Weekly: Spot Soybean Likely To Trade Bearish On Weak Demand

MUMBAI (Commodities Control)-

International Soybean Market Recap

CBOT soybean futures started the week on bullish note as per our expectation amid crop loss in Argentina but towards the end of the week soybean futures came under pressure as USDA raised U.S. 2017-18 soybean stockpiles in its monthly crop report and finally ended the week, down by 2.96% at $10.39 a bushel.



In its March Supply/Demand Reports, the USDA pegged soybeans, the U.S. 2017/18 carryout is estimated at 555 million bushels vs. the average trade estimate of 530 million bushels and the USDA’s February estimate of 530 million.

The USDA pegged the Argentine 2018 soybean production at 47.0 million metric tons, compared with the average trade estimate of 48.36 million mt. and the USDA’s February estimate of 54.0 mmt.

Brazil’s soybean output is pegged at 113.0 million mt. vs. the average trade estimate of 113.82 mmt. and USDA’s estimate last month of 112.0 mmt.

In general, the trade felt like the USDA would have needed to print an Argentine soybean number of 46.0 or 45.0 mmt to really make the market’s gyration interesting.

However, USDA dropped U.S. soybean exports by 35.0 million bushels, a not-so-friendly move.

In addition to it Chinese officials have said U.S. soybeans are a prime target for retaliation against tariffs imposed by the Trump administration on steel and aluminum imports, according to the American Soybean Association which has put additional pressure on CBOT soybean futures.

Farm groups have long feared that China, which imports more than third of all U.S. soybeans, could slow their purchases of agricultural products, heaping more pain on the struggling U.S. farm sector.

Warnings to the soybean growers group about their product being used as a target in trade disputes were made last year, group officials told Reuters on Friday.

They came up in talks between the American Soybean Association's leaders and officials at the Chinese embassy in Washington and in conversations between Chinese officials and U.S. soybean farmers, when the farmers were on a trip to China last fall, according to the group.

We have heard directly from the Chinese that U.S. soybeans are prime targets for retaliation," the trade group said in a statement.

The Chinese embassy in Washington did not respond to a request for comment on Friday.

President Donald Trump signed executive orders last spring that called on the Department of Commerce to investigate whether imports of steel and aluminum were compromising U.S. national security, the soybean group said.

U.S. agriculture trade groups have sharply criticized the White House's push to move ahead this week with import tariffs of 25 percent on steel and 10 percent for aluminum, warning that retaliatory actions could target U.S. exports of grain and oilseeds.

China's Ministry of Commerce last month launched an anti-dumping and anti-subsidy investigation, potentially leading to hefty tariffs on imports of the ingredient used in livestock feed and the fiery Chinese liquor baijiu.

Domestic Soybean Market Recap

Soybean price in the benchmark Indore market declined by Rs 100 to trade at Rs 3800/100kg during the week ending on 10th March at the benchmark Indore market.



Total crop arrivals during the week were reported at 0.40 to 1.30 lakh bags against 0.85 to 1.35 a week ago.

Domestic soybean market came under pressure due to sluggish demand of soybean from millers in spot market.

As per traders, demand of soybean from millers has declined during the week due to slow off take of soymeal in domestic as well as international market.

Amid poor demand of soymeal, millers have been compelled to sell soymeal at lower price level which has affected their crush margin. Soybean crushing has turned into disparity of Rs 200/tonne against parity of Rs 632 last week.

On the other hand, farmers and stockists are still reserved sellers which can be confirmed by tracking arrivals week on week, as most of them are anticipating higher prices in near term. They are expecting soybean prices to rise to Rs 4,000/100kg in near term and then they might gradually liquidate their stock.

However farmers and stockist have wait for a long time for level of Rs 4000 as yesterday both CBOT soybean and soymeal futures declined sharply which is likely to keep the domestic market sentiment weak for next week.

In futures market, Soybean most active April contract during the week on the National Commodity & Derivatives Exchange Ltd (NCDEX) ended down by 0.52% at Rs 3,822/100kg.

SOYMEAL

Soymeal at the benchmark Indore market during the week declined by Rs 600 to trade at Rs 31,100 per tonne on sluggish demand from poultry feed manufacturer at higher price level.

Traders are reporting that demand of soymeal from poultry feed manufacturer has declined as poultry farmers are gradually reducing the placement of chicks. From March on wards summer season starts and conumption of broiler chicken declines which leads to slow placement of chicks.

As far as intenational soymeal market is concerned Indian soymeal is tentatively priced at $502 per tonne CIF Rotterdam vs $430 Argentina CIF Rotterdam (March) as on March 10, 2017. India Soybean Meal is now at premium of $72/MT in international market compared to $55 last week.

Due to higher premium in International Indian soymeal exports has dropped to 73,816 tonnes in February from 1,05,678 in January.

Overseas buyer are ready to pay premium of around $10-15/tonne for Indian soymeal which is non genetically modified whereas the Argentine soymeal is genetically modified.

SOYOIL

Refined soy oil in benchmark Indore market of Madhya Pradesh during the week gained by Rs 30 to trade at Rs 780/10kg amid improved demand in retail market.

On 1st of March Indian government increased the import duty on palm oil to 44% from 30% and RBD palmolein to 54% from 40% as result of which the palm oil prices have gained by nearly Rs 80/10kg.

Post duty hike spread between RBD palmolein and soy oil has reduced to Rs 60 from Rs 85 of pre duty hike so some of the RBD palmolein demand has shifted to soy oil.

CBOT soy oil futures declined by nearly 2.20% during the week to end at 31.59 c/lb on account of higher soy oil stock due to higher crushing of soybean seed.

USDA pegged U.S. soy oil ending stock for March at 0.79 million tonnes vs 0.70 in February whereas it pegged world soy oil ending stock for March at 3.14 vs 3.07 in February.

Soy oil Degum price during the week ended on March 10, declined by $15 to trade at 795 per tonne in dollar terms (CNF) whereas it gained by Rs 20 to trade at Rs 732/10kg in rupees term at Kandla port.

Soy Oil April futures on National Commodity & Derivatives Exchange Ltd (NCDEX) ended down by 4.20% at Rs 793.80/10kg.

NEXT WEEK: Domestic Soybean prices are likely to trade bearish as lower demand from millers at higher price level will weigh on prices however lower supply will limit the fall.

(By Commoditiescontrol Bureau; +91-22- 40015516)