Risk-off sentiment continued in the commodities market, whether bullion, base metals, energy or agri commodities.

US Central bank continued with mega-size rate hikes and gave the message they would do everything to bring the inflation down to within their comfort zone of 2 per cent, even if it leads to a path of a painful recession.

The US economy is in a recession as negative growth for two consecutive quarters itself fulfils the condition of a recession whether one declares it or not.

The US dollar will have rosier weeks on Fed hikes and any marginal increase in the greenback will rattle the market more aggressively. Therefore, one need not catch the falling knife.

Gold

Gold prices have tumbled from Rs 52,620 per 10 grams to trade near Rs 49,500 in a month’s time on hawkish US

policy Stance, soaring US bond yields, and a strong US dollar index.
The dollar index, which is at a 21-year high of 111.58, is likely to stay firm and test 114/115 levels in the coming weeks, which will continue to dampen the sentiment for the yellow metal. Gold prices will come down to Rs 48,000 and Rs 46,500 in the weeks to come and any rally in them will not sustain as long as the world’s central banks continue to sound more hawkish.

Cotton
Cotton prices have fallen more than 17 per cent this week, making a QTD loss of 30 per cent to trade around Rs 35,616 per bale (1 bale= 170 kgs) in key mandis while prices on the commodity exchange have lost 5.40 per cent to trade at a 9-month low of Rs 31,770 per bale on expectations of higher cotton production for the crop year 2022-23.

India’s Cotton production for 2022-23 is estimated higher by 8.5 per cent YoY at 34.2 million bales (of 170 kg each) against 31.5 million bales in 2021-22, as per our own estimate, exerting a steep pressure on the prices.

The arrival of a new crop has already started hitting the mandis, which will be in full swing from October onwards. Prices are likely to remain bearish and can drop to Rs 30,000 initially, and later to Rs 25,000 per bale.

Gram (Chana)
Chana prices in the Delhi market are trading firm in the price band of Rs 4,800–Rs 4,875 per quintal since September 1. Demand for chana remains steady from the dal millers ahead of the festive season, however, NAFED liquidating chana stocks capped the upward movement of prices.

Meanwhile, it is very unlikely that prices would fall below the prevailing level as they have sustained above the support point for a long time, despite NAFED offloading chana at cheaper rates.

Chana Delhi prices would trade firm in the price band of Rs 4,800-Rs 4,900 per quintal in the short term. Prices would gain momentum only if they breach the Rs 4,952 level and trade towards the Rs 5,200-5,300 level.

Maize
Prices in the Chhindwara market have softened by 5 per cent from September 1, trading at Rs 2,400 per quintal. The demand from the poultry feed industry remains hand-to-mouth which has weighed on the prices.

Meanwhile, traders and feed makers are looking ahead to new crop harvest as prices would correct in the coming days. The crop reports across key producing states are in a good condition which is hinting at an increase in maize production this year.

As per our own estimate, maize production for 2022-23 is estimated to be higher by 1 per cent YoY at 21.95 MMT against 21.77 MMT in 2021-22. Also, the impact of the export ban on broken rice would increase the availability in the domestic market and cap the domestic broken rice prices, thus mounting pressure on maize prices.

Maize Chhindwara prices would trade bearish and may correct to Rs 2,300 per quintal in the short term. Thereafter, prices may drop by another Rs 300-400 as the new crop arrival increases in the market.

(The author is AGM- Research, Origo e-Mandi)