             2011E               2012E                 2013E
                                                                                   Production                          9,060               8,989                 9,572            10,102              10,605                11,096
China dominates the production and consumption scenario in
                                                                                 Consumption                           9,047               8,997                 9,639            10,229              10,642                11,183
case of zinc as well with a 50 percent share in each category. In                Surplus/Deficit                         13                  (8)                 (67)              (127)                (37)                  (87)
the coming year, zinc prices will also take cues from how the
                                                                       Source: EIU, Factiva, Angel Research
Chinese economy takes steps towards its monetary policy. We
expect the country to reduce interest rates in the coming year       Table 14: Refined Zinc World Total Production and Consumption '000 Tonnes
and this will help revive market sentiments and support upside in    Column1                                          2008                2009                   2010              2011                2012                  2013
lead and zinc prices.                                                             Production                         11,768               11,291             12,871               13,200              13,891                14,244
                                                                                 Consumption                         11,559               10,845             12,615               12,997              13,428                14,080
                                                                             Surplus/Deficit                          209                  446                   256               203                 463                   164
Outlook                                                              Source: EIU, Factiva, Angel Research
For the coming year, we expect sharp gains in lead and zinc prices
to be capped. In the case of zinc, the scenario of surplus is
negative and this coupled with any negative news or
                                                                                                   Lead and Zinc Technical Levels
developments with respect to the ongoing European debt crisis                                                  Lead             Zinc
would be negative for the commodity. But second-half                 CMP                                                                  103.5                                                     98.3
performance in the coming year could become stable on account        Support 1                                                                88                                                      85
of an expected bounce back in prices of other base metals.
                                                                     Support 2                                                                72                                                      74
                                                                     Resistance 1                                                           135                                                      123
                                                                     Resistance 2                                                           154                                                      130




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                                                                                             Table 15: Yearly Performance - Crude Oil
Crude Oil                                                                            Column1                      Open          High          Low           MRV             % Chg
Nymex Crude Oil prices have gained almost 4 percent on a year-                 WTI Crude ($/bbl)                  91.98        114.25         74.89         93.88            2.5
to-date basis but prices on the MCX have increased more than          Nymex Crude Oil Futures ($/bbl)             91.31        114.83         74.95         94.96            3.7
that in the international markets by a whopping 21 percent (Table         Spot Brent Crude ($/bbl)                96.12        128.21         93.38         107.05           13.3
15). Gains in the domestic markets are higher on account of             Brent Crude Futures ($/bbl)               94.75        127.02         92.37         105.00           10.7
Rupee depreciation; year-to-date the currency has weakened             MCX Crude Oil Futures (Rs/bbl)             4094          5380          3543          4983             21.9
                                                                       Source: Reuters and Angel Research
more than 18 percent, thus supporting prices in India.

During the first-half of the year, Nymex crude oil prices rose more                                       Fig 31:Nymex and MCX
than 4 percent as geo-political concerns in the Middle East and                                         Crude Oil Price Performance
                                                                       Nymex Crude Oil                                                                                MCX Crude Oil
North Africa region supported prices. In the first week of May,        117                                                                                           5342    5500
crude oil prices on the Nymex hit a high of $114.83/bbl but prices     112
                                                                                                                                                                               5100
                                                                       107
are currently finding it difficult to sustain around $100/bbl owing    102
                                                                                                                                                                               4700
to the rising global economic troubles.                                 97 91.55
                                                                        92                                                                                                     4300
                                                                                                                                                                     93.75
                                                                        87
On a year-to-date basis, crude oil inventories declined around 3        82                                                                                                     3900
                                                                        77 4136
percent to 323.6 million barrels on 16 December 2011. In the            72                                                                                                     3500
month of December crude stocks decreased almost 3.5 percent as
oil companies drew down inventories to lessen their tax burden
at the end of the year. Inventories rose 6.1 percent to 355.7                                     Nymex Crude Oil ($/bbl)              MCX Crude Oil (Rs/bbl)
million barrels in the first quarter of the current year and
continued to rise by 1.1 percent in the second quarter to touch       Source: Reuters, Angel Research
359.5 million barrels till the end of June.
                                                                                 Fig 32: Average Monthly Crude Oil MCX Prices (Rs/bbl)
US crude oil inventories increased as crude imports rose faster        5,300                                                                                                5,142
than refineries demand. However, in the third quarter (Q3)             5,100
                                                                                                         4,886                                                    4,920
inventories witnessed a sharp drop of 6.2 percent to 336.2 million     4,900
barrels, as supply disruptions due to hurricanes in the Gulf of        4,700                    4,630
                                                                                                                  4,569
Mexico cut production of crude oil from the oil rich regions.          4,500
                                                                                                                           4,319 4,332                    4,272
                                                                       4,300
                                                                                4,093 4,109                                                       4,098
According to the EIU, the pace of slowdown in US oil consumption       4,100
                                                                                                                                          3,924
gained momentum during the third-quarter of 2011 on the back           3,900
of weakness in petrol consumption. With high crude oil prices          3,700
currently, and slow pace of economic growth, demand growth for         3,500
the fourth-quarter could be sluggish. Consumption in China is
witnessing deceleration as growth is down from a rise of 10.4
percent year-on-year in the first-quarter to just 5.8 percent in      Source: Reuters, Angel Research
August. Moderation in economic growth and industrial activity
has affected demand growth.
                                                                                     Fig 33: Average Monthly Nymex Crude Oil Prices vs.
                                                                                                       Inventories
Global oil consumption is expected to grow at 1.7 percent pace till
                                                                       115                                                                                                      375
the end of 2011 and the slowdown in consumption growth is on                                            110
                                                                       110
the back of slow growth during the second-half of the year.                                    103
                                                                                                                                                                                365
                                                                       105                                       101
                                                                       100                                                                                      97     98       355
                                                                                                                          96   97
                                                                        95                                                                                                      345
                                                                                90
                                                                        90             90                                                              86
                                                                                                                                         86    86
                                                                                                                                                                                335
                                                                        85
                                                                        80                                                                                                      325




                                                                                     Average Monthly Nymex Crude Oil Prices ($/bbl)               Avg. Crude Oil Inventories

                                                                      Source: Reuters, Angel Research




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Crude Oil                                                                              Fig 34: Top Crude Oil Producing Countries
Consumption in the US fell by 0.5 percent in 2011 because of a                               Venezuela
not so upbeat state of the economy and weak consumer demand.                                      6%
                                                                                                                      Iraq
                                                                                           Kuwait                      6%
Consumption in the EU declined in 2011 and is expected to                                   6%
continue its downward trend for the year 2012 also as                                                                               Saudi Arabia
                                                                                                                                       23%
uncertainty on the economic front prevails.                                       United Arab
                                                                                   Emirates
                                                                                      7%
However, there could be revival in Japan’s consumption as after                                  Mexico
the earthquake in March’11, increase in use of oil powered                                        7%
                                                                                                                                              US
generators will support growth. Global oil consumption growth is                                     Canada                                  18%
expected to increase at slow pace of 1.6 percent in 2012 because                                       8%
                                                                                                                China
of slow demand in the EU and the US and also due to slow                                                         9%
                                                                                                                             Iran
                                                                                                                             10%
economic growth in China and India.
                                                                     Source: EIU, Factiva, Angel Research
Saudi Arabia is the leading crude oil producer and accounts for 23
percent of the world production (Fig 34), followed by the US at 18
                                                                                      Fig 35: Top Crude Oil Consuming Countries
percent for the year 2010. On the consumption side United States
                                                                                                          South Korea                         Canada
is the leader and the country consumes more than what it                                                      5%                                4%
                                                                                             Germany
produces (Fig 35). That is major reason why crude oil markets are                              5%
affected by the US economic scenario and economic indicators on                             Brazil
                                                                                             5%
a day-to-day basis. China is the second-largest crude oil                                                                                    US
consuming nation in the world followed by Japan.                                  Saudi Arabia                                              37%
                                                                                      5%

BRIC (Brazil, Russia, India and China) nations are among the major                                Russian
                                                                                                    6%
crude oil consuming countries in the world irrespective of their
                                                                                                     India
production status.                                                                                    6%
                                                                                                              Japan
                                                                                                               9%            China
India holds the fourth rank when it comes to crude oil                                                                        18%
consumption (Fig 36). India’s production may have marginally
                                                                     Source: EIU, Factiva, Angel Research
changed from 2000-2010 year but the consumption has increased
from 2261 million barrels per day in 2000 to 3319 million barrels
per day in 2010.                                                               Fig 36: Crude Oil Production and Consumption in India
                                                                      3500                                                                               3319

Outlook                                                               3000
In the coming year, crude oil prices will continue to hover above
                                                                      2500
the crucial $90/bbl mark as consumption growth continues in the               2261

emerging and developing economies. The only risk to the               2000
downside will be the negativity surrounding the European debt
                                                                      1500
crisis.
                                                                      1000 726                                                                         826


               Crude Oil Technical Levels                              500

CMP                      MCX: 5220           NYMEX: 98.90
                                                                                                             Production      Consumption
Support 1                   4250                   78
Support 2                   3800                   70                Source: EIU, Factiva, Angel Research

Resistance 1                6100                   115
Resistance 2                6360                   120




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                                                                                                  Fig 37: Commodity Food Price Index
Overview                                                                 200
                                                                                                                                               Apr-11, 190.9
Agri Commodities                                                         190
                                                                                                                      Feb-11, 189.3

                                                                                                                                                                             Aug-11, 181.7
                                                                         180
Commodity Food Price declined in 2011 on easing supply side
                                                                         170
concerns and demand related issues amidst global uncertainties
                                                                         160                                   Oct-10, 163.2                                                       Nov-11, 164.3

Year 2010 and 2011 witnessed a very volatile year for Agri               150
commodities in India as well as in the global markets. Upside rally
                                                                         140
in most of the agricultural commodities which started in July                         Jun-10, 136.5
2010, continued its upward movement in the beginning of 2011.            130
                                                                                0      0     0        0    0     0    0        1       1   1    1       1      1     1     1       1         1        1
                                                                                1
                                                                                -      1
                                                                                       -     1
                                                                                             -        1
                                                                                                      -    1
                                                                                                           -     1
                                                                                                                 -    1
                                                                                                                      -        1
                                                                                                                               -       1
                                                                                                                                       -   1
                                                                                                                                           -    1
                                                                                                                                                -       1
                                                                                                                                                        -      1
                                                                                                                                                               -     1
                                                                                                                                                                     -     1
                                                                                                                                                                           -       1
                                                                                                                                                                                   -         1
                                                                                                                                                                                             -        1
                                                                                                                                                                                                      -
Supply side constraints related to weather extremities, rising                  n
                                                                                u
                                                                                       l
                                                                                       u
                                                                                       J
                                                                                             g
                                                                                             u
                                                                                                      p
                                                                                                      e
                                                                                                           t
                                                                                                           c     v
                                                                                                                 o
                                                                                                                      c
                                                                                                                      e        n
                                                                                                                               a
                                                                                                                               J
                                                                                                                                       b
                                                                                                                                       e
                                                                                                                                           r
                                                                                                                                           a    r
                                                                                                                                                p       y
                                                                                                                                                        a      n
                                                                                                                                                               u
                                                                                                                                                                     l
                                                                                                                                                                     u
                                                                                                                                                                     J
                                                                                                                                                                           g
                                                                                                                                                                           u
                                                                                                                                                                                   p
                                                                                                                                                                                   e
                                                                                                                                                                                             t
                                                                                                                                                                                             c        v
                                                                                                                                                                                                      o
                                                                                J            A        S    O     N    D                F   M    A       M      J           A       S         O        N
demand for food, feed and fuel and the resultant decline in the
ending stocks of most of the agricultural commodities like Cotton,    Source: Reuters
sugar etc led to more than 15% rise in Commodity food Price
Index during the period October- April 2011. This rise in
agriculture prices has fed into food inflation in many countries
prompting governments to impose quantitative restrictions, only
to further exasperate the situation.

However, after April 2011, global food prices have declined
continuously on the back of lower demand amidst growing fears
of recession in the developed markets and higher output amidst
favorable weather. Nevertheless, it remained close to levels of
the 2008 food crisis which sparked riots in some poor countries
and panic buying in the richer world. Corn, wheat and soybean
futures at the Chicago Board of Trade and Sugar and Cotton
futures at ICE, all posted huge losses and were dragged down to       Source: Reuters
multi-month lows as investor concerns that the euro zone debt
crisis would put brakes on the global economic growth and
deplete the commodity demand.                                                           Fig 39: In dian Agri C o m m od ities Year-to -Date
                                                                                273
                                                                       2 70                               C h an ge (% )
On the domestic front, year 2011 was comparatively stable on the       2 20
back of above normal monsoon for the second consecutive year
                                                                       1 70
which led to increase in output of most of the Agri commodities                        155

which includes Grains. Oilseeds, Spices, Sugar and Cotton.             1 20
However, year 2011 was a witness to new highs for certain                                        55
                                                                        70
commodities which includes Guar seed, Pepper, Chana etc.                                                  24
                                                                                                                 21
                                                                        20                                                10       4                2
                                                                                                                                           3
Monsoon- a key driver of Agricultural Commodities                      (3 0 )
                                                                                                                                                            (3 )   (3 )
                                                                                                                                                                          (1 1 )
                                                                                                                                                                                    (2 5 )

                                                                       (8 0 )                                                                                                                    (5 5 )
India received bountiful rains for the second consecutive year in
2011 monsoon season with monsoon being 101% of the Long
Period Average (LPA). Monthly rainfall over the country as a
whole was 112% of LPA in June, 85% of LPA in July, 110% of LPA in     Source: Reuters
August and 106% of LPA in September. The month of June
witnessed below normal rains due to which sowing of the Kharif
crops got delayed.

However, above normal rains in the months of August and
September aided sowing which was delayed by almost 15-20
days. Except for coarse cereals and Pulses all the major Kharif
crops like Rice, Cotton, Oilseeds, Sugarcane etc witnessed an
increase in acreage.




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                                                                      Table 17: First Advance Estimates for 2011-12 Kharif Crops
Agri Commodities                                                     Crop                        2010-11            2011-12    % Change
                                                                     Rice                          80.65             87.1         8.00
Another bumper Kharif food grain crop in 2011-12 season              Jowar                             3.48            3         (13.79)
                                                                     Maize                         16.32             15.86       (2.82)
After witnessing a bumper Kharif food grain and Oilseed output at
                                                                     Cereals                      113.08            117.52        3.93
120 million tonnes and 20.8 million tonnes in 2010-11 season
respectively, India produced another bumper food grain crop in       Tur                               2.89           2.9         0.35
2011-12 season too. According to the first advance estimates,        Urad                              1.4           1.17        (16.43)
Kharif food grain output is estimated at 123.8 million tonnes,       Moong                             1.52           1.2        (21.05)
while Kharif Oilseed output is estimated at 20.9 million tonnes.     Total pulses                      7.12          6.43        (9.69)
The Production of major cash crops viz- Cotton, Sugarcane and        Total Kharif
Jute are estimated higher compared to the previous season.                                         120.2            123.88        3.06
                                                                     foodgrains
                                                                     Groundnut                         5.66          5.62        (0.71)
However, the output of Kharif Pulses and Coarse cereals declined
                                                                     Castorseed                        1.34          1.69        26.12
around 10% and 6% on account of lower area under cultivation
and delay in sowing owing to delayed monsoon.                        Sesamum                           0.88          0.73        (17.05)
                                                                     Soybean                       12.66             12.57       (0.71)
Food Inflation near its 4 years low in December 2011                 Kharif Oilseeds               20.85             20.89        0.19
                                                                     Sugarcane                    339.17             342.2        0.89
Food Inflation during the year 2011 slipped from its high of         Cotton                        33.43             36.1         7.99
17.05% in February,2011 to the lowest in December 2011 at
                                                                     Jute & mesta                  10.58             11.22        6.05
1.18%. The decline in food inflation is mainly attributed to above
normal monsoon since last 2 consecutive years and thereby            Source: Ministry of Agriculture
record output of food grains, Oilseeds, Cotton and vegetables
(Potato). Although the month of November 2011 witnessed a rise
in food inflation towards 12.21% mark it declined drastically                               Fig 40: Food Inflation during 2011
thereafter on the back continuous slide in the prices of Cereals         17         17.05
and vegetables.
                                                                         15

Lower area under Rabi oilseed and Pulses- a cause of worry               13
                                                                                                                                  12.21
                                                                         11
                                                                                              10.05
Significant rise in the MSP had encouraged farmers to go for               9
increased sowing of the chief Rabi crops. Progress of the Rabi
                                                                           7                                         7.33
crops which was satisfactory in the beginning of the season has
however lost momentum in the month of December 2011 owing                  5
to unfavorable weather conditions. Except Wheat and groundnut,             3
all other major Rabi crops like Chana, Mustard seed and cereals            1                                                         1.81
have witnessed a decline in area. As on 22nd December, 2011
Wheat has been sown has been sown over 24.41 mln ha so far,
compared with 24.01 mln ha a year ago. Thus, India may produce
record bumper crop of Wheat in 2011-12 season. However, the
                                                                     Source: PIB
output of Pulses and Oilseeds, the may decline in the coming
season. Thus, despite government’s effort, Indian imports of
Edible oil and Pulses may continue to rise in the coming year.




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 Saturday | December 24, 2011


Pulses                                                                                               Table 17: Yearly Performance -Pulses

Year 2011 was comparatively stable for most of the Pulses in India         Column1                         Open                    High                 Low                MRV                   % Chg
except for Chana which is considered as the king of Pulses. Despite        NCDEX Chana Spot                 2458                   3700                2200                3235                   32
record high production for the third consecutive year, Chana prices                                         2559                   3700                2198                3168                   24
                                                                           NCDEX Chana Futures
gained 36% year to date and made an all time high of Rs 3700 per qtl
                                                                           Urad Rajkot Spot                 3825                   4825                3225                3225                   (16)
on the back of rising consumption demand and lower stocks. Urad
prices however remained under pressure on the back of sufficient           Masoor Indore Spot               3200                   3700                2719                2950                   (8)
supplies on account of higher output in 2010-11 season. Along with         Tur Akola Spot                   3400                   4550                2700                3380                   (1)
Urad, Tur prices also remained under pressure during 2011. However,        Source: Reuters and Angel Research
prices recovered towards the last quarter of 2011 as a result of lower
output in 2011-12 season.
                                                                                                     Fig 41: Trend in MSP of Major Pulses
MSP increased by more than 25% in most of the pulses in last 2 years                                     4000                                                                                             70
                                                                               substantial hike
                                                                                                         3500                                                                                             60
                                                                               of around 60% in
Although India is the largest pulses producing nation accounting for           MSP of Chana                                                                                                               50
more than 25% of the world Pulses output, it has to rely on imports to         witnessed in last 2       3000
                                                                               years, followed by                                                                                                         40
the extent of 2-3 million tonnes annually. India’s import bill of Pulses       masoor around             2500
stands around Rs 9000 crores. Thus, to reduce the import dependency,           50% and Tur                                                                                                                30
                                                                               around 40%                2000
government has taken various measures so as to increase the Pulses                                                                                                                                        20
output, one of them being the hike in MSP. During the last 2 years                                       1500                                                                                             10
government has made substantial increase in the MSP of Pulses.
                                                                                                         1000                                                                                             0
                                                                                                                                                            Moo           Chan             Maso
                                                                                                                     Tur               Urad
                                                                                                                                                             ng             a               or
Hike in MSP failed to increase acreage                                                2009-10                       2300               2520                 2760          1760             1870
                                                                                      2010-11                       3000               2900                 3170          2100             2250
Favorable monsoons, a hefty hike in Minimum Support Price (15-30%)                    2011-12                       3200               3300                 3500          2800             2800
and the resultant increase in area by 11% led to a record output of                   % hike in last 2 years        39.13              30.95                26.81         59.09            49.73
Pulses in the year 2010-11 at 17.29 million tonnes. However, in 2011-
12 season despite of hike in MSP, acreage under Kharif Pulses, sowing      Source: Ministry of Agriculture
of which is done in June-July, declined around 10% due to delay in
monsoon Further, lower returns earned last year also led to shift in
area to other remunerative crops. In case of Rabi Pulses, sowing started               Fig 42: Decline in Acreage Under Pulses Despite hike in
on a positive note with acreage, however, unfavorable climate led to                           90               MSP                                                                                 10
                                                                                                                                                                  8.02
                                                                                                 80
decline in area in Maharashtra, AP and Karnataka and thus sowing is                                                                                                                           4.55 5
                                                                                                 70
down by around 1%.                                                                               60                                                                                                 0
                                                                                                 50                                                                             -3.36
                                                                                                                                                                                                    -5
Lower acreage and unfavorable weather to hit Pulses output in 2011-                              40                                                 -7.19
12 season.                                                                                       30                                                                                                 -10
                                                                                                 20
                                                                                                                  -15.7 8          -15.4 0                                                          -15
According to the first advance estimates, Kharif Pulses output is                                10

estimated to decline by 9.6% at 64 lakh tonnes against 71 lakh tonnes                                0                                                                                              -20
                                                                                                                                                            Other                       Other
in 2010-11 season. Major decline has been witnessed in Moong crop ,                                         Tur        Moong                 Urad           Kharif       Chana           Rabi
                                                                                                                                                            Pulses                      Pulses
which is down by almost 25% at 14 lakh tonnes. For Rabi, season the                          2010-1 1      37.63        23.52             22.33             22.35        83.5            46
government has taken various measures so as to offset the 10% decline                        2011-1 2      44.68            27.8          24.06             20.69        86.4            44
in Kharif Pulses output. However, current climatic conditions and                            % Chg         -15.78      -15.40             -7 .19             8.02        -3 .36          4.55
sowing trend point towards lower Rabi Pulses output in the coming
season.                                                                    Source: Ministry of Agriculture

No respite from Pulses imports

Indian Pulses imports declined to 2.7 million tonnes during FY 2010-11
due to record high Pulses production last year compared to 3.5 million
tonnes in FY 2009-10. However, with lower Pulses output in the current
season and rising consumption demand, we expect India to import 3
million tonnes Pulses in FY 2011-12.

High global prices of Pulses and weak rupee is making imports costlier
which is in turn expected to pass on the cost to the retail prices.




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  Saturday | December 24, 2011


Pulses                                                                                      Fig 44 : Daily Chana Spot and Futures Price Chart
                                                                        3,800                                                                                                           3800
Chana
                                                                        3,600                                                                                                           3600
Chana, one of the most important Rabi crop in India, contributing
                                                                        3,400                                                                                                           3400
40-45% in total pulses production, made an all time high of Rs
3700 per qtl and settled 32% higher year to date. Year 2011             3,200                                                                                                           3200

started on negative note with arrival pressure building up              3,000                                                                                                           3000

gradually since the month of January 2011. Prices declined from         2,800                                                                                                           2800
its high of Rs 2800 per qtl in the month of January 2011 and            2,600                                                                                                           2600
touched a low of Rs 2198 per qtl in April 2011.                         2,400                                                                                                           2400
                                                                        2,200                                                                                                           2200
Owing to record high output since last 3 consecutive years,
                                                                        2,000                                                                                                           2000
farmers from MP, the largest Chana producing state liquidated
the entire new stocks of Chana in anticipation of further fall in
prices. Thus, Chana prices started recovering gradually and made
                                                                                                                       Chana Futures              Chana Spot
all time high in the month of September 2011. Another reason for
the price rise was the tight supplies of yellow peas. It is a normal   Source: Reuters
practice of the dal miller to mix yellow peas with Chana to
prepare besan (Chana Flour) as yellow peas are much cheaper                                       Fig 45: Monthly Average Price of Chana
compared to Chana. Thus, high prices of yellow peas and lower                                                                                             3,432
                                                                                                                                                                             3,390
stocks of Chana in the major supplying state (MP) further               3400
supported Chana prices to remain firm. As prices rose by more                                                                                                       3,178
                                                                        3200                                                                     3,115                                3,134
than 65% during the period April to September 2011, the FMC
and the Indian government took various measures so as to curb           3000                                                            2,930
the rising prices, which included, imposition of special margin of
                                                                        2800
10 percent on long side of Chana, reducing stock limits on Chana
                                                                                 2,598 2,591                                   2,613
from 500 tonnes to 250 tonne, implementing contingency plan to          2600
                                                                                                   2,477
increase Rabi pulses production etc. This has led prices to decline                                                   2,418
                                                                        2400                                2,326
by almost 21 percent. At present prices are reacting more on the
sowing progress and the climatic conditions prevailing across the       2200
producing regions.

Chana Fundamentals                                                     Source: Reuters
India is producing a record bumper crop of Chana since last 3
consecutive years on account of significant hike in MSP and the                                     Fig 46: Chana MSP vis-a-vis Area and Output
                                                                                            100                                                                                        300 0
resultant increase in area under cultivation. To reduce import                               90                                                                                        280 0
dependency and make India self sufficient in Pulses production,         Af ter    three      80                                                                                        260 0
                                                                        consecutive          70
Indian government has increased MSP of Chana by more than               year of higher
                                                                                             60
                                                                                                                                                                                       240 0
                                                                        output, India                                                                                                  220 0
30% from Rs 1600 per qtl in 2007-08 to Rs 2100 per qtl in 2010-         may witness          50
                                                                                                                                                                                       200 0
                                                                        lower output         40
11. Higher support prices attracted farmers towards this crop and       in      2011-12      30                                                                                        180 0
thus acreage under Chana increased from 79 lakh ha in 2007-08           se ason              20                                                                                        160 0
                                                                                             10                                                                                        140 0
to 93.6 lakh ha in 2010-11. Thus hefty hike in MSP, higher acreage                            0                                                                                        120 0
                                                                                                                                                                            2011-
and yield led to significant increase in Chana output which stood                                   2006 -07     2007 -08       2008 -09    20 09-10        201 0-11
                                                                                                                                                                             12 *
at 8.2 million tonnes in 2010-11.                                                  A re a            82.46           79.08       84.48          84.38        93.6            91
                                                                                   Production        63.3            57.5        70.6           73.5         82.5           77.3
                                                                                   M SP              144 5           160 0       173 0          1760         2100           2800
For 2011-12 season, Indian government made a substantial hike
in MSP of Chana by more than 33% from Rs 2100 per qtl in 2010-         Source: Ministry of Agriculture
11 to Rs 2800 per qtl. Higher returns earned in 2010 and assured
good returns in 2011-12 season attracted farmers towards this                                       Table 18: Indian Chana Statistics
                                                                                      Chana MSP            Area (Lakh         Production % change % change  % change
crop in the current season. However, unfavorable weather               Column1
                                                                                       (Rs/qtl)            hectares)            ( MMT)    ( MSP)   (Area) (Production)
conditions prevailing in some of the growing areas like                2006-07              1445               82.46             6.33           0.70        10.00           13.00
Maharashtra and AP has led to a lower sowing of the crop. Thus,        2007-08              1600               79.08             5.75           10.70       (4.10)          (9.20)

acreage in the current season is expected to decline by around 3%      2008-09              1730               84.48             7.06           8.10         6.83           22.80
                                                                       2009-10              1760               84.38             7.35           1.70        (0.12)           4.10
and the yield is also expected to be lower due to unfavorable          2010-11              2100               93.6              8.25           19.30       10.93            3.10
weather conditions. Thus, after three consecutive years of higher      2011-12 E            2800                91               7.7            33.33       (2.78)           (6.67)
production India may witness a decline in Chana output by 6-7%.        Source: Ministry of Agriculture and angel Research                              2011-12 figs are estimated




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 Annual Review and Outlook
 Saturday | December 24, 2011

Chana                                                                            Fig 47: State wise Chana Sowing as on 16th December, 2011
Sowing Progress 2011-12                                                          90                                                                                                            5.0

Chana sowing which started on a brisk note in October 2011,                      80                                                            1.9                           1.6
                                                                                                               (0.5)                                                                           0.0
gradually lost the momentum due to climatic constrains. Chana                    70

                                                                                 60
acreage as on December 16, 2011 stood at 83.5 lakh hectares                                          (3.3)
                                                                                                                                                                                               (5.0)
                                                                                 50
(ha), down 3 percent compared to 86.3 lakh ha during the same                                                                                                                          (6.6)
                                                                                 40
period last year.                                                                30
                                                                                                                                                                                               (10.0)
                                                                                                                          (18.9)
                                                                                 20                                                                                                            (15.0)
MP accounts for more than 40 percent share in Indian Chana                       10
                                                                                                                                                             (15.6)

production. Sowing in MP is which was up 14.4 percent as on 2nd                      0                                                                                                         (20.0)
                                                                                                                        Maharash                     Karnatak
December 2011, is now down by 0.5 percent. Rajasthan is the                                Total              MP
                                                                                                                          tra
                                                                                                                                      Rajasthan
                                                                                                                                                         a
                                                                                                                                                                       UP            AP

second largest Chana producing state in India holding around 12-              2011         83.551            31.11         8.85        15.344         8.21            8.322         5.12
                                                                              2010         86.36             31.26        10.913       15.06          9.73            8.187         5.48
14 percent share in total production. Chana acreage in Rajasthan              Change        (3.3)            (0.5)        (18.9)         1.9          (15.6)           1.6          (6.6)
which was up by 10.9 percent as on 2nd December is now up by
only 2 percent. Maharashtra which stands in line with Rajasthan
with respect to production has however witnessed a decline in          Source: Ministry of Agriculture
acreage by 18.9 percent on account unfavorable weather and
shift in acreage. Sowing is expected to continue till December
                                                                                     Fig 48: In d ian C h an a Im p o rt q u an tity an d
end. Except Rajasthan and UP all other Chana producing state has        900                                Valu e                                                                              3 .5
witnessed a sharp decline in area. Thus, in the current season, we
                                                                        800                                                                                                                    3
expect Chana acreage to decline by 3 percent.
                                                                        700
                                                                                                                                                                                               2 .5
Imports turning costlier due to tight supplies globally                 600
                                                                                                                                                                                               2
Chana accounts for 9-10 percent of the total Pulses import. In          500
                                                                                                                                                                                               1 .5
2010-11, Indian imports declined to 1 lakh tonne against 3.3 lakh       400
tonnes in 2009-10 season due to higher production. Almost 74                                                                                                                                   1
                                                                        300
percent of the import comes from Australia followed by Tanzania
                                                                        200                                                                                                                    0 .5
9 percent, USA 4 percent, and Canada 4 percent. On the
international fronts, Australian Chickpeas output is expected to        100                                                                                                                    0
                                                                               2 0 0 5 -0 6         2 0 0 6 -0 7       2 0 0 7 -0 8    2 0 0 8 -0 9      2 0 0 9 -1 0         2 0 1 0 -1 1
increase by 7.2 percent to 407000 tonnes despite of fall in the
                                                                                         Q uantity in tn                      V alu e in C ro re s                    P e r unit value (Rs)
area under cultivation by 45 percent. Higher yield mainly boosted
chickpea output in Australia. However, the Australian exports
may decline by around 12 percent from 3.81 lakh tonnes to 3.35         Source: DGCIS
lakh tonnes in 2011-12 on the back of increased domestic usage.
                                                                       Once the arrivals reach its peak in April- May, Chana prices will
On the other hand, decline in Canadian Chickpea acreage by 61          bottom out and gradually start rising thereafter. Going by the
percent and lower yield on the back of frost over the key growing
                                                                       current sowing progress, Chana acreage is expected to remain
areas may lower Canadian Chickpea output by around 58 percent
                                                                       lower in the current season. Further unfavorable weather
to 54,000 in 2011-12 seasons. Sharp decline in output may
hamper exports and lower the carry stocks of Chickpeas in              prevailing in Maharashtra, Karnataka, and AP may further lower
Australia. Thus, on the back of supply tightness in major chickpeas    the yield of the Pulse crop. Consumption on the other hand is
exporting countries, supply is expected to remain tight and prices     increasing year on year. Further, there would be negligible carry
are expected to remain on higher side making imports expensive.        over stocks from 2010-11 season. Thus, Chana prices in the year
Outlook                                                                2012 is expected to remain firm and trade in the range of Rs
                                                                       2800 per qtl to Rs 4500 per qtl,
The upward trend in Chana prices is expected to continue in the
first two months of the year 2012 as the stocks are very low and                                      Chana Technical Levels
fresh arrivals expected to pick up only in February. Although fresh    CMP                                                                                     3265
arrivals from Karnataka and Maharashtra start from January, they
                                                                       Support 1                                                                               2900
may not make much difference. The arrival pressure will build up
only after February when arrivals from MP and Rajasthan hit the        Support 2                                                                               2770
markets. Following a seasonality pattern prices will start declining   Resistance 1                                                                            3700
February onwards with increase in arrival pressure. However,           Resistance 2                                                                            3900
prices in the current season will not decline much as the MSP of
Chana is Rs 2800 per qtl below which farmers will not sell their
produce.

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 Saturday | December 24, 2011



Guar Complex                                                                                   Table 19: Yearly Performance - Guar Complex
Year 2011 was a remarkable year in the history of Guar complex                  Column1                       Open                High                Low                 MRV                  % Chg

with record high prices on the back of record high exports which      NCDEX Guargum Spot                      6364.3             23070               6364.3             22164.3                248.3

has almost doubled in the financial year (FY) 2010-11 and the         NCDEX Guargum Futures                   6445               23424                6412               23424                 263.4
trend is expected to continue in the FY 2011-12.                      NCDEX Guarseed Spot                     2334.3            6935.7               2334.3              6611.3                183.2
                                                                      NCDEX Guarseed Futures                  2439                7159                2439                7159                 193.5
Guar seed and Guar gum futures gained 193.5 percent and 263.4
                                                                      Source: Reuters and Angel Research                MRV denotes Most Recent Value
percent year-to-date. The year 2011 started on a brisk note and
the rally continued till the first half of 2011 with Guar seed and
Guar gum prices gaining by more than 90 percent and 125                                   Fig 49: Daily Guar seed and Guar gum Price Chart
                                                                       Guarseed                                                                                                               Guargum
percent respectively. The price rise during this period was mainly      7,200                                                                                                                    22,400
attributed to the record high exports which jumped 84 percent           6,700                                                                                                                      20,400
and stood at 4,03,007 tonnes as compared to 2,18,473 tonnes             6,200
                                                                                                                                                                                                   18,400
during the last year.                                                   5,700
                                                                                                                                                                                                   16,400
                                                                        5,200
Further, delayed monsoon in the largest Guar Growing region i.e         4,700                                                                                                                      14,400
West Rajasthan also supported the upside in the Guar prices till        4,200                                                                                                                      12,400
July end. Monsoon is very crucial for Guar seed sowing which            3,700
                                                                                                                                                                                                   10,400
normally starts in mid July with arrival of monsoon in Rajasthan,       3,200
the largest Guar producing state accounting for 70 percent of the                                                                                                                                  8,400
                                                                        2,700
Indian Guar seed output. India witnessed 15 percent below               2,200                                                                                                                      6,400
normal rains in the month of July 2011, while it picked up in
August 2011. Thus, the delay in arrival of monsoon caused delay                                         Guar seed Futures (Rs/qtl)                 Guar gum Futures (Rs/qtl)
in sowing of the crop which was lagging behind by almost 30
percent as on 2nd August 2011. Sowing continued till the end of       Source: Reuters

August with marginal decline of 3 percent year on year. (Fig 51)                               Fig 50: Monthly Average Price of Guarseed
                                                                       6000                                                                                                                        5785
August onwards Guar prices witnessed a consolidation phase on
above normal monsoon in the month of August and September              5500

2011, which raised hopes of better output. (Fig 50) Between            5000                                                                   Consolidation Phase
                                                                                                                                                              4487                    4509
August 2011 and mid November 2011 Guar seed prices                     4500                                                                           4346                4382
                                                                                                                                          4117
consolidated in a very narrow range between Rs 4000 and Rs             4000
4700 per qtl level. Mid November onwards prices gained a
                                                                       3500                                                      3354
                                                                                                                       3235
whopping 35 percent in the time span of just 1 month and made
                                                                                          2873     2836 2936
new high of Rs 6552 per qtl on the back of drop in output by 25        3000
                                                                                2617
percent in 2011-12 season (Oct-Sep) and expectations of record         2500
high exports in the coming season too.                                 2000


However, the spectacular rise in the prices of both Guar seed and
Guar gum is a bit hard to digest during the peak arrival period.      Source: Reuters
Thus, the regulator has imposed special margin on 20 percent, 15
                                                                                         Fig 51: S o w ing P ro g ress o f G uar in Rajasth an
percent of which is to be paid in cash. The regulator’s action has
                                                                         35
born some fruits in the form of correction in the prices since last                                                                                                                           30
                                                                                                                                                                              30                   29
few sessions.                                                            30                    2 010          2 01 1
                                                                                                                                        2 6 .3 6
                                                                                                                                                        2 8 .4 1
                                                                                                                                                                                   2 6 .0 8
                                                                                                                            2 4 .7 9
                                                                         25                                                                                        2 3 .9 8
Guar acreage decline 3 percent year on year                                                                                                    2 0 .3 2
                                                                         20
                                                                                                                                   1 7 .0 1
Sowing of Guar started on a brisk note, however, below normal            15
                                                                                                                 1 4 .2 6
rains in July 2011 slowed the sowing progress. Northwest India                      1 0 .1 2       1 0 .9 6
                                                                         10
recorded 23percent below normal rains in the month of July.                                                   6 .8 1
                                                                                                 4 .1
Thus, as on 2nd August 2011, Guar sowing was lagging behind by             5
                                                                                  0 .9
31percent. Month of August however, recorded above normal                  0
rains with North West India witnessing 10percent above normal
rains. As a result sowing picked up dramatically and was down by
only 3percent by the end of August 2011. Thus, area under
cultivation stood at 29 lakh hectares against 30 lakh hectares in     Source: State Farm Dept.
the previous year. (Fig 51)


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  Annual Review and Outlook
  Saturday | December 24, 2011


Guar Complex                                                                           Fig 52: Area Production and Yield in Rajasthan
                                                                         Area &
                                                                                                                                                              Yield
Guar Output drop 25 percent from last year’s record high level         Production
                                                                         35.0                                                                                          600
Lower area under Guar cultivation and unfavorable weather                                                               33.2                30.0       29.0
                                                                         30.0               28.1        29.1
during the growth stage resulted into decline in output of Guar                                                                 25.8                                   500
                                                                                24.4
seed by 25 percent compared to last year’s record high crop of 15        25.0
                                                                                                                                                                       400
lakh tonnes. Yield in the current season has declined to 390 kgs         20.0
per hectare compared to 500 kgs per hectare last year.                                                                                         14.9                    300
                                                                         15.0                               12.4        12.6
                                                                                                                                                            11.3
                                                                                                                                                                       200
                                                                         10.0
Rajasthan government has estimated Guar seed output for 2011-                       5.9           6.6
12 season that begin in October at 11.36 lakh tonnes. (Fig 52)            5.0                                                                                          100
                                                                                                                                    2.1
                                                                          0.0                                                                                          0
April to July exports up 88 percent in the current fiscal- Record
high exports expected in 2011-12
Guar gum is mainly used for Oil well drilling. A remarkable surge                   Area (lakh ha)                   Production (lakh tn)              Yield (kg/ha)

in exports since last 1 year has pushed Guar prices to record high
levels in the year 2011. Guargum exports almost doubled from           Source: State Farm Dept.
2.1 lakh tonnes to 4.03 lakh tonnes in the FY 2010-11. Export
                                                                                     Fig 53: Guar gum Exports during the first four
demand continued in the current fiscal too, with exports up by
almost 88 percent during the period April- July 2011. According to        Export volumes       months of 2011-12 season             Export Value
Apeda, exports of Guar gum from April to July of the current fiscal       250000                                                                                   250000
                                                                                                                                                    223,296
year 2011-12 stood at 193802 tn, a rise of 88 percent as                                           In 2011-12 export qty rose by
                                                                                                   88% in Apr- July period, whie in
compared to 102831 tn during the same period last year. (Fig 53)          200000                   value terms it rose 284%                                        200000

In value terms however, Guar gum exports jumped more than
280 percent from Rs 581 crores to Rs 2232 crores due to increase          150000                                                                                   150000

in per unit value. The consumer who paid Rs 6200 per qtl for Guar
gum in the last year is now paying Rs 15100 /qtl.                         100000                                                                                   100000

                                                                                                                                                   58,112
Global uncertainties coupled with rise in per unit value have not
                                                                          50000                                                                                    50000
impacted export volumes of Guar gum.

Outlook                                                                         0                                                                                  0
                                                                                          April                May              June                July
Negligible stocks from the last season and lower output in the                            2010-11 exports                                 2011-12 Exports
current season, point towards a tightening supply situation in the                        Value in 2010-11(Rs lakh                        Value in 2011-12(Rs lakh)
long run if export continue to remain robust. Although the
regulator’s measure and peak harvesting season is putting              Source: Apeda
downside pressure on the prices, the demand supply
fundamentals would continue to support the upside in the prices.
                                                                                           Guar Seed Technical Levels
Domestic consumption accounts for only 10-15 percent of the            CMP                                                                6800
Indian Guar seed Production. Thus export demand was the only
                                                                       Support 1                                                          5800
factor which has pushed prices to such elevated levels. However,
higher prices of Guar seed and Guar gum might shift overseas           Support 2                                                          4900
buyers to some other substitute which may hurt the exports in          Resistance 1                                                       8000
the long run.                                                          Resistance 2                                                       9000
Guar seed prices may remain under downside pressure in the first
quarter of 2011 as overseas demand would remain subdued due
to higher prices. Also, supplies would be stable as stockiest would
release the stocks in anticipation of further fall in prices. Prices
may decline towards 4700 levels. April onwards, prices trend in
Guar complex would be determined by the IMD’s First Long
Range Forecast, which is issued in April.
If the overseas demand continues to remain robust in 2012,
supplies would not be sufficient to cater the demand and would
thus support the upside rally.

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  Annual Review and Outlook
  Saturday | December 24, 2011


Edible Oil Complex                                                                          Table 20: Yearly Performance - Soy bean
                                                                      Column1                         Open              High         Low         MRV         % Chg
Edible oil complex remained firm during the first half of 2011
                                                                                                            2343           2502         2063        2401          2.5
owing to unfavorable weather in Soybean growing areas leading         NCDEX Soy bean Spot

to possible decline in the global availability of the edible oil.     Soy bean Futures                     2390.5          2537         2031        2423          1.4

During the second half, of the year International Edible Oil prices   CBOT Soybean                         1388.5          1451         1100     1165.25        (16.1)
tumbled owing to lingering global economic concerns with              Source: Reuters and Angel Research

reduction in the overall commodity demand.

However, in the domestic markets, Edible Oil prices have
registered modest gains of 8.2 percent while that of CBOT Soy Oil
has witnessed sharp decline of 12.3 percent year to date.
Domestic prices overlooked weakness in the global markets on
varied supportive factors namely renewed demand for edible oil
ahead of winter season, weaker rupee and hoardings by the
stockiest.
Soybean
CBOT Soy bean fell while that of domestic improved
Soy bean prices started on positive note in the month of January
2011 owing to the ongoing concerns of unfavorable weather
condition for soybean crop in South America and delayed sowing        Source: Reuters & Angel Research
of soybean in USA. USA alone contributes around 37 percent
while Brazil and Argentina together contribute more than 50
percent. Further, robust Soy meal exports from the nation (India)
led prices to remain at elevated levels. After touching a high of
Rs. 2537/qtl in the month of January 2011 prices declined by 6.2
percent till the first half of year. Prices in the domestic market
thereafter traced the sowing pattern of the Kharif Oilseeds and
moved according to the seasonality pattern. Spot prices
registered marginal gains of around 2.5 percent while Futures
settled 1.4 percent negatively year to date. International prices
however settled 17 percent down year to date due to decline in
the offtakes by the major buyers towards the end of the year.

CBOT Soybean which remained firm till the first half of 2011,
slipped towards the end of the year on account of decline in the      Source: USDA & Angel Research
exports from the major supplier U.S. and rising Soybean
inventories there. Ending stocks in two major producers
particularly U.S., Argentina have risen by 7.20 percent and 0.21
percent respectively. Soybean production in U.S fell by 8.52                                      Table 21: Global Soybean Facts
percent to 82,887 thousand tonnes in 2011-12 while that in                                   Global                 Global        Ending       Global      Imports-
                                                                      Year                   Production             Imports       Stocks       Exports     China
Argentina is expected to improve by 6.12 percent to 52,000
                                                                      2007-08                   220,469                78,271        51,555      78,774      37,816
tonnes. U.S. Argentina and Brazil contribute around 80 percent to     2008-09                     211,960             77,326        42,598       76,845     41,098
the global output. Average CBOT prices which were quoting             2009-10                     260,854             86,791        59,453       92,550     50,338
around $1,391 cents per pound declined to $1,121 cents per            2010-11                     264,180             88,495        68,434       92,420     52,339
pound towards the end of the year.                                    2011-12 (Dec Est)           259,216             93,963        64,536       96,992     56,500
                                                                      Source : USDA
Consequently exports from U.S declined by 13.4 percent while
that of Brazil and Argentina increased by 28 percent and 17
percent respectively. Cheaper quotes offered by Brazil and
Argentina led exports to improve from the region.

Also, prediction from Shanghai JC Intelligence that Chinese
soybean imports this year will only be 52.4 MMT, below last
year’s 54.8 MMT and the first decline since 2004 as losses from
soybean processing by Chinese crushers discourages additional
purchases also pressurized prices towards the end of the year.


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  Annual Review and Outlook
  Saturday | December 24, 2011

Soybean
Domestic prices of Soybean dipped since September 2011 due
to optimistic reports of better production in the country
coupled with fear of increased fresh arrivals from the end of
September 2011. However, according to the First Advance
Estimates released by the Ministry of Agriculture on 14th
September 2011, Kharif Oilseed production in 2011 stood at
12.53 million tonnes 0.67 percent down as compared to last
year. There were some reports of decline in the output in
Madhya Pradesh, the chief producing state of the protein
contributing more than half to the total output. Average prices
which stood at Rs.2,426/qtl in the month of August slipped to
around Rs.2,300/qtl in September 2011. Prices continued their       Source: Ministry of Agriculture
downward journey to touch average yearly lows of Rs.2,413/qtl
in October. However, prices bounced back since then and
settled 1.4 percent higher year to date.

India’ Oil meal Exports from April- November up 22 percent-
Solvent Extractor’s Association

Total Oil meal exports during the period April –November 2011,
is up 22 percent at 29.2 lakh tonnes against 23.8 lakh tonnes
during the same period in 2010-11. Oil meal exports surged
mainly on the back of higher mustard meal exports which
surged 66 percent in Apr- Nov 2011 period to 8.4 lakh tonnes
compared to 5.08 lakh tonnes during the same period last year.
Exports of Soy meal however increased marginally by 3 percent
to 17.5 lakh tonnes during Apr-Nov, 2011.

In the month of November 2011, Oil meal exports were up 7           Source: Solvent Extractors of India (SEA)
percent at 5.3 lakh tonnes compared to 4.9 lakh tonnes in
November 2010. However, in the month of November, oil meal
                                                                    Also, if weather remains conducive Brazil output might remain at
exports were up mainly because of higher mustard meal export.
In fact, soy meal exports declined by 10 percent and mustard        the same levels as that of previous year. Thus, fresh arrivals from
meal exports surged 105 percent in the month of November            Brazil might pressurize prices during that period. Thereafter,
2011. India's soy meal exports during October and November          commencement of fresh arrivals in the domestic mandi is likely to
totaled to 6.9 lakh tonnes as against 8.54 lakh tonnes a year       pressurize prices according to the seasonality pattern.
ago.
                                                                    However, towards the end of the year prices might track sowing of
Outlook                                                             the protein in U.S. and weather prevailing in the nation. Prices
                                                                    might also trace sowing progress in Argentina and Brazil and
Soy bean prices in the first quarter are expected to trade with
                                                                    ending stocks of the protein in the global market. With global
positive bias on account of decline in the global ending stocks
and raising concerns of dry weather in South American crop          economic crisis setting its roots deep, its become crucial to keep
regions namely Brazil and Argentina. Soy bean crop there is in      track of demand from the major consuming nations.
the maturity stage and will be harvested in the months of March
and April. If dry weather continues, prices will find support and                            Oil Complex Technical Levels
strengthen. However, towards the end of the first quarter prices    Column1            NCDEX Soybean            NCDEX Ref Soy Oil   MCX CPO
are likely to correct on account of fresh arrivals from the above   CMP                    2390                       678             518
two major producers of the protein.                                 Support 1                2030                      620            470
                                                                    Support 2                1880                      588            450

 Prices will also take cues from the exports of Soy meal and        Resistance 1             2630                      730            575

ending stocks of Soybean in India. Prices in the second quarter     Resistance 2             2825                      745            600

are expected to take cues from first Long Range Forecast (LRF)
released by the Indian Metrological Department in the month of
April and sowing pattern in India.


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 Annual Review and Outlook
 Saturday | December 24, 2011

Refine Soy Oil                                                                            Table 22: Yearly Performance -Refined Soy Oil
                                                                                                       Open     High     Low       MRV     % Chg
Prices of both Refine Soy Oil and Crude Palm Oil moved in tandem       Column1
                                                                                                       633.5   669.75   586.3     685.75
with the international market in most part of 2011.However,            NCDEX Soy Oil Spot                                                      8.2
                                                                                                       639.8   672.05   588.5      693
towards the end of the year prices have moved in contrary              NCDEX Soy Oil Futures                                                   8.3

direction on account of decline in the imports of the Edible Oil       CBOT Soy Oil                    57.77   49.63    60.41      50.64     (12.3)

and weak rupee. This caused availability in the domestic markets       Source: Reuters and Angel Research

to decline. Refine Soy Oil registered positive gains of around 5
percent year to date. On the other hand CPO on the MCX
platform fell by 8.2 percent while BMD CPO fell by 12.3 percent
year to date.

India imports almost 50 percent of its annual vegetable oil
requirement, as the domestic output has failed to keep pace with
growing consumption demand. In the oil year 2010-11 (Nov-Oct),
India imported 83.71 lakh tonnes of vegetable oil to meet its
consumption demand of 162 lakh tonnes. In 2011-12 season,
Indian edible oil imports are estimated to reach 90 lakh tonnes,
up by 7.5 lakh tonnes compared to the previous year on the back
of rise in consumption by 5 percent to 170 lakh tonnes.
                                                                       Source: Reuters & Angel Research
 Indian vegetable oil output is expected to rise by 2-2.5 percent.
In 2010-11, Indian edible oil import comprised of 64 percent palm
oil and 12 percent Soy oil degummed. However, imports in 2011-
12 are expected to turn costlier as Indonesia hiked export duty on
crude palm oil (CPO) by 1.5 percent to 16.5 percent and lowered
duty on refined Palm olein (RBD) from 15 percent to 8 percent.
India is the main importer of CPO from Indonesia.
Crude Palm Oil in the early part of the year remained firm and
touched a high of MYR 3,981/tonne in the month of February
2011 owing to prolonged rains and anticipation of decline in the
output. Apart from above factor decline in the inventories also
added to the bullishness. Prices thereafter scaled down owing to
reports of better production in the two major producing nations
namely Indonesia and Malaysia. Prices since then continued t o         Source: SEA
trade lower from the second quarter on account of decline in
exports from the above nations due to waning demand caused by
global economic worries. Prices on an average touched a low of
MYR 3108/tonne in the month of November 2011.

Prices however bounced back in the later part of November 2011
with reports of floods in Malaysia and declining supplies.
November CPO output reached 1.58 million-1.62 million tons
compared with 1.91 million tons in October as trees entered a
seasonally slow production period. Palm oil inventory levels
declined to 2.0 million tons at the end of November. Stocks
reached 2.10 million tons, according to Nov. 10 data from the
government-backed Malaysian Palm Oil Board. Overall prices
remained weak throughout the year and settled down year to             Source: Malaysian Palm Oil Board & Angel Research
date.
                                                                       With demand narrowing down owing to global economic
Outlook
                                                                       cues prices are expected to remain weak till August 2012.
Edible Oil prices are expected to remain firm till January on
                                                                       However, prices are likely to recover gradually September on
account of weather disruptions resulting from La Nina conditions.
                                                                       account of the commencement of festival season. Prices in
La Nina, a phenomenon that usually results in above-average
                                                                       the second half largely might track demand from major
rainfall in South East Asia which is likely to revise the output and
                                                                       importing nations particularly EU and China and Oil stocks in
also disrupt transportation of Oils from refineries. However,
                                                                       India.
towards the beginning of February prices are likely to witness
correction owing to fresh arrivals in the producing nations.

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Mustard seed                                                                          Table 23: Yearly Performance - Mustard seed
Year 2011 was a remarkable year for Mustard seed with record       Column1
                                                                                                   Open      High         Low      Close         % Chg
high mustard meal exports and highest ever hike in MSP.            NCDEX RM Seed Spot             2806.25    3375        2467.5    3357.5            19.6
Mustard seed, the second most important Rabi oilseed in India                                     2848.5     3570        2629      3458
                                                                   NCDEX RM Seed Futures                                                             21.4
after Soybean has posted highest returns in the edible oil         Source: Reuters and Angel Research
complex during the year 2011. Mustard seed futures as well as
spot gained 21.4 percent and 19.6 percent during the year
2011 on account of shift in overseas demand for a cheaper
substitute meal i.e, mustard meal.

Along with the oilseed complex, mustard seed prices started
the year on a positive note. However, the upside was short
lived as harvesting of this Rabi oilseed crop began in February
and continued till March 2011. Prices declined by almost 15
percent during the harvesting period to touch a year’s low of Rs
2629 in the month of March. Seasonality pattern of Mustard
reveals that prices generally bottom out in March with arrivals
reaching its peak and starts rising gradually with declining
arrival pressure. Thus, April onwards prices started recovering
and sustain at higher levels till September 2011. In the month
of September 2011 however, arrivals of Soybean begin in India.     Source: Reuters and Angel Research
Following other oilseeds trend, mustard prices again decline in
the month of September 2011. The last quarter of 2011 was a
remarkable period, with a whopping rise in mustard seed prices
by around 34 percent on account of higher mustard meal
exports and highest ever hike in MSP by more than 35 percent
for 2011-12 season.

India’s mustard meal exports surged 66 percent during the
period April- November 2011

Out of the total oil meal exports during the period April-
November 2011 of the current fiscal, the highest increase yoy
were posted in mustard meal, which surged 66 percent in Apr-
Nov 2011 period to 8.4 lakh tonnes compared to 5.08 lakh
tonnes during the same period last year.

Shift in export demand from Soy meal to mustard meal               Source: SEA and Angel Research
Soy meal exports account for more than 70 percent of the total
oil meal exports from India, followed by mustard meal with 20           Fig 63: Share of Soymeal and                 Share of Soymeal and
percent share. However, during the current financial year, we              mustard meal (2010-11)                   mustard meal (2011-12)
could clearly notice that there has been change in the demand                       Others                                Others
pattern due to lower prices of the substitute. During the period                     7%                                    11%
April- November 2010 Soy meal exports accounted for 72                   Mustar
                                                                         d Meal
percent and mustard meal accounted for 21 percent of the                  21%
                                                                                                                Mustar
total oil meal exports. However, in the current financial year                                                  d Meal                      Soymea
the share of soy meal declined to 60 percent while that of                                                       29%                           l
                                                                                                    Soymea
mustard meal increased to 29 percent. Soy meal price are                                                                                     60%
                                                                                                       l
normally higher than that of the mustard meal due to high                                            72%

protein content in soy meal. Thus due to higher prices
importers preferred the cheaper substitute.
                                                                   Source: SEA and Angel Research




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 Saturday | December 24, 2011


Mustard seed                                                                              Fig 64: Highest Rise ever in MSP of Mustard seed
                                                                        3000                                                                                                                     38.0
                                                                                                                                                                 2500 (35.1 %)
Highest ever hike in MSP of Mustard seed                                                                                                                                                         33.0
                                                                        2500
Indian government for the first time ever has increased the MSP                                                                                                                                  28.0
                                                                        2000
of mustard seed by 35 percent. Increase in MSP of oilseeds by 35                                               1600 (20.3 %)                                                                     23.0
percent compared to that of food grain by around 10 percent             1500                                                                                                                     18.0
clearly notifies the government strategy to boost oilseeds acreage
                                                                                                                                                                                                 13.0
and output and thereby reduce import dependency.                        1000
                                                                                                                                                                                                 8.0
Acreage lower despite of increased MSP                                   500
                                                                                                                                                                                                 3.0
The government’s effort failed to attract famers towards this                0                                                                                                                   -2.0
crop. Sowing of mustard seed, which is up by 1.5 percent as on 8th
December, 2011 is now down by almost 6 percent at 62.6 lakh ha
against 66.36 lakh ha during the same period last year. Rajasthan                                                     MSP (Rs /qtl)                         % Change
is the largest mustard producing state in India with 50 percent
share in output followed by UP, Haryana and MP with 14 percent,       Source: Ministry of Agriculture & Angel Research
12 percent and 10 percent share respectively. Farmers in
Rajasthan in the current season opted for Chana which had
fetched handsome returns in 2011. Thus, in Rajasthan mustard
sowing is down 12.5percent.

Unfavorable weather conditions to hit crop yield
Further, hotter-than-normal weather could affect the crop yield
from 1050 kgs per hectare to 1000 kgs per ha. There has been
some improvement in the weather in the last few days but the
high temperatures earlier had already done some damage. While
temperatures have dropped in Uttar Pradesh, Punjab, and
Haryana, they are above normal in Rajasthan, Gujarat, and
Madhya Pradesh. The mustard crop needs cold weather and a
few showers and if that does not happen in the next 10 days, the
crop scenario could worsen.
Mustard Output to decline around 8-10percent
Mustard seed output which touched a record 7.6 mn tn last year
                                                                      Source: Ministry of Agriculture & Angel Research
(Ministry of agriculture), is expected to decline by 8-10percent in
the coming year on account of lower acreage and unfavorable                       Fig 66 : A re a, P rod uction and Yie ld o f M u stard in Ind ia
                                                                        8 .0 0                                                                                                                   11 10
climatic conditions. Further, carryover stocks for the next season                                                                                                 7 .6 0
                                                                                           7 .4 4
would also be lower on account of increased crushing amidst firm        7 .5 0                                                   7 .2 0
                                                                                                                                                             7 .2 0
                                                                                                                                                                                                 10 90

demand for mustard oil and mustard meal in the current season.          7 .0 0   6 .7 9                                                                                          6 .8 6 .8 0     10 70
                                                                                                                        6 .6 0                     6 .6 0
According to traders' estimate, carryover stocks at the end of          6 .5 0                                                            6 .5 0                                                 10 50
February are 1-1.5 lakh tn against 2.5-3 lakh tn last year.             6 .0 0                      5 .8 3 5 .8 3                                                                                10 30

Outlook                                                                 5 .5 0                                                                                                                   10 10

Harvesting of mustard seed is expected to commence in February.         5 .0 0                                                                                                                   990

Thus, till February we expect Mustard seed prices to remain firm        4 .5 0                                                                                                                   970
on higher demand for mustard oil and meal. However, following           4 .0 0                                                                                                                   950
a seasonality pattern mustard seed prices may decline in February                2 0 0 6 -0 7          2 0 0 7 -0 8     2 0 0 8 -0 9       2 0 0 9 -1 0       2 0 1 0 -1 1      2 0 1 1 -1 2 E

and March on account of peak arrival period. However, the                                       A re a (m n h a)                  P ro duc tio n (m n tn)                    Y ie ld (kg/ ha)

downside would be short lived as overall fundamentals point           Source: Ministry of Agriculture & Angel Research
towards an upward rally in mustard prices in the current season
with lower output and lower carryover stocks. Further shift in                             Mustard Seed Technical Levels
demand pattern from the overseas buyers from Soy meal to              CMP                                                                                       3430
mustard meal may provide further support to the prices. Thus, in      Support 1                                                                                 3000
the year 2012 we expect mustard prices to remain bullish and
                                                                      Support 2                                                                                 2800
may rise by 14-15% from the current levels.
                                                                      Resistance 1                                                                              3600
                                                                      Resistance 2                                                                              3800


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Saturday | December 24, 2011

Spices Complex

Spices trading have ever been luring investors since past few
years at the bourses due to profitable returns registered by them.
In the year 2010 sharp gains were witnessed in turmeric due to
price supportive fundamentals attached to it. This year Black
Pepper has been in the forefront posting gains of more than 50
percent due to global supply constraints. Further exports of the
spices have also improved from a mere 3.50 lakh tonnes in 2005-
06 to 5.25 lakh tonnes in 2010-11, a rise of 50 percent year on
year. Spices exports gained resulting from higher exports
countered in Chilli and Turmeric in last few years.

In order to get the overall growth of the spices sector year on        Source: Spices Board of India & Angel Research
year we will proceed further with individual performance of the
major spices particularly Black Pepper, Jeera, and Turmeric.

                                                                                              Table 24: Yearly Performance - Pepper
Black Pepper                                                                   Column1               Open        High          Low            MRV       % Chg

                                                                       NCDEX Pepper Spot            22192.8    36542.5        22030       36068.75    62.524558
Black Pepper remained in the limelight in most part of 2011 on
account of lower global availability amidst demand from overseas       NCDEX Pepper Futures          22932      39120         21906           34915   52.254492

buyers. Prices in the Spot and Futures rose by around 62.52            Source: Reuters and Angel Research     MRV denotes Most Recent Value

percent and 52.25 percent respectively year to date. New
historical highs of Rs.36,542.5/qtl and Rs. 39,120/qtl respectively
were made in the Spot and Futures tracking bullish fundamentals.
Rise in exports during April to October 2011 also helped prices to
gain.

Lower global supplies led prices to spurt

Lower production of Black Pepper in Vietnam the largest supplier
to the global market led prices to touch new highs during the
second half of the year. Production in Vietnam remained almost
steady at 1 lakh tonnes as compared to 95 thousand tonnes in
2009. Average annual production of Pepper in Vietnam in the last
few years stood around 1.20-1.30 lakh tonnes. Decline in the
output was largely accounted due to erratic weather condition
during the crop growth and harvesting period. The other major
supplier Indonesia also witnessed a decline in the output by
around 44 percent to around 33,000 tonnes in 2011 due to
unfavorable weather conditions. Performance of output in the           Source: Reuters & Angel Research
three major producing nations is shown in the adjacent figure.

Composite prices of pepper in the international market which
were quoting around $4,796/tonne in beginning of the year rose
by 30 percent to $6,245/tonne in the month of August 2011.
Composite prices of Pepper are the average prices of the all the
major origins particularly Vietnam, Indonesia, Brazil, India and
Malaysia. Prices are still at the higher levels owing to lower
availability with Indonesia, Vietnam and Brazil. Stockists there are
hoarding on the stocks to reap better profits and they have lower
carryover stocks till fresh arrivals commence in the month of
March (Vietnam), July (Indonesia) and September (Brazil). Thus,
globally the exports from six main exporting nations in the first
ten months fell by 4.7 percent to 2.04 lakh tonnes as compared to
2.14 lakh tonnes in the same period previous year.
                                                                       Source: Peppertrade board & Angel Research


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Black Pepper
According to International Pepper Community (IPC) exports
from the Vietnam, India and Brazil witnessed a rise while that of
Indonesia, Malaysia and Srilanka declined during January to
October 2011. Sharp decline in the exports were witnessed in
Indonesia. The significant fall in the output was witnessed owing
to wet weather condition during flowering and berry formation
stage. Excessive rains during the berry formation cause berries
to fall thus leading to decline in the output. During January to
November 2011 exports from Lampung the main source of Black
Pepper in Indonesia contributing more than 90 percent to the
supplies fell by more than 50 percent to 20,200 tonnes as
                                                                      Source: Peppertradeboard & Angel Research
compared to 43,600 tonnes in the same period last year.
Vietnam is projected to export 1.15 lakh tonnes in 2011 as
against 1.17 lakh tonnes in 2010. Comparative analysis of
exports in six major nations is shown in the adjacent chart.

Domestic Scenario

Pepper production in India since last few years are steadily
declining owing to unfavorable weather conditions and diseases
to the old pepper wines as the wines have grown old. Pepper
production in India which was highest in the early 20’s to 70-80
thousand tonnes have now cornered to around 45-50 thousand
tonnes currently (3-4 years). This has caused prices to remain at
elevated levels in the domestic market. Prices in the Spot
market which touched historical high of Rs.22,340/qtl in 2010
continued its upward rally surging by 55.7 percent to touch new
historic levels of Rs.36,542.50/qtl. Prices witnessed correction in
the month of March owing to fresh arrivals from Vietnam but           Source: Spice Board
lower stocks with other major producers led prices to bounce
back again. Reports of lower output in Indonesia also led prices      origins. In the second half prices are likely to witness further selling
to surge from September 2011.                                         with commencement of fresh arrivals in Indonesia. Prices will also
                                                                      track demand from U.S. which currently has reduced at higher levels.
Outlook                                                               Towards the end of the third quarter prices are likely to find support
Lower production in India coupled with limited stocks in the          on account of revival of domestic and overseas demand. In the last
international market is expected to keep Pepper prices firm in        quarter prices may be determined by the pepper output in India and
the beginning of the first quarter. Fresh arrivals in India will      stocks with major producers.
commence in the last week of December 2011 but farmers will
not be readily selling the produce owing to lower global                                    Pepper Technical Levels
availability. Towards the end of first quarter and most part of       CMP                                           35850
second quarter prices might witness selling pressure tracking         Support 1                                     32000
reports of improved global production for the year 2012. Global
                                                                      Support 2                                     26500
production of Pepper according to IPC is projected to rise to
                                                                      Resistance 1                                  40000
3.20 lakh tonnes as compared to 2.98 lakh tonnes in 2011. Rise
in the output in Vietnam and Indonesia has resulted in improved       Resistance 2                                  42500
world production. Once fresh arrivals commence from Vietnam
prices might witness selling. Price trend will also be determined
from prices quoted in the international market of various

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Turmeric                                                                               Table 25: Yearly Performance - Turmeric
                                                                              Column1               Open      High         Low        MRV       % Chg
Turmeric which was crowned as the major gainer in 2010
                                                                     NCDEX Turmeric Spot          16847.05 16847.05      5116.65     5354.75   -68.2155
collapsed in 2011 taking cues from good production in 2011 to
                                                                     NCDEX Turmeric Futures         10276    10826        3918        4624     -55.0019
69 lakh bags as compared to 48 lakh bags in 2010. Handsome
                                                                     Source: Reuters and Angel Research     MRV denotes Most Recent Value
profits earned by the farmers in the last year encouraged them
to cover more area under this spice in 2011. Thus, prices which
were quoting around 16,600 in the spot market in the beginning
of the year plunged to lows of Rs.5,300/qtl currently (December
19th December 2011). Price trend of the Turmeric is shown in
the chart beside. Spot prices and Futures fell by around 68.2
percent and 55 percent respectively year to date. From the
Chart it is can be seen that difference between Spot and Futures
which was seen in 2009 is still there. In 2011, difference
between Spot and Futures in the beginning of the year which
surged to 6546 has reduced to 1227 currently. Huge difference
in the beginning of year was noticed on account of lower stocks
till fresh arrivals and absence of trading contracts in the month
of January to March.
With commencement of fresh arrivals in the month of April
2011 prices fell to lows of Rs. 9,400/qtl. Sufficient stocks with
stockists led prices to remain bearish till date. Further, in the    Source: Reuters

month of October 2011 positive sowing reports of Turmeric and
thereby increased expectation of output led prices to remain
down. Prices continued their downward trend and fell to lows of
5,300 levels towards the fag end of the year. Production in 2011
is expected to touch new historical highs of 82 lakh bags a rise
of 18.8 percent year on year.

Production of Turmeric in Erode witnessed the highest surge of
around 29 percent to 45 lakh bags as compared to 35 lakh bags
in the last year. Farmers remained hooked to this spice this year
too owing to better profits earned in the last year (2010) and
increased exports. Exports from India during April to October
2011 stood at 50,000 tonnes a rise of 56 percent as compared
to previous year. Targets set by the Spices Board have already
been met till October 2011. Exports are expected to touch new
historical levels in 2011-12.

Outlook
Turmeric prices are expected to remain bearish in the first
quarter of 2012 owing to commencement of fresh arrivals and
sufficient carryover stocks of Turmeric with the stockists. In the
second quarter demand from the overseas buyers is expected to
be placed in good quantity which might also support prices to
strengthen.
Moreover if, prices fall towards the low of Rs.3,000 prices are
expected to bounce back as farmers will hoard turmeric stocks
and not sell at lower levels. Prices might bounce back from
those levels. Prices towards the end of second quarter are likely
to take cues from the Long Range Forecast released by the
Indian Metrological Department in the month of April.                                  Turmeric Technical Levels
After witnessing two years of bumper production farmers are          CMP                                              4610
likely to shift to other remunerative crops such as cotton. This     Support 1                                        3450
might reduce the output and might support prices towards the         Support 2                                        3000
mid of third quarter. In the last quarter prices might take cues     Resistance 1                                     7500
from the carryover stocks of Turmeric towards the end of the         Resistance 2                                     9500
season and crop estimates for the next year.
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                                                                                             Table 26: Yearly Performance -Jeera
Jeera                                                                      Column1                Open             High            Low              MRV             % Chg
Jeera prices began on a positive note in the beginning of the
                                                                     NCDEX jeera Spot             14498          16727.2         13915          14584.75        0.5983584
year owing to ongoing delayed sowing and there by consequent
delay in the harvesting of the spice. Prices touched a high of       NCDEX Jeera Futures          14471           17401          13127             14870        2.7572386
Rs.16,727/qtl in the domestic Unjha mandi in the month of            Source: Reuters and Angel Research           MRV denotes Most Recent Value

February 2011. Rains in the growing regions during the maturing
stage further supported prices in the above mentioned period.                                Fig 75: Jeera Spot vis a vis Futures
Earlier estimates of Jeera by the spot market participants were       17800             17401
registered at 25 lakh bags (each bag weighs 70-75 kgs.). Prices                                                                16757
after making a peak witnessed selling owing to decline in the         16800                     16674.00
exports and fresh arrivals in the domestic. Jeera fell by around
                                                                      15800
16 percent and posted a low of 13952/qtl in the month of June.
However, reports of lower output in Syria and Turkey, the other       14800
major producers of the spice led prices to make a U turn and
bounce from the lower levels. Rains during the harvesting led         13800
                                                                                                                             13952.80
crop to damage in Turkey this season. Prices therefore in the                                                                                       13139
                                                                      12800
domestic witnessed a surge of around 14.3 percent reversing
earlier losses to touch a high of Rs.15,899/qtl in the month of
July. If we monitor the price trend and the arrivals (Fig 76 )                                   Jeera Spot (Rs./Qtl)         Jeera Futures (Rs./qtl)
during that period average arrivals had declined to 7000-8000
bags daily. This also led prices to strengthen.
                                                                                       Fig 76: Jeera arrivals and price performance
                                                                       45000                                                                                          17500
Prices after July 2011 saw a fall towards 14200 levels on account                                     Peak arrivals- Avg
                                                                       40000                                                                                          17000
of lower offtakes from the local stockists. The other reason                                          /day - 26,000 bags
                                                                       35000                                                             Arrivals narrowed to
attributed for such dip in the prices was reckoned on account of                                                                         less than 3,000 bags
                                                                                                                                                                      16500
                                                                       30000
revision in the output of jeera to around 29 lakh bags same as                                                                    15899                               16000
                                                                       25000
that of the last year. Considering the steady arrivals of 6-7                                                                                                         15500
                                                                       20000
thousand bags daily the output was revised by the Spot market                                                                                                         15000
                                                                       15000                                                                                14240
participants. Subsequently tracing the Spot prices, Futures            10000                                                                                          14500
mirrored the fall registering a decline of around 21 percent to         5000                                                                                          14000
touch a low of Rs. 13,139/qtl in the month of November.                                                             13915
                                                                           0                                                                                          13500
However, if we examine the exports of jeera month on month
exports during September 2011 surged to highs of 6,500 tonnes
                                                                                                   Jeera arrivals (bags)         Spot Prices (Rs./qtl)
highest in the last three years. Exports surged owing to lower
price quotes in the international market and sufficient stocks of
jeera in the domestic. This led prices to improve towards the
                                                                     Source: Reuters and Agriwatch
end of Dec 2011 and settled 0.59% and 2.75 % higher y-y.
                                                                     This is likely to keep domestic prices undertone in the beginning of
Outlook                                                              third quarter. Prices are expected to bounce back from September
Jeera prices in the first quarter are expected to remain             2012 on account of demand from the domestic. Prices in the last
supportive tracking firm overseas orders amidst reports of un        quarter are likely to track sowing progress. Sowing next season is
favourable weather during sowing of the seeds. Warm weather          expected to improve anticipating better exports in 2011-12 season.
in Saurastra and Gujarat have caused germination to halt for the
sown seeds. Thus, in some areas farmers have re- sown the
seeds which will cause harvesting to be delayed in the month of
                                                                                              Jeera Technical Levels
March. Price trend will also be determined by the weather            CMP                                                                14600
prevailing in the month of January and February. Frost might         Support 1                                                          12300
damage jeera plantation in the chief growing belts.                  Support 2                                                          11000
However, till date area covered under jeera is promising with
production estimates to cross 32 lakh bags. If weather remains       Resistance 1                                                       14520
conducive the earlier set estimates are likely to be achieved.       Resistance 2                                                       19500
This may pressurize prices towards mid of March. In the
beginning of the second quarter prices are likely to remain
under pressure on account of increased fresh arrivals. Prices will
also take cues from the crop sowing in Syria and Turkey. With
lower crop this season and prices there quoting largely at higher
levels might induce farmers to sow more of this spice.

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Sugar                                                                                            Table 27: Yearly Performance - Sugar
After two consecutive years of Sugar deficit in 2008-09 and 2009-                                        Open                High                Low                MRV             % Chg
10, both International and Indian Sugar markets have witnessed a       NCDEX Sugar Spot                  3190               3350                2800               3176.65          (0.4)
Sugar surplus in the year 2010-11 and the same is expected to          NCDEX Sugar Futures               2976               3065                2421                2882            (3.2)
continue in the year 2011-12.
                                                                       LIFFE Sugar                       788.5              890.1               571.9               611.2           (22.5)

                                                                       Source: Reuters and Angel Research                  MRV denotes Most Recent Value
In the Indian markets, Sugar prices declined drastically during the
first half of the year owing to record high supplies of around 29.5
million tonnes which includes carryover stocks of 5.1 million                            Fig 78: Daily NCDEX and Liffe Sugar futures Price Chart
                                                                        NCDEX
tonnes and Sugar output of 24.4 million tonnes in 2010-11.                                                                                                                           Liffe
                                                                         3,100                                                                                                         880
Further better crop prospects for 2011-12 season on account of
higher acreage also underpinned the sentiments. The first tranche        3,000                                                                                                         830
of exports of 5 lakh tonnes notified in April failed to provide any      2,900
support to the prices which touched its low of Rs 2421 per qtl in                                                                                                                      780

June 2011.                                                               2,800
                                                                                                                                                                                       730
                                                                         2,700
However, since July 2011, Sugar prices started rising gradually                                                                                                                        680
                                                                         2,600
after the Indian government allowed 5 lakh tonnes more exports,
over and above the existing 5 lakh tonnes for 2010-11 season. In         2,500
                                                                                                                                                                                       630

addition to this, demand for the sweetener also started picking up
                                                                         2,400                                                                                                         580
since the beginning of August with series of festival in the Indian
markets. Delay in crushing in Maharashtra and UP on account of
cane price disputes among farmers and millers and permission to                                            NCDEX Sugar (Rs /qtl)              Liffe Sugar ($/tn)

exports 10 lakh tonnes of Sugar under Open General License
                                                                       Source: Reuters
(OGL) fueled the prices further.

However, the last month of the year finally ended on a negative         NCDEX
                                                                                    Fig 79: Monthly Average Price of NCDEX and Liffe Sugar
                                                                                                                                                                                    Liffe
note, as crushing started in full swing across India. Despite of        3000                                                                                                  2,947         850
export notification, prices remained under downside pressure                                                                                                          2,912
                                                                        2900
due to sharp decline in the international Sugar prices which is                  2,806
                                                                                                                                                                                            800

making Sugar exports less profitable. Further, higher monthly sale      2800             2,747
                                                                                                 2,760
                                                                                                                                   2,746             2,747 2,745
                                                                                                                                                                                            750
quota coupled with subdued demand from bulk manufacturers               2700
                                                                                                                 2,692                       2,682
                                                                                                         2,644
led to huge selling pressure in the domestic. Year to date Sugar                                                                                                                            700
                                                                        2600
futures declined to 3.2 percent in the Indian market, while Spot                                                          2,549
                                                                                                                                                                                            650
Kolhapur declined 0.4 percent.                                          2500

                                                                        2400                                                                                                                600
An increase in global Sugar output by % and a decline in global
Sugar consumption by % led to a significant fall in the                 2300                                                                                                                550

International Liffe Sugar prices which plunged more than 33%
year to date in 2011. During the period May to July 2011, Sugar                                                  NCDEX Sugar Futures            LIFFE Sugar
prices had shown some signs of recovery on account of a drastic
decline in Sugar output in the largest Sugar producing country,
Brazil. Further, supply concerns on the back of Port congestion in                   Table 28: Indian Sugar Balance Sheet (Figs in mmt)
Brazil and Thailand, the two largest Sugar exporting countries also                                        2009-10            2010-11            2011-12            % Change (2010-
supported the prices to recover. However, the upside was short         Column1                                                                                      11 & 2011-12)
lived as lower Brazilian output was overshadowed by higher 2011-       Opening Stocks                              3.7                 5.1               5                    -1.96
                                                                       Production                                 18.9              24.4               26.5                   8.61
12 Sugar output estimates from Thailand and India.
                                                                       Imports                                    4.76                  -                 -                     -
                                                                       Total Availability                        27.36              29.5               31.5                   6.78
After touching its yearly high of $ 876 per tonne in the month of      Domestic Consumption                        22               22.5              23.15                   2.89
July, sugar prices declined sharply to touch its yearly low of $ 599   Exports                                    0.21                 2                 2                    0.00
per tonne. Higher supplies from Thailand, the second largest           Total Consumption                         22.21              24.5              25.15                   2.65
exporter and India, the second largest producer has underpinned        Closing Stocks                             5.15                 5               6.35                   27.00
the sentiments.                                                        Stock to use ratio                        23.41             22.22              27.43                   23.43
                                                                       Source: Government of India and Angel Research




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 Saturday | December 24, 2011


Sugar                                                                                       Fig 80: In d ian Su g ar P ro d u ction C o nsu m p tio n Gap
Indian Sugar – Demand Supply Scenario                                      30                                                                                                                                10
                                                                                                                                            7 .5 2
                                                                                                                                                                                                             8
Sugar production follows a cyclical pattern wherein two to three           25                                                                        4 .3 5
                                                                                                                                                                                                             6
years of lower production is followed by 2-3 years of higher                                                                                                                                     3 .3 0      4
                                                                           20      1 .7 2    1 .7 4                                                                                 1 .9 0
production. During the year 2008-09 and 2009-10, farmer’s                                                                                                                                                    2
fetched good returns on account of lower Sugarcane output                  15                                                                                                                                0
                                                                                                                                -0 .3 4
which prompted them to bring more area under Sugar cultivation                                                                                                                                               -2
                                                                           10
                                                                                                                                                                                                             -4
in 2010-11. Thus, after two consecutive years of lower production                                      -3 .7 6
                                                                                                                                                                          -3 .0 9
                                                                                                                                                                                                             -6
India produced 24.5 million tonnes Sugar in 2010-11 season                  5                                    -5 .8 1
                                                                                                                                                                                                             -8
against the Consumption demand of 22.5 million tonnes.                      0
                                                                                                                                                              -7 .9 7
                                                                                                                                                                                                             -1 0


Assuming consumption to grow with a CAGR of 2.63percent and
production to rise by 7-8percent, India is heading towards a                          Su rplus/ d e ficit (m m t)                         Produ ct io n (m m t)                 Con sum p tio n (m m t)
second consecutive year of surplus production in 2011-12 season.
Domestic sugar production in 2011-12 is expected to be around
                                                                        Source: Ministry of Agriculture
26-26.5 million tonnes while consumption is estimated at 23.2
million tonnes. Thus, with the carryover stocks of around 5 million
tonnes, total supplies for 2011-12 is estimated at around 31                                          Fig 81: G lo b al su g ar Balan ce 2000-01 to 2011-12
million tonnes. Taking into consideration the surplus situation             1 80                                                                                                                      20

Indian government has allowed 10 lakh tonnes exports as of now              1 70
                                                                                                                                                14                                                    15
and is expected to consider more exports after reviewing the                1 60                       10
                                                                                                                                                       12

output in January- February.                                                1 50
                                                                                                                                                                                                      10


                                                                            1 40                                 4                                                                  4        3        5
                                                                                                                                      3
Global Sugar Demand Supply Scenario                                                   1       0
                                                                            1 30
                                                                                                                                                                                                      0
Global Sugar output in 2011-12 is estimated to rise by 3.66                 1 20                                                                                           -1
                                                                                                                           -2
percent to 168 million tonnes compared to 161 million tonnes.               1 10
                                                                                                                                                                                                      -5

Rise in sugar production in most of the major sugar -producing              1 00                                                                                  -9                                  -1 0

countries, i.e India, Thailand and Australia is expected to
compensate the downward revisions in Brazilian Sugar output.                         Surp lu s/ De f icit (m illion tonne s)                          Su gar Pro duc tion (m illion tonn es)
                                                                                     Sugar Con sum ption (m illion tonne s)
Consumption on the other hand is expected to rise by around 2
percent to 165 million tonnes, thereby leading to higher closing
stocks by around 10 percent.                                            Source: USDA

Outlook
                                                                        Global Sugar prices had already discounted the fact of higher
Comfortable supplies in the current season are expected to keep         global sugar surplus by declining more than 33%. In the first
inj the range of Rs 2700- 3200 per qtl level in the first half of the   quarter of 2012, we expect global Sugar prices to remain under
2012. Despite higher supplies no major downside is expected as          pressure as exports from the European Union, Central America,
support price of cane this season has increased by more than            India and Thailand increase. However, second quarter onwards,
17%. Thus, if Sugar prices decline sharply, mills will stop crushing
                                                                        prices would take cues from the Brazilian Sugar output
cane as it will affect their realizations. Thus to protect millers
interest, government will have to undertake certain measures on         estimates for 2012-12 season, harvesting of which would start
of them could be allowing further Sugar exports. Sugar decontrol        by April. Brazilian output is currently not expected to increase
is also on cards wherein sugar prices will be determined by             due to the low rate of cane replanting and potential dry
market forces with government giving up its control over the            weather. Thus prices may start recovering from second quarter
sector.                                                                 onwards.
Even if government allows further exports over and above the            Overall for the year 2012, we expect Domestic Sugar prices to
existing 10 lakh tonnes, the actual realisation from the exports
                                                                        gain by Rs 15-16% from the current levels.
would depend on Global Sugar prices. During the second half of
2012, prices would take cues from the Sugarcane planting figures
and output estimates for 2012-13 season. Following the cyclical                                         Sugar Techn ical Levels
pattern of production, year 2012-13 output may be lower after           CM P                                                                                           2870
two consecutive year of higher production. Thus, prices may             Support 1                                                                                      27 0 0
remain firm in the second half of 2012.                                 Support 2                                                                                      26 0 0
                                                                        Re sistance 1                                                                                  30 8 0
                                                                        Re sistance 2                                                                                  33 5 0


                                                                                                                                          www.angelcommodities.com
 Annual Review and Outlook
 Saturday | December 24, 2011


Kapas/ Cotton                                                                                              Fig 29: Yearly Performance Cotton
Cotton, the white gold as commonly known has witnessed a very                                                  Open                   High                Low                   Close                % Chg
volatile year with prices testing a multi decade high in both the       Column1
international and in the Indian markets. Cotton prices in the           NCDEX Kapas Futures                    749.5                  1262               630.1                  768.5                  2.5
domestic market surged by more than 55% during the period               IC E C OT T ON                         144.97                 227                 84.4                  87.2                 (39.8)
October 2010- March 2011 mainly on robust buying by the                 Source: Reuters and Angel Research
exporters to fulfill their export commitments amidst global supply
tightness. But if we compare the price gains with the international
prices, we could clearly notice that the global cotton prices have                               Fig 82: Daily Kapas and ICE CottonPrice Chart
                                                                           NCDEX Kapas                                                                                                            ICE Cotton
more than doubled during the same period. Indian cotton price                                                                                                                                                250
gains were comparatively lower as the supplies were sufficient to         1,200
cater the domestic as well as exports demand in the year 2010-11
                                                                                                                                                                                                             200
(Oct-Sep).                                                                1,100


                                                                          1,000                                                                                                                              150
NCDEX Kapas futures surged from Rs. 713 per 20 kgs during the
start of the season October to Rs 1214 per qtl in March 2011,               900
increase of 70%.                                                                                                                                                                                             100
                                                                            800
On the international front, the opening price of Cotlook A index, a                                                                                                                                          50
                                                                            700
measure for international prices, for cotton season 2010 on 2nd
August 2010 was 86.30 US C/lb. The Cotlook A index had reached              600                                                                                                                              0
at all‐time record level of 243.65 US C/lb on 8th March 2011,
which was around 182% higher than the opening price of 86.30
US Cents/lb. ICE Cotton futures surged to a highest in 140 years
                                                                                                     NCDEX Kapas (Rs /20 kgs)                       ICE Cotton Futures (cents /pound)
from 99 cents per pound in October 2010 to 215 cents per pound
in March 2011, an increase of 117% due to global supply                 Source: Reuters and Angel Research
tightness. The reason for global supply tightness can be
attributed to the following factors:
                                                                                                      Fig 83: Monthly Average Price of Kapas
                                                                        1200                                               1,176
Global cotton consumption was estimated higher at 25.38 million
                                                                                                                   1,101                                      Prices at multi year high due to
tonnes (116.6 million bales) against production estimated at            1100                                                        1,079
                                                                                                                                                              lower end stocks and stock to
25.02 million tonnes (114.95 million bales). Also, year 2010-11                                                                                               use ratio
was the 5th consecutive year when world cotton demand                   1000

outpaced its supply. World ending stocks of cotton declined to its       900
15 year low and stood at 9.2 million tonnes compared to an                                                                                    810
                                                                                                           791
average 11.72 million tonnes. (Average of last 5 years) The world        800
                                                                                                                                                                                 743
                                                                                 728       734                                                       724                                   737    725
                                                                                                     721
stocks/use ratio of less than 37% this year is the lowest since                                                                                                          715                                 719
                                                                         700                                                                                   669
1993-1994. Demand from China has increased drastically in the
current season due to drop in Chinese cotton output by 7%.               600
Cotton production in Australia, the world's fourth-largest
exporters declined significantly as the worst floods in 50 years
decimated its cotton crop.                                              Source: Reuters and Angel Research
                                                                                         F ig 8 4 : G lo b a l S t o ck t o u se R at io v is -a -v is Y e a r ly A ve r ag e
After touching its peak in March 2011, Cotton prices in the             Sto c k t o U se
                                                                                                                           C o t t o n p r ice                       IC E C o t t o n P r
                                                                            R at io                                                                                                                          160
international as well as in the Indian markets have fallen                60
drastically and has touched its low made during the start of the                                                                                                                                             140
                                                                          50
season in October. International prices declined mainly on                                                                                                                                                   120
                                                                          40
concerns that China's action to curb inflation will slow its                                                                       S t ao c k t o u se r at i o at m u lt i
                                                                                                                                                 y e ar s l o w
                                                                                                                                                                                                             100
economy and cotton demand. Also, USDA's Jun 30 hike in its US             30
                                                                                                                                                                                                             80
cotton acreage estimate for this year to a 5-yr high of 13.725 mln        20                                                                                                                                 60
acres from a March estimate of 12.565 mln acres raised the hopes          10                                                                                                                                 40
of output. Taking the cues from the international markets, Indian
                                                                            0                                                                                                                                20
cotton prices also fell despite of approval for additional exports of               1
                                                                                    9
                                                                                    -
                                                                                           2
                                                                                           9
                                                                                           -
                                                                                                 3
                                                                                                 9
                                                                                                 -
                                                                                                      4
                                                                                                      9
                                                                                                      -
                                                                                                           5
                                                                                                           9
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                                                                                                               6
                                                                                                               9
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                                                                                                                    7
                                                                                                                    9
                                                                                                                    -
                                                                                                                           8
                                                                                                                           9
                                                                                                                           -
                                                                                                                               9
                                                                                                                               9
                                                                                                                               -
                                                                                                                                      0
                                                                                                                                      0
                                                                                                                                      -
                                                                                                                                          1
                                                                                                                                          0
                                                                                                                                          -
                                                                                                                                               2
                                                                                                                                               0
                                                                                                                                               -
                                                                                                                                                    3
                                                                                                                                                    0
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                                                                                                                                                          0
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                                                                                                                                                                5
                                                                                                                                                                0
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                                                                                                                                                                     0
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                                                                                                                                                                           7
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                                                                                                                                                                                0
                                                                                                                                                                                -
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                                                                                                                                                                                       0
                                                                                                                                                                                       -
                                                                                                                                                                                            0
                                                                                                                                                                                            1
                                                                                                                                                                                            -
                                                                                                                                                                                                 1
                                                                                                                                                                                                 1
                                                                                                                                                                                                 -
                                                                                                                                                                                                       2
                                                                                                                                                                                                       1
                                                                                                                                                                                                       -
                                                                                    0      1     2    3    4   5    6      7   8      9   0    1    2     3     4    5     6    7      8    9    0     1
10 lakh bales.                                                                      9
                                                                                    9
                                                                                           9
                                                                                           9
                                                                                                 9
                                                                                                 9
                                                                                                      9
                                                                                                      9
                                                                                                           9
                                                                                                           9
                                                                                                               9
                                                                                                               9
                                                                                                                    9
                                                                                                                    9
                                                                                                                           9
                                                                                                                           9
                                                                                                                               9
                                                                                                                               9
                                                                                                                                      9
                                                                                                                                      9
                                                                                                                                          0
                                                                                                                                          0
                                                                                                                                               0
                                                                                                                                               0
                                                                                                                                                    0
                                                                                                                                                    0
                                                                                                                                                          0
                                                                                                                                                          0
                                                                                                                                                                0
                                                                                                                                                                0
                                                                                                                                                                     0
                                                                                                                                                                     0
                                                                                                                                                                           0
                                                                                                                                                                           0
                                                                                                                                                                                0
                                                                                                                                                                                0
                                                                                                                                                                                       0
                                                                                                                                                                                       0
                                                                                                                                                                                            0
                                                                                                                                                                                            0
                                                                                                                                                                                                 1
                                                                                                                                                                                                 0
                                                                                                                                                                                                       1
                                                                                                                                                                                                       0
                                                                                    1      1     1    1    1   1    1      1   1      1   2    2    2     2     2    2     2    2      2    2    2     2
                                                                                           S t o ck t o U s e R a t io in % (LH S )                     I C E C o t t o n in c en t s / p o u n d (R H S )

                                                                        Source: USDA and Angel Research




                                                                                                                                      www.angelcommodities.com
Annual Review and Outlook
Saturday | December 24, 2011


Kapas/ Cotton                                                                                        Table 30: Co tton Balance sheet
                                                                         Colum n1                                   2 01 1-12 (P)                     2 0 10 -1 2          % Chg
Cotton year 2011-12 commenced in October 2011, however, the              O peni ng s tock                                 4 7.5                           4 0.5                   17 .3
pace of arrival has been slow as compared to last year due to            Producti on                                      3 56                            32 5                    9 .5
delay in sowing in Gujarat, agitations by the cotton farmers for         I mports                                           5                               5                     0 .0
increasing MSPs in Maharashtra and hoarding of Kapas by the              Tota l Suppl y                                  4 08 .5                         37 0 .5                  10 .3
cotton farmers in anticipation of better prices. As on 18th              Cons umpti on                                    2 50                            25 3                    (1.2)
December 2011, the progressive arrivals are 73.63 lakh bales as          Exports                                           80                              70                     14 .3
against 100.35 lakh bales in previous year. (1 bale= 170 kgs)            Tota l Dema nd                                   3 30                            32 3                    2 .2
                                                                         End Stocks                                       7 8.5                           4 7.5                   65 .3
Although Cotton sowing for 2011-12 season was delayed due to             Source : CCI         P - P rovis iona l   Figs in La kh ba les of 1 70 kgs
delay in monsoon over key growing states of Gujarat and                                          Tab le 31: W orld Cotton Balance Sheet
Maharashtra, area under cotton increased substantially by 8.45%          Colum n1                         20 07-08        2008-09             2 009-10          2010 -11       2011-12*
and stood around 121.9 lakh hectares(ha) in 2011-12 season               W orld Beginning stock 12 .7                     12.2                1 1.9             8.5            9.0
                                                                         W orld Production                26 .1           23.5                2 2.0             25.0           26.9
against 111.4 lakh ha last year owing to shift in acreage as a
                                                                         W orld Consum ption              26 .5           23.7                2 5.2             24.5           24.4
result of higher returns earned last year. As per CAB dated 15th         W orld Exports                   8.4             6.6                 7 .8              7.6            7.7
November 2011, the cotton production in the country for cotton           W orld Ending stocks             12 .2           11.9                8 .5              9.0            11.4
season 2011‐12 has been estimated at 356.00 lakh bales against           Stock to use ratio               46 .0           50.2                3 3.7             36.8           45.3
325 lakh bales last year. Consumption is however estimated lower         Source : CCI
in the current season Thus taking into account the opening stocks                         Fig 85: C otton Season ality Pattern (S-6 variety in
of over 47 lakh bales, total supplies of Cotton are sufficient to                                           Rs p er Candy)
                                                                         23,500
meet the domestic and export demand of 330 lakh bales.                                                                                                                                    58000
                                                                         23,000                                                                             A vg of last 10 years

On the Global front, after a gap of almost 6 years, cotton               22,500
                                                                                                                                                                                          53000
production is once again expected to touch its record level output       22,000
in 2011-12 season that began in August 2011. Production is               21,500                                                                                                           48000
expected to rise by more than 8% to 27 million tonnes on account         21,000
of higher output in India, Australia, Brazil and Pakistan. This is       20,500
                                                                                                                                                                                          43000

going to offset the loss in output in China.                             20,000
                                                                                                                                                                                          38000
                                                                         19,500
However, consumption is expected to remain stable around 24.9
                                                                         19,000                                                                                                           33000
million tonnes as global concern continues to keep demand on                            Oct    Nov    Dec    Jan     Feb M ar          A pr    M ay Ju n          Ju l   Au g Sep t
the lower side reflecting current sluggish demand and weaker
                                                                                                            A vg pric e of last 10 years                    2010-11
forecasts for world economic growth. With larger production and
lower consumption, ending stocks are expected to increase by             Source: USDA and Angel Research
22% to 11.3 million tonnes. Stock to use ratio has increased                                  Fig 86: Glo bal S to ck-To-Use Ratio vis-a-vis C otlook
significantly to 45% compared with 36% in 2010-11.                               65                                    Index A                      1 65
                                                                                 60
Outlook                                                                      )
                                                                                                                                                                                      1 45
                                                                             %
                                                                             (   55
                                                                             o
                                                                             i                                                                                                        1 25    s
                                                                             t                                                                                                                e
                                                                                                                                                                                              c
                                                                             a   50                                                                                                           i
The demand supply scenario in the domestic market point                      R
                                                                             e
                                                                                                                                                                                              r
                                                                                                                                                                                              P
                                                                             s                                                                                                        1 05    n
towards a stable year for Cotton with sufficient supplies to meet            U
                                                                             o
                                                                             T
                                                                                 45                                                                    Cotlo ok In dex A
                                                                                                                                                       ave rage o f last 5 year
                                                                                                                                                                                              o
                                                                                                                                                                                              t
                                                                                                                                                                                              t
                                                                                                                                                                                              o
                                                                             k                                                                                                                C
the domestic as well as export demand. Arrivals are expected to              c
                                                                             o
                                                                             t   40
                                                                                                                                                       is 85 .8                       85
                                                                             S
pick up by the end of December and thus prices might remain                                                                                                                           65
                                                                                 35
stable at current levels or may even decline slightly in January.
                                                                                 30                                                                                                   45
However, following a seasonal pattern, we expect Cotton prices
to start recovering February onwards with declining arrival
pressure. In addition to this export demand would support prices                                                S tock-to-U se ratio                 Cott on Pr ices
to remain firm in the coming year.
                                                                         Source: USDA and Angel Research

Although global prices may not witness substantial gains like last                                   Cotton Complex Technical Levels
year due to sufficient supplies in the global markets too, however,      Column1                                     NCDEX Kapas                                   MCX Cotton
downside risk is very less from the current levels is likely as prices   CMP                                            750                                          16440
are near its 5 years average levels.                                     Support 1                                            640                                        15500
                                                                         Support 2                                            550                                        15000
                                                                         Resistance 1                                         900                                        19550
                                                                         Resistance 2                                        1050                                        20500



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