Commodity prices stable this week; Commodities in the world in 2007

Commodity prices stable this week

It has been a quite week on the commodity front, with prices of all major commodities staying stable this week.

The average maize prices this week have been stable at Rs.6900 – 7000 per MT levels at the market yard, though the prices are higher over last year by 12 – 13%.

Pearl Millet (Bajra) prices also stayed at similar levels as they were in the last week (Rs.7000 – 7100 per MT), but the prices are certainly higher than last year by 11.5%. The prices are higher than maize by 2.3%, which is very notional and this helping some small substitution in the layer rations.

Sorghum (Jowar) prices have also remained at levels similar to last week Rs.8800 – 9000 per MT range, but the prices are higher substantially over last year by 17%. As against maize the prices are higher by 27%.

Barley prices in the market yard moved downs ward by about 7.2%. Current prices at the market yard was Rs.7400 – 7600 per MT at the market yard. Some analysts believe that this is a temporary correction and the prices are likely to go up again in the near future. Over last year the prices are lower by 18.5%.

Reports indicate that on the week ending Dec 30, the rate of inflation was 5.58%, which is the highest recorded in these times, though as per RBI this is not alarming. As per the reports the Chicken prices were up by 9% in this week.

Though the commodity prices have been stable the broiler prices have been rising, due to increased demand in all the major markets. Prices in some of the major markets Delhi Rs.45- 47 per kg (live), Hyderabad Rs.42 per kg live, Bombay 40 per kg live, which is good for the farmers, who will be able to cover some of the losses.

The prices of maize in US at CBOT from last weeks, close at $144.95 per MT to %156 per MT this week, a gain of 7.6% over last week. For May 07 delivery, prices of Maize at CBOT was $160.36 per MT.

Commodities in the world in 2007

Despite a bumper maize crop in China, the prices are rising, which will contribute to a rise of 2.5 percent in the country's consumer price index (CPI) in 2007. This is a steep increase on the 1.4 percent predicted for 2006. Reports available indicate that the average grain prices will grow six percent in 2007, outpacing last year's rise and becoming the major contributor to price hikes in 2007.

In order to contain the price rise, China has released 4.3 MMT of grain rom its reserves. The amount is similar to the grain that has been contracted for exports from China. It is also indicated that the prices will not fall until new crops are harvested in the first half of 2007. Other inflationary pressures is the rise in prices of for farming materials -- including fertilizers, pesticides and diesel oil, which are expected to drive up farming costs in 2007.

Report indicate that China’s maize consumption for the year 2007 is likely to rise by 8.2% over 2006 reaching 145 MMT and China would be able to produce a similar quantity (145 MMT) from 27.35 Mill Hactares. This would be an increase of 3 MMT over 2006 production.

Maize production in Brazil is also likely to rise to 45.06 MMT in 2007, an increase of over 8% over last year. This increase has mostly been linked to the high maize prices both on the domestic and international markets, which has led to higher plantings.

As in India, Brazil traditionally grows crops two times a year. The first harvest is likely to be 33.78 MMT, while the second one is expected to be 11.28 MMT.

With the oil prices coming down and expected to reach $45 per barrel in the long run as per some analysts, the debate is now on, as to what will happen to the grain prices. Oil prices are currently running at $60 per barrel. Some analysts believe that the prices of major commodities used for bio fuel Corn, Sugar and Vegetable will see a major correction and will come down. The prices of the above three commodities have risen sharply over the last one year, mainly due to its diversion into the biofuels sector, which has seen huge investments all over the world, more specifically in US. China on the other hand had put a cap on the use of maize for ethanol production to help stabilize the prices in the country.

Amit Sachdev
Representative
U S Grains Council, India
bluecross303@gmail.com

Jan 13, 2007