Mumbai (Commoditiescontrol) – Indian soybean market witnessed sideways trade with minor gains on the back of weak arrivals in domestic market, ambiguity over Bhavantar scheme, weather concerns in Brazil and US-China trade talks playing the major cards during previous week. On w-o-w basis, NCDEX soybean futures gained 1.3% from INR 3806 (Last week closing) to INR 3854. However, the increase in soy oil was less compared to beans and the prices surged by 0.7% from INR 764.2/10 Kg to 769.85/10 Kg.
Madhya Pradesh government earlier announced for the continuation of Bhavantar scheme for the Soyabean crop after making some favorable amendments. However, at the end of previous week, congress ministry scrapped the BBY scheme completely that was initiated by BJP regime in 2017, stating it was not beneficial to the farmers and will review the scheme. The ambiguity over the continuation of BBY led to fall in arrivals drastically as most of the farmers in MP region restricted the supply in mandis and are waiting for the further clarity by political parties. The total arrivals in MP markets was observed less than 1 lakh bags throughout last week compared to 2.5 lakh bags a week earlier. Shortening in arrivals shall continue to strengthen the domestic market sentiments.
On the demand front, most of the crushers reported fading imports demand from the Iran side after the outbreak of highly pathogenic avian influenza (HPAI) in Iran poultry. India's soymeal sales to Iran was set to spike as the oil producer uses the rupees it receives for its crude exports to cover its animal feed demand. Indian market was expecting significant demand for meal from Iran, up to 5 lakh tons in the current fiscal year which also led to sharp gains in prices earlier this month. However, temporary diminishing demand from Iran side might put slight pressure on domestic sellers in the short run while in medium term one can watch exports to resume back to the normal levels keeping prices on firm note.
Looking at global side, CBOT prices shredded significantly during mid of week, when a NEWS reported that US-China trade talk was off. However later both the countries declared that as rumor and market started correcting back to the previous levels. With a month left in their truce, senior US and Chinese officials will meet in Washington this week, hoping to move toward a bargain to end their unprecedented trade war. Soybean producers in the US hope that China, one of the world's biggest soybean importers, will reduce its tariffs on the oilseed and begin importing US beans again. The Chinese Commerce Ministry said earlier this month that Chinese Vice Premier Liu He would visit the United States on Jan. 30-31 for trade negotiations. Any positive development concerning the trade talks between the two sides will boost U.S. soybean prices.
China’s soybean imports from the United States plunged 99% in December to just 69,298 tons, taking its full-year 2018 imports to the lowest level since 2008 on the back of ongoing trade war. It was the second month in a row when Chinese imports from the United States ground to a virtual halt amid the tit-for-tat dispute, although some buying has since resumed as talks between the world’s two largest economies continue. For the full year, imports from the US were at 16.6mn tons, about half of 2017’s 32.9mn tons. By contrast, China brought in 4.39mn tons of soybeans from Brazil in December, up 126% from 1.94mn tons a year ago, according to the data from the General Administration of Customs. China imports from Brazil totaled 66.1 million tons up by 30% from previous year.
Meanwhile Argentina exports of soybeans during the fourth quarter of 2018 trebled on the year as China scrambled for South American volumes due to the ongoing US-China trade war while Brazilian supplies dried up. Q4 exports hit 2.24 million mt in 2018, up from less than 700,000 mt the year before, with China picking up nearly 97% of that volume, compared to a share of 72% in 2017.
Further, U.S. President Donald Trump said he had reached an agreement to reopen the government for three weeks. The pact requires passage in the House of Representatives and Senate, along with Trump’s signature. The U.S. Department of Agriculture’s chief economist late on Friday said he expects the agency will release a monthly crop supply/demand report as planned on Feb. 8, once USDA offices reopen on Monday.
At the Brazil side, the updated weather maps were slightly wetter for northeast Brazil over next week and the longer-term maps have a couple of cold fronts passing through next week with cooler temperatures and better rain chances. However, the long lasting dry spells have already trimmed yield potential in many area of Brazil. Parana’s rural economy agency Deral has lowered the state production to 16.9 million tons from 19.1 million tons in December. Parana is second largest soyabean producing state after Matto Grasso. The average estimate of 10 consultancies including Brazil's food supply and statistics agency Conab shows the country, the world's largest exporter of soybeans, is now expected to produce 117 million tons of oilseeds in the current cycle. The figures are still in-line with the previous assumption and market has already absorbed the fact of loss in yield in Brazil.
Moving ahead, weak arrivals and expectation of better demand from Iran in days to come shall support the domestic soybean market to trade with positive bias. Further lack of any strong fundamental factor in domestic market shall push Indian Soybean to follow global veg oil basket. At global front, positive hopes over US-Sino trade relation shall provide slight strength to the market sentiments. However more volatility could be observed after the scheduled meeting and any cynical discussion could also reel the market under pressure. Adverse weather in Brazil shall continue to play bullish cards in period ahead.
(By Commoditiescontrol Bureau)
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