Invest in jute, almond to diversify commodities portfolio

Invest in jute, almond to diversify commodities portfolio

Jute and almond can be used to diversify your commodity portfolio.

One is known as a good packaging material, the other as health food. That apart, both jute and almond are good options to diversify your portfolio, too, say experts.

For 2011-12, experts are positive on almond. However, the outlook for jute is bleak due to expectation of a good crop. Let's look at the two commodities-the only ones in their categories, dry fruit and fibre, respectively-to understand the available investment opportunities.

Due to shortage and good exports, the price of almond jumped 4.28 per cent, or Rs 20, to Rs 382 per kg between April 1, 2011, and October 31, 2011. The ongoing wedding and festival demand is likely to take prices higher.

Nalini Rao, research analyst, Angel Broking, says, "Almond prices rose despite record production due to export demand. Another reason was floods in Australia which delayed shipments."

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Global exports in 2010-11 were 5.86 lakh tonnes, 8.61 per cent more than in the previous year. However, global imports were 5.36 lakh tonnes as compared to 4.83 lakh tonnes in 2009-10. Global production in 2010-11 was 8.94 lakh tonnes compared with 7.99 lakh tonnes in 2009-10. Consumption rose 5 per cent to 8.22 lakh tonnes between 2009-10 and 2010-11. The US, the largest producer, accounts for close to 83 per cent global output.

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The European Union, the largest user, consumes 2.88 lakh tonnes annually. India consumes around 42,000 tonnes, of which 95 per cent are imported. Over 80 per cent imports are from California. According to the Almond Board of California, the global demand for California almonds reached a new high in 2010-11.

Market experts say demand surges during the marriage and festive season (October-December).

According to the US Depart-ment of Agriculture, which compiles global data on agriculture, India's consumption of shelled basis (a category of almond) in 2010-11 is likely to be 51,000 tonnes. Of this, imports are pegged at 50,000 tonnes.

According to the Almond Board of California, the top five export destinations (China, Spain, Germany, India and the United Arab Emirates) account for 53 per cent export shipments. Asia has increased its share, with the region now accounting for 34 per cent shipments. This is driven mainly by growth in China and India.

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Subhranil Dey, analyst, commodities, fundamental, SMC Global Securities, says, "In view of the demand-supply mismatch, prices may remain on the higher side, in the range of Rs 320-420 per kg."

Nalini Rao of Angel Broking agrees. "Prices are likely to remain high due to the ongoing festive and wedding season and on account of demand ahead of Christmas and New Year."

Supported by favourable weather and sufficient availability of seeds, sowing is estimated at 11 million bales (1 bale equals 180 kg) in 2011-12, as against one million bales last year. Raw jute production was low in 2010-11 in spite of good sowing due to poor rainfall.

Sowing starts at the end of March and continues till the end of May. On the National Multi-Commodity Exchange of India, the spot price of jute slid over 30 per cent, or Rs 1,017, to Rs 2,233 per quintal between April 1, 2011, and October 31, 2011. "Jute prices have been falling due to easy availability of seeds, good sowing and favourable weather," says SMC's Dey.

According to the International Jute Study Group, the production of jute and allied fibres in India during 2009-10 was 16.20 lakh tonnes, up 9.7 per cent from 14.76 lakh tonnes in 2008-09.

According to the Office of the Jute Commissioner, production of jute goods was 15.66 lakh tonnes in 2010-11. However, consumption of raw jute was 13.52 lakh tonnes.

Manish Poddar, chairman, Indian Jute Mills Association, says raw jute production in 2011-12 is expected to be 120 lakh bales while consumption will be 100 lakh bales. The price will remain in the range of Rs 2,200-2,700 per quintal this year, he says.