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Mumbai (commoditiescontrol) - Oilseed market dropped in the spot and futures market this week on high supply outlook against weak demand.
MUSTARD SEED:
A weak tone was witnessed in mustard complex as low demand for by-products continued to pressure prices amid higher production estimate.
Mustard seed sentiment was down since last week after Ministry of Agriculture estimated mustard seed production at 79 lakh tonnes against market expectation 65-70 lakh tonnes.
In addition to it, weakness in soybean prices also dampened market sentiment as production estimate was raised by 22 percent.
However, downside was capped as prices have dropped near to Minimum Support Price (MSP) after recent sell-off and low level buying in small lots from millers was witnessed to keep their crushing units operational.
New mustard crop quality said to be better than last year with oil content at 42 percent, which also prompted some buying interest in raw material among market participants. Mustard seed prices dropped 2.5 percent in benchmark Jaipur market of Rajasthan this week.
Mustard oil drift lower as whole oil complex was battered this week on outlook of big supply globally. Local edible oil production itself is estimated to rise by 25 percent as oilseed production is estimated to rise by 33 percent in 2016-17.
Demand for mustard oil Kachi gani (Jaipur) was weak as prices remained at premium of Rs 8/per kg against rival refined soy oil (Indore).
According to CC-Analyst, mustard oil prices need to fall by another Rs 2-3/kg to for competitive with other edible oils in the complex and the same fall will result weakness in mustard seed prices. Low demand for mustard oil will direction impact on prices of raw material as crushing will reduce.
Mustard oil is highly priced in the complex that blending with other cheap oil is also not making attractive to millers.
Demand for the other by-product mustard cake was as per requirement and prices closed down 1.6 percent this week, while mustard oil Kacchi Ghani was down 4 percent.
Market participants are anticipating mustard seed prices to fall below MSP of Rs 3,700 per quintal amid low mustard oil demand and more than sufficient supply.
Mustard seed is likely to face pressure in coming weeks as new crop daily arrivals likely to surge upto 5-7 lakh bags against current 2 lakh bags, where as demand for mustard oil and cake continued to remain laggard in the spot market.
In futures market, most active April contract close 0.5 percent lower on the National Commodity & Derivatives Exchange Ltd (NCDEX), while forward May contract was down 0.4 percent.
SOYBEAN:
A downtrend continues in Soybean market after Agriculture Ministry raised crop size estimate last week to 141 lakh tonne in 2016-17 against last year 85 lakh tonne. Market was expecting production of 114-115 lakh tonne.
The production size is big enough that the country need huge demand for soybean meal from local and export markets to stabilize and pushup prices.
Demand for soybean meal from local poultry farms remain as per requirement on anticipation supply will be easily available on big crop size. Demand for soybean meal is also weakening as other poultry feeds are available at cheaper rates.
In export market, demand for soybean meal is not picking as expected due to high volatility in global futures market and reports of Birdflu in many countries.
According to CC-Analyst, nearly 100 lakh tonne crop is still available in the market, which is large enough to meet demand till new crop arrival starts in Sept-Oct. In comparison with production, demand for soybean meal should triplet in export market while consistant demand from local poultry farms needed to support prices of soybean seen.
Monthly data released by The Solvent Extractors Assoc. of India (SEA), the soybean meal export has slump 35 percent to 1.55 lakh tonnes in month of January'17 against 2.41 lakh tonnes in December'16.
The analyst continues to say, India has to export nearly 4-5 lakh tonnes soybean meal with regular local demand to support and pushup prices of raw material.
Weakness in overseas market have also sent negative impact in local market.
U.S soy complex was down this week, largely due to speeding harvesting in Brazil coupled with stable weather condition in Argentina.
Analyst have raised Brazil soybean crop estimate to 1078 lakh tonnes against 1050 lakh tonne in January and USDA forecast of 1040 lakh tonnes.
U.S soybean futures dropped 1.85 percent this week and soybean meal lost 2.44 percent largely due to outlook of big supply from Brazil and concern about demand shift from U.S to South America.
In domestic market, soybean prices likely to remain under pressure, but downside seen limited as prices at many places are trading near Minimum Support Price (MSP). Some panic selling from farmers may occur as the same have been facing losses in other Agri-commodities.
Soybean prices were dropped Rs 50 this week and traded in range of Rs 2700-2900/100kg against Rs 2750-2950 on Previous friday, while soybean meal lost Rs 300 at Rs 22,700 per tonne against last week Rs 23,000 on low demand.
In futures market, Soybean most active March contract dropped 2 percent while forward April contract was lower by 2.1 percent on the National Commodity & Derivatives Exchange Ltd (NCDEX) this week.
NEXT WEEK: Outlook for oilseed market is unclear as prices are trading near Minimum Support Prices (MSP) while demand continues to remain weak on high supply outlook.
(By Commoditiescontrol Bureau; +91-22-40015516)
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