Indian Passion for Gold Gets American Glitter

US & Co set to become biggest suppliers as mining the metal gets difficult in other big producers

 India's lust for gold is legendary. Indian households hold over $950 billion of the yellow metal, revealed a recent study by Macquarie Research. India imports most of its requirements: a quarter of all the gold sold globally is imported by us. 

But in recent times, another country has matched India's hunger for gold. China, the largest producer of the precious metal, became a net importer in 2011, as domestic demand soared. Sometime this year, China is expected to overtake India as the largest gold consumer. China, which is among the top producers of gold globally, has high entry barriers for private miners and also uses its production for building up national reserves. 
Entry barriers for entrepreneurs are high in Russia as well. South Africa and Australia, both big producers of the yellow metal, are becoming unpopular due to high taxation and high production costs, respectively. 
Some European gold reserves — for example, the Rosia Montana in Romania, the largest untapped reserves in Europe — are facing problems due to environmental regulations. That begets the question: where will India get its gold from? The US, and other countries in the Americas. 
North America has always been significant in the global gold stakes. Globally, there have been 99 significant gold discoveries (defined as a deposit containing at least 2 million oz of the metal) during 1997-2011. The Americas hold the greatest share in these discoveries—not surprising given that the Americas have accounted for more than half the industry's discovery-oriented gold exploration spending during the period. In 2010, the gold exploration budget rose to $5.4 billion, which was 59% more than in 2009. In 2011, mines in the US produced gold worth about $12 billion. 
Gold mining companies are again flocking to the Americas. In Canada, miners are making huge new discoveries as well as re-starting old mines that were deserted due to lack of funds. In 2011, production rose 21% year-on-year to Canada's highest output in five years. Mexico's large mineral belts have been equally attractive for gold miners. North America Accounts for Lion's Share of Production 
With 2011 production coming in at an estimated 85 mt, Mexico has seen a 254% increase in output. 
In all, North America was responsible for 16% of mine production in 2011. And with a year-on-year production growth of 9%, well above the global average, along with a bevy of ongoing junior exploration, North America will be pumping out gold from a lot of new mines. Mining companies without proven reserves—the so-called juniors—are equally enraptured by North America. More than 70% of them own a project in North America, with over half owning a project in Canada, 17% in the US and 11% in Mexico, according to research by Zeal, a consultancy. 
What does this mean for India? It is clear that in the short term the physical market will not be flooded by freshly mined gold despite the high prices. Scrap sales and offloading of bullion by central banks will remain critical for ensuring adequate supply in the market to meet our demand. 
The silver, or perhaps golden, lining is that mines of the future will be developed in nations that believe in free trade. Unlike China, which is using mines for building domestic reserves, countries such as the US and Canada will allow gold to flow into the international market.

Truant Rains May Spoil the Party for Guar Farmers Acreage in Rajasthan doubles this season as guar gum prices soar 10-fold in a year

Deficient rains in parts of Rajasthan may spoil the party for overenthusiastic farmers who have expanded guar acreage this kharif season. Rainfall over the state is scanty with a deficit of 72% that might cut guar production by 10-15%, estimates Central Research Institute for Dryland Agriculture, a national institute which carries out basic and applied research in rain-fed farming. However, the institute says the output may go down up to 25% if the state doesn't receive sufficient rainfall till July-end.  "Guar crops may be impacted if there is no sufficient rainfall till July-end," said Dr B Venkateswarlu, director, CRIDA. The institute has said maize and sorghum yield may fall whereas good rainfall would ensure normal production of soyabean and cotton. Rajasthan contributes nearly 80% of total guar production in India and the crop requires 4-5 regular rains till it is sown. About 80% of the crop is sown in rain-fed regions such as Jodhpur, Balmer, Bikaner and Jaisalmer which are awaiting rains. Farmers in irrigated regions such as Ganganagar, Hanumangarh, Bharatpur and Alwar have sown the crop with the help of stored water. Rajasthan is expected to double guar acreage to 60 lakh hectares from 30.5 lakh hectares last year on good returns. Guar gum prices soared to . 34,000 per quintal earlier this year from . 3,000 per quintal a year ago whereas guar seeds were sold at . 350 per kg than . 30 per kg a year ago.  "There is a big concern among farmers as a large number of them are dependent on rain for this crop," said PK Hisariya, president, All India Guar Gum Growers Association.  Last year, US-based oil and gas firms bought huge volumes of guar gum which is used as a sealant in oil and gas production. Guar gum is traditionally used in the making of sauces, ice cream and confectionaries. India, which is the world's largest producer of guar beans and guar gum, exports nearly 80% of the crop.  tapash.talukdar@timesgroup.com  Poor rains may cut output by 15%

Sweeten your returns with sugar The prices may remain firm in the short term due to the high demand and a likely drop in next year’s output.

Sugar is the only food item that is extracted from two different plants, sugarcane and sugar beet, and is among the most important agro-based industries in the world. Sugarcane and sugar beet grow in very diverse climatic regions and account for nearly 80% and 20% of the world's sugar supply, respectively. Sugarcane has been witnessing a metamorphosis, from that of a sweetener to an alternate fuel, which has changed the structure of the sugar sector.      India is the second largest producer of sugar in the world and the domestic sugar industry is one of the largest agro-based industries, after cotton textiles. It is a highly regulated industry, wherein the entire value chain, from the price of sugarcane to the distribution of sugar and the use of its byproducts, is under the regulatory purview. Besides being the chief raw material for the sugar industry, sugarcane is also used extensively in two cottage industries—gurand khandsari—which account for over 30% of sugarcane usage.      Sugar production is centred on a few countries, mainly Brazil, which accounts for over 22% of global production, followed by India (15%), EU (10%), and China (8%). While global sugar production and consumption have increased considerably since the 1990s, the rise in production has been intermittent due to the cyclical nature of the sugar producing crops, which has a large bearing on global sugar prices. In 2011-12, the global sugar production was 172.12 million tonne and the consumption was 167.7 million tonne, a surplus for the second consecutive year.      The average annual ICE (IntercontinentalExchange) sugar prices were only 9.9 cent per pound in 2007 due to the global supply glut. However, a significant price increase was witnessed from 2007 to 2010 due to a lower output in 2008-10, coupled with a rising conversion of sugarcane to ethanol in Brazil. In 2011-12, there was again a sugar surplus of about 5.5 million tonne on account of higher global output, except in Brazil, which saw a 20% drop in output. This has led to a drop in the monthly average Liffe (London International Financial Futures and Options Exchange) prices in the current year from $799 per tonne in July 2011 to $566 per tonne in May 2012.      Though India is among the largest producers of sugarcane, the yield and the sugar recovery rate is 46 tonne per hectare and 10.2%, respectively, which is much lower than the world average. Indian sugar production has grown at a CAGR of 2.4% over the past 12 years and was around 26 million tonne in 2011-12. However, it has been characterised by fluctuations of surplus and shortages due to the cyclical nature of production.      The domestic consumption has increased from 16.2 million tonne in 2000-1 to over 22 million tonne in 2011-12. Due to the consistent rise in demand and fluctuations in production, India's sugar status as a net importer/exporter changes frequently.      Currently, the domestic as well as global sugar markets have huge sugar inventories, which has led to a decline in prices. However, due to concerns over Brazilian sugar output, along with a higher demand in June and July ahead of Ramzan, the global sugar prices are expected to remain firm in the short term. However, sharp gains may be capped due to sufficient supplies. In the domestic market, the stocks are sufficient to meet domestic and export demand, but the downside in prices will be restricted. This is because the next year's crop is expected to fall due to a drop in output in Maharashtra and Karnataka. If the monsoon continues to remain below normal, it will have a significant impact on the cane crop output for 2012-13 and may support the upside in prices.  Tips for first-time investors  Sugar production follows a cyclical pattern, where 2-3 years of high production is followed by 2-3 years of lower produce. So, keep an eye on the cycle. The weather conditions in the major sugar producing nations affect the yield and recovery rate of sugar from cane and, thus, impact the output and prices. Also, the sugar industry in India is highly regulated and, hence, the monthly release mechanism, changes in trade policies, and declaration of the fair remunerative price of cane has a large impact on sugar prices.  Trading strategies (1-2 months)  The NCDEX August sugar prices are currently trading at about 2,955 per quintal and are expected to trade at 2,900-3,020 per quintal in the medium term. The writer is Associate Director, Commodities & Currencies, Angel Broking