Trade talks may firm up commodity prices here
Global and domestic prices of cotton, edible oil and soyabean may firm up if talks between the US and China move toward a resolution of the ongoing trade war.
“Constructive trade talks between the US and China will impact positively on commodities, majorly on metals and industrial agri-commodities like edible oil, soyabean and cotton,” says Anuj Gupta, deputy vice-president of commodities research, Angel Commodities Broking.
Chinese and US negotiators are planning talks to resolve their trade row from August 21. Gupta says the prices of these commodities fell sharply after a tariff war between the two countries started in April this year. Both the US and China have put tariffs on an estimated $34 billion worth of imports from either of the countries.
“The trade war scenario between two economic giants led to a fall in prices of commodities as buying and selling between two major buyers and sellers stopped. For example, cotton prices which were at 94 cents per pound fell to 81 cents per pound. Now, with trade talks commencing, the global and domestic markets are expected to react positively,” says Gupta, adding that after this tariff and trade war, some demand has shifted to India. On Ncdex, soyabean prices were hovering around Rs 3,900 a quintal in April and this month prices have made a low of Rs 3,282 a quintal. In international markets, soyabean prices corrected almost 24 per cent since April 2018 from the highest level in April 2018 of $1,067 per bushel to $810 per bushel. Further, palm oil corrected almost 9 per cent from $2,418 per tonne in April to $2,190 per tonne this month. On MCX, prices also corrected almost 11 per cent from Rs 660 per 10 kg to Rs 590 per 10 kg in this month, says Gupta.
Exporters and companies say that with the Chinese delegation travelling to the US for talks on August 21 and 22, the markets are hoping for higher rates.
“We are closely watching the talks between USA and China. Indian cotton trade gets to benefit from both sides. If the talks are successful, then global prices will see a jump. Prices of cotton in global marketNSE 0.00 % have seen a drop of 7 per cent to date, since the time the trade barriers were announced,” says Atul Ganatra, president of the Cotton Association of India.
Domestic prices are competitive and may simultaneously see a jump, he says. “However, if the talks fail, then also we gain, as we cater to the Chinese market. Indian companies are signing export contacts for November-December shipments and this year we expect a pick-up in exports to China,” says Ganatra.
India is the second largest exporter of cotton after the US to China. Of the 50 lakh bales of cotton imported by China, India only sent 6-7 lakh bales, with the majority of the yarn going from the US. India annually exports 70 lakh bales.
The Soyabean Processors Association of India, which has been pushing for export of soyabean meal that is used in livestock and poultry feed industry, says that domestic prices fell by 5 per cent after the tariff war began in April.
“Volatility in the market is not good for the trade and we expect the situation to ease,” says Davish Jain, chairman of the association.
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