COMMODITIES: Good year ahead

Low inventories, decreasing acreage, high fuel prices to keep commodities firm in 2008

The prices of agri commodities are expected to remain firm in 2008 on the back of low global inventories, decrease in acreage and shift in use of biofuels due to high oil prices.

According to a report by Kotak Commodity, most agricultural commodities will move up during 2008.

The report states that factors such as production problems in Canada and Australia (two nations from where India imports pulses and wheat) and the potential for restocking in India and China could firm up the prices.

With India's wheat production estimated at 74 million tonnes in 2007-08 against the demand of 76 million tonnes, the country will be dependent on imports.

"Domestic wheat prices will continue to take cues from international markets (which has a tight demand-supply situation) and the outlook remains positive for prices," the report adds.

On the maize front, the market is expected to be positive. Though the expected global corn production (including India) is 1.1 million tonnes higher, bigger demand from the alternative fuels sector, at a time when crude oil is ruling high, could fuel the maize market.

Despite the higher kharif oilseed output, the lower rabi oilseed acreage could lead to lesser rabi production. According to government data, oilseed acreage as on December 14, 2007, stood at 7.7 million hectares, down 11 per cent compared with last year.

Moreover, with global oilseed stocks for 2007-08 reduced by 1.8 million tonnes, commodity analysts have put a positive price outlook for the coming year.

The spices segment in the domestic market is also expected to remain firm owing to lower production coupled with delays in arrivals. The report estimated the pepper crop output to be 48,000-50,000 tonnes, which is more or less the same as last year.

However, due to incessant rains in the main growing areas in October, arrivals could get delayed which in turn would support prices.

Turmeric, which is set to see a decline of 10-15 per cent on the back of lower than expected realisation during 2006-07, is expected to trade firm till the new crop. The report puts the production figure for 2007-08 at 4-4.2 million bags (each of 75 kg against last year's 5.2 million bags.

Similarly, cardamom output is estimated to be 25 per cent less at 9,000 tonnes leading to a tight demand-supply situation, making the price outlook positive, said the report.

However, sugar remains insulated from the uptrend in agri commodities. But, according to the report, recovery loss could bring sugar production down from the estimated 30 million tonnes to 28 million tonnes.

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YEAR OF THE BULL

Wheat prices to follow firm global cues

Higher demand of maize may keep prices firm

Poor show in rabi season may push oilseed prices up

Turmeric market seen up till arrival starts

Arrival delays in pepper could stoke bullish sentiments

Sugar remains an exception to the trend