Monday morning commodity traders across Asia would be scampering to cut losses, as the biggest boom in the global commodity cycle begins to unravel.

It is not just gold and silver the marquee items for markets like India, but is much more broad this time. The 19 commodities ReutersJefferies CRB Index has slipped by 2.7% on Friday, the biggest fall since March 20 this year. The index has eased by over 20% since July 3. But more significantly the futures, or the expected prices for most commodities, are now pointing downwards for the first time in over a year. A combination of rising US dollar, rising global supply of agricultural commodities and spreading recession in Eurozones are the reasons for the rapid downturn.

For instance, corn futures for December delivery has fallen almost 5% to $5.495 a bushel on the Chicago Board of Trade, the biggest decline since August 4, as per Bloomberg data. Its prices had climbed as USA and EU began massively spiking their automobile fuel with corn-based ethanol to take on rising crude oil prices.

The drop will be welcomed by India and even China, struggling to tame domestic inflation riding on 8% plus GDP growth rates. India?s bellwether inflation index has touched 12.44% for the latest reported week. The government has been hamstrung by the cascading rise in prices of wheat, rice and palm oil in international markets from importing more to tame domestic prices at the retail level. India?s import bill till June is already $24.45 billion, with the trade deficit opening up to $10 billion.

The contagion has spread as global analysts feel the commodity markets have entered a bear phase. Soybean futures for November delivery, for instance, fell 4.3% to $12.19 a bushel in Chicago Board of Trade, the biggest drop since August 8. This is on top of an earlier drop of 70 cent, hitting the lower circuit filter.

Commodity traders at Jhaveri Bazaar in Mumbai said the pressure to exit from current position will be massive if international gold prices touched $700 a troy ounce. ?That will signal that the bull-run in precious metals is well and truly over,? a Mumbai-based commodity analyst said.

The bear phase is equally striking for metals. Platinum futures for October delivery sunk almost 7%, to $1,388.20 an ounce on the New York Mercantile Exchange on Friday, capping an 11% drop for the week, the most in the last eight years. The automobile industry?s exhaust control equipment use 60% of the world production of the metal. Similarly, nickel futures at the London Metal Exchange are again pointing down by 2.20%. The only short-term exception is copper, taking on the effect of a slowdown in the world?s largest mine in China.

The most visible signs of the tanking of the global commodity cycles became visible in July as crude oil prices that had spearheaded the surge, eased by a massive 26% from its all-time high of $147 a barrel to touch $109 in less than a month.

That movement has now been mirrored in all commodities. The turnaround has been dramatic and almost sudden and has caught traders and government unawares. All global commodity indices, like the UBS Bloomberg CMCI Index of 26 raw materials, had advanced for six consecutive years. That index is now down 18 % since July 3. Speaking to FE, V Shummugham, chief economist at MCX, said, ?For the last few months, due to volatility in the equity markets, too much of money was chasing the commodity markets. The price correction is now taking place and the commodity prices are going back to fundamentals.?

The two factors that had pushed commodity prices were the meltdown in the US equity markets that began last year and the boom in developing countries of Asia, basically China and India. But last week traders in China, the world?s biggest oilseed consumer, have dropped orders for almost 150,000 tonnes of palm oil and soybeans on weak domestic demand plus prices. This washout process, meaning dropping of orders when prices slip, has begun to impact big Chinese traders also, agency reports said.

A Bloomberg report said vegetable oils have dropped on China?s Dalian Commodity Exchange by 3.2% on top of a 4.8% earlier drop. This is a ten-month low. Similarly, palm oil for January delivery fell 4.2% down 28% in the past month.

Palm oil, which reached an all-time high of 4,000 ringgits in March, is now trading at just 2,600 ringgits per tonne in Malaysian exchanges, a drop of 35%. In India, too, the other major global consumer of palm oil, supply is comfortable with the government finding no takers for its 1 million tonnes of edible oil imports this month.

Of more comfort to the Indian consumer will be cereal prices. The benchmark Thai rice, which was trading at $789 per tonne in June, is now placed at $738, down more than 6%. Wheat, which has risen to around $13 per bushel is now trading below $9 per bushel, a 30% drop. Global production of wheat is expected to be 658 million tonnes this year, up 8.3% from last year and rice is expected at 666 million tonnes, up 1.4% year on year.

The other factor driving commodity prices down in August is the turnaround of the US dollar. The currency has moved up as concerns have spread on weakness in the Eurozone. ?With the reversal of demand for dollars, the speculators have given up their positions?, said Amit Mitra, Secretary General, Ficci. ?Due to the strengthening dollar, the hedging positions in the commodity markets have been squared off. The equity markets will gain out of this downturn?, said Debjyoti Chatterjee, assistant vice-president at Mape admisi, one of India?s largest commodity market brokers.

Going ahead, investment guru Marc Faber told Reuters that commodity prices have reached a peak because the world is in a recession. He said raw materials demand would continue to decline. The weakening trend in commodity prices in India is now expected to make it easier for the government to fend off demands for further curbs on commodity trading.

Without wanting to be quoted, officials from NCDEX and MCX said they would now move the government again to resume trading in the agricultural commodities that had been banned since January 2007. The government had taken the plea that futures trading in the commodities were responsible for skewing agricultural spot prices, an argument that took no account of the global hardening of commodity prices. As the chart shows, in the non-agriculture space, too, barring the prices of iron and coal, all others in this broad category like nickel, zinc, aluminium, copper, lead and tin are trading at their near one-year lows with chances of falling further.

Of immediate consequence will be the impact of the margin calls in the Indian bullion markets. On Saturday silver hit two lower circuits and fell more than 10 per cent, soon after opening on MCX. The near month contract on the exchange finally settled at Rs 19,398 per kilogram, down 6.61%, while gold October futures settled at Rs 11,270 per 10 grams, down 1.81% from previous close. The scene was roughly the same in the spot markets, where prices virtually slipped all through the day.

Both the leading exchanges increased their margins on silver, which meant additional fund requirement for the traders, but such short duration ahead of another holiday led to liquidation of long positions in gold as well. Usually, on a Saturday, traders in commodities bourse are required to make their margin payments. The pressures could multiply on Monday and in other commodities as the downturn will now continue.