Commodity Prices Rise on Low Global Crop Estimates.

The prices of agricultural commodities that are an important part of India's exports and imports have been rising for some months after estimates of lower output and dwindling stocks worldwide.

While cotton prices have surged on export demand, followed by heavy speculation, sugar is rising on improved scope for exports. India depends on imports for edible oil and hence prices of palm and soy oil have been rising due to global cues.

In the past month, sugar has surged 5.8 per cent on hope the government will allow exports to take advantage of spiralling prices abroad. On the London exchange, sugar is trading at a 30-year high, above $800 a tonne, up nearly 40 per cent in the last one month.

Cotton, at $1.52 per pound, is at a 140-year high. Despite record crop estimates, prices have zoomed 22.3 per cent in the past month and 52.7 per cent in the past three months.

Globally, in just one month, prices went up 56 per cent. Yesterday, the US department of agriculture (USDA) lowered estimates of China's cotton supply, indicating China would import more. India has already approved over five million bales for export. Even after that, prices in the local market are rising, as there is heavy speculation. An Ahmedabad-based risk management firm's director said textile mills' demand was yet to be met and speculators were keeping prices high. India is expecting an output of 350 million bales this year.

Soybean oil and palm oil prices in India have risen 16-18 per cent in the past month on surging global prices and are slated to go up further. Reason: Lower output and rising Chinese imports. Dorab Mistry, director of Godrej International, estimated the world production of palm oil in calendar year 2010 would expand very little, by about 300,000 tonnes. Production growth would be negative in Malaysia and mildly positive in Indonesia, he said.

Malaysian crude palm oil production is estimated at 17.2 million tonnes for 2010, slightly less than in 2009 but very insufficient to meet the demand..

Food markets also look tight. China will probably buy about a third of the US soybean crop and the USDA said on Tuesday inventories of corn and soybeans would fall sharply ahead of the 2011 harvest. India also exports maize. However, due to a pick-up in arrivals of kharif maize, prices have started falling. In the past month, while global crop prices have moved up 23.7 per cent, in India, the arrivals have pushed down prices by 17.5 per cent.

Source : sify.com