Spot Soybean Hits 5-Month High On Bullish Fundamentals

MUMBAI (Commodities Control) :

International Soybean Market Recap -

For Soybeans, it had been an eventful week with the farm journal tour findings, Chinese export order cancellations, Commerce Department’s finding for the Biodiesel imports from Argentina & Indonesia and duty imposition. Moreover, there have been output estimates from various agencies downsizing the world output and prices.

The Farm Journal tour results have appeared less impressive to many observers. The low pod counts found by tour scouts across all Midwest states feels like it might still have something to say about final yields. The tour actually ended up with a forecast US soybean production figure of a record 4.331bn bushels, on an average yield of 48.5 bushels per acre. That compares with a USDA forecast of 4.381bn bushels, on a yield of 49.4 bushels per acre.

The US Department of Agriculture announced a huge cancellation, of 640,970 tonnes, in Chinese import orders of US supplies of the oilseed, which had been due for delivery in 2016-17 (which ends next week). Latest USDA data had showed China holding some 1.4m tonnes in unfulfilled import orders of US soybeans. There were also 295,000 new crop soybeans sold to unknown destinations.

The Commerce Department's preliminary finding that imports of biodiesel from Argentina and Indonesia were subsidized and the department would impose duties ranging from 50.2% to 64.1% for Argentina and 41.0% to 68.2% for Indonesia retroactive for 90 days.

Oil World has cut their 2017-18 US soybean production by 2.0 million tonnes to 113.0 million tonnes and compared to last year's 117.2 million tonnes.

Commerzbank downgraded its near-term price outlook for Chicago Soybeans, forecasting a retreat in values to average $9.25 a bushel in the last three months of the year, beneath the $9.37 ¾ a bushel being priced in to November futures.

Safras has raised their 2016-17 soybean production to 116.3 million tonnes versus the USDA estimate of 114 million tonnes. They also raised the Brazilian export total to 65 million tonnes compared to the USDA estimate of 61.0 million tonnes. Celeres raised the 2017-18 Brazilian soybean area to 34.5 million hectares up 1.9% from last year. They see yields falling 5.9% to 3.16 tonnes per hectare with output pegged at 109.1 million tonnes.

On the Weekly chart, there had been a Doji candle formation in the previous week which highlights a change of trend. In the current week we saw a prices correcting from the lows and retreating on the upside.

Domestic Soybean Market Recap

Soybean prices in the spot markets traded bullish during the week ending 26th August, in line with our expectation and closed higher by Rs 85 at Rs 3,160/100kg amid strong fundamentals.





Following factors have boosted the Soybean market sentiment in the Domestic market -

Lower Arrivals : Farmers were reluctant to sell soybean at current price on anticipation of higher prices of soybean in coming months due to crop loss in Maharashtra. Currently, 0.75-0.85 lakh bags (1 bag = 90 kg) of soybean seed arrived daily across the country, sharply down from about 1-1.20 bags at this time of previous year, said traders.

Arrivals in Madhya Pradesh, the largest soybean producing state in India, were at 0.35-0.40 lakh bags, down from over 0.50-0.55 bags a year ago.

Further, kharif crop sowing is over which has given good window to farmers to hold back their inventory and there is no urgent need of funds for them. The main factor that would determine prices of soybean seed in the future was the rate at which the farmer was willing to sell his produce, said traders.
Demand Scenario : Buying interest in soybean seed from millers was good, as demand for soybean oil and soybean meal was firm. Demand for soymeal is good in domestic market from poultry feed manufacturers.

Farmers are not selling their produce at lower levels. So, miller are buying seeds at higher rates in bulk quantities as realization from sale of soybean oil and soybean meal is good. Soybean crush margin is in parity of around Rs 200/tonne.
Soybean Crop Prospects of 2017-18 : Crop prospects of soybean in key producing areas of Maharashtra is below average as compared to last year. Due to dry spell in July in Maharashtra around 25-30% of the crop has been damaged.

Marathwada and Vidarbha in Maharashtra are the key producer of soybean and accounts 90% of total production in the state, while rest 10% contributed by Madhya Maharashtra.

Soybean sowing in Maharashtra as on August 24 dropped 3.15% to 38.002 lakh hectares against 39.24 lakh hectares same period a year ago. According to KVR scientist, late sown soybean crop is in flowering stage, whereas early sown variety has entered podding stage. The crop is now at a very crucial growth stage and needs good rainfall at regular interval.





Sowing window for soybean has closed so soybean acreage is unlikely to change in coming weeks. Rainfall in Vidarbh and Marathwada during the current season so far was in deficiet of 28% and 12% respectively.


SOYMEAL

Soymeal at the benchmark Indore market gained by Rs 1,000 over the previous week to trade at Rs 26,800 per tonne amid improved demand from poultry feed manufacturers.

Demand from poultry farmers has increased drastically during the week amid rise in the placement of chicks, however the international market is subdued with weak exports weighing on meal prices at higher price level.

Indian Soymeal is priced at $433 per tonne FAS Kandla Vs $345 Argentina CIF Rotterdam (August) as of August 26, 2017. The difference between the two origin is $83 per tonne up by $11 compared to a week ago making Indian Meal less attractive.





SOYOIL

A bullish trend followed in refined soy oil in benchmark Indore market of Madhya Pradesh during the week which gained by Rs 15 to trade at 660/10kg on account of improved domestic demand couple with positive global sentiment.




In a major move, the US government announced to use rates of 64.17 percent for Argentina bio-diesel imported to USA from 50.29 per cent earlier. Argentina majorly exports soy oil for biodiesel use in USA. The news was supportive for the US soy crushing industry and CBOT soy oil futures.

CBOT soy oil December futures have gained by nearly 2.76% to 34.91 cents per pound during the week which kept market sentiment positive in domestic market also.

In domestic market wholesale traders were procuring soy oil in bulk quantities amid improving retail demand on account of Ganesh Chaturthi festival.

There was fear in mind of traders that due to increased import duties by US on biodiesel so soy oil price may increase sharply and to avoid procuring at higher price level they started purchasing soy oil in bulk quantities at current price level.

In futures market, soy oil most active September contract during the week on the National Commodity & Derivatives Exchange Ltd (NCDEX) ends up by 1.83 percent at Rs 663.40/10kg.


NEXT WEEK: Soybean prices may trade higher next week due to restricted farmer selling, poor crop prospects of 2017-18 in Maharashtra and improving demand from millers.

(By Commoditiescontrol Bureau; +91-22-40015533)