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Weekly Soy Market: US-China Trade Concerns To Weigh On Sentiments

9 Feb 2019 10:07 am
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Mumbai (Commoditiescontrol) – Indian futures witnessed sideways trade during early part of week with lack of any fresh fundamentals amid closure in most of the Asian exchanges due to Lunar Year Celebrations. However, absence of any strong positive cues dragged the market down and finally, by the end of week, most active Feb’19 contract finally closed at INR 3744, lower by 1.3% from previous week settlement.

In the meantime, SEA published its latest report on Meal exports data for the month of Jan’2019. The export of oilmeals during January 2019, provisionally reported at 283,850 tons compared to 269,668 tons in January 2018. The overall export during April 2018 to January 2019 is reported at 2,692,452 tons compared to 2,516,657 tons during the same period of last year i.e. up by 7%.

Soymeal exports in Jan’19 were observed near 2.7 lakh tons, higher by 13% on monthly basis. On y-o-y basis, soymeal exports were close to 11.34 lakh tons vs. 10.43 lakh tons, posting a rise of 9%. Among the major importers, Vietnam imported 491,720 tons of oilmeals (compared to 552,443 tons); consisting of 45,056 tons of soybean meal. South Korea imported 632,109 tons of oilmeals (compared to 675,420 tons) out of which soymeal contributed 30,797 tons. Thailand imported 263,280 tons of oilmeals (compared to 159,377 tons); consisting 16,541 tons of soybean meal.

Iranian market has opened up for Indian soybean meal. During current year from April 2018 to January 2019, about 2.8 lakh tons of soybean meal shipped against last year just 23,000 tons, supporting export of oilmeals from India.

However, with Brazil in its full pace of soybean harvest and with prevailing huge difference (>$100/tons) between Indian soyameal and Brazilian meal, the demand from Persian nation and other countries is likely to shift towards south American regions in time ahead. This shall affect domestic meal export pace and shall weigh on Indian soybean prices.

As per trade sources, India may slow Soy Oil fresh overseas buy on wide discount for forward vs Spot. May shipment was observed nearly $55-60 discount to Feb because of which buyers are likely to refrain from big deal. Moreover, market is also expecting huge soya imports near to 4 lakh tons in month of Feb. Bulk stocks shall continue to add pressure on market sentiments.

Demand in the physical market continued to remain subdued from millers and crushers with ongoing lean season for soybean and oil market. Moreover, demand generally shift from soya oil to palm oil from Feb onwards in India as latter is more economical and doesn’t solidifies at room temperature post winter season, so is perfect choice for the blenders.

Meanwhile, China's agriculture ministry said a new African swine fever outbreak was confirmed in Hunan province. The outbreak occurred on a farm with 4,600 live pigs in the city of Yongzhou, infecting 270 of the animals and killing 171, the Ministry of Agriculture and Rural Affairs said in a statement on Friday. China has already reported about 100 outbreaks of the disease in 24 provinces and cities since August. The outbreak shall further trim demand for soybean meal in coming weeks.

At US front, the latest World Agricultural Supply and Demand Estimates (WASDE) report from USDA lacked any market-shaking data.

Some of the major highlight of WASDE reports are:

US Oilseed Data

U.S. oilseed production for 2018/19 is estimated at 134.0 million tons, down 1.5 million from the previous report. Soybean production is estimated at 4,544 million bushels, down 56 million. Harvested area is estimated at 88.1 million acres, down fractionally WASDE-585-3 from the previous report. Yield is estimated at 51.6 bushels per acre, down 0.5 bushels, led by reductions for North Dakota, South Dakota, and Nebraska. The soybean crush forecast is raised 10 million bushels to 2,090 million.

Global Soybean Data

Global soybean production is lowered 8.2 million tons to 361.0 million with lower crops for Brazil, Argentina, Paraguay, Uruguay, and South Africa.Prduction for Brazil is lowered 5 million tons to 117 million due to dryness in parts of the South and Center-West regions. Production for Argentina is lowered 0.5 million tons to 55 million due to a reduction in harvested area that is partly offset by increased yields.Global soybean exports are reduced 1.7 million tons to 154.4 million. Global imports are also reduced mainly on a 2-million-ton reduction for China due to lower crush demand.Global 2018/19 soybean marketing-year ending stocks are lowered 8.6 million tons this month to 106.7 million, which is an 8.6-million-ton increase over the 2017/18 estimate.Chinese soybean consumption was cut 3.5 MMT from the December figure, with imports lowered another 2 MMT .

Moving ahead, WASDE updates would not have any major impact on overall market sentiments and now the focus will once again shift to US-Sino trade disputes. Trade concerns between US and China has once again emerged as a meeting between President Donald Trump and President Xi Jinping is highly unlikely to take place before a critical March deadline to avoid higher U.S. tariffs on Chinese goods. Any pessimism over two countries trade relationship shall keep the overall market sentiments on dreary note. Moreover, demand from Chinese nation is likely to shift towards Brazil which shall further pressurize the Chicago soybean sentiments.

Considering the above fundamentals, Indian as well as Global soybean market is likely to trade on bearish tone with lack of any strong positive factor supporting the overall sentiments.

(By Commoditiescontrol Bureau)

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