Spot Soybean To Trade Higher Next Week

MUMBAI (Commodities Control): Domestic Soybean Market Recap

Soybean prices in the spot markets during the week ending 23rd September closed higher by Rs 40 at Rs 3,020/100kg, in line with our expectation. Total old crop arrivals during the week, were reported at 0.65 to 1 lakh bags against 0.85 to 1.30 a week ago.

This week there was limited trading activity in spot markets due to Amavasya on 19th and 20th September coupled with heavy rains in last three days in key soybean growing areas of Madhya Pradesh due to which farmers were unable to bring soybean for auction in market yards. Due to recent rains early sown variety of soybean has been damaged due to water logging as it was mostly harvested and kept in the field whereas late sown variety which is in pod filling stage will benefit from the rains if water recedes in coming 2-3 days other wise they will also get damaged. As per industry officials as of 11th Septemeber India`s soybean production during the 2017/2018 crop year may drop 22 percent to 89 lakh tonnes from a year ago after a reduction in the planting area and because of a prolonged dry spell in key growing regions but according to us this crop number will further decline to 85 lakh tonnes due to recent damaged caused by rains. According to traders 50% of the farmers in Madhya Pradesh plant early variety of soybean crop. Further harvesting has been delayed by 10-15 days so new crop arrival has declined to 5,000-7,000 bags from 8,000-15,000 a week ago. New crop is containing 18-25% moisture and traded in the range of 2,200 - 2,600/100kg. Even if the soybean production declines to 85 lakh tonne in 2017-18 season then also it will be sufficient to meet the demand of crushing industry due to higher end stock of 20 lakh tonnes in 2016-17 season. So soybean prices are unlikely to rally sharply in coming months. On derivatives, the benchmark October soybean seed during the week was up by 1.07 percent at Rs 3,135/100kg on the National Commodity & Derivatives Exchange Ltd.
SOYMEAL



Soymeal at the benchmark Indore market traded steady at Rs 25,200 per tonne amid limited demand from poultry feed manufacturers. Indian Soymeal is priced at $410 per tonne FAS Kandla Vs $367 Argentina CIF Rotterdam (September) as of September 23, 2017. The difference between the two origin is $43 per tonne down by $25 compared to a week ago. Premium of Indian soymeal has declined in international market due to weak rupee and rally in CBOT soymeal futures. The rupee fell to a nearly 6-month low of 65.14 against the US dollar, its lowest since April this year. The Federal Reserve on Wednesday announced a plan to start shrinking its balance sheet in October and signalled one more rate hike later this year which triggered selling in rupee. CBOT soymeal futures have gained by 2.04% during the week tracking gains of soybean futures as market participant feels that U.S. soybean crop will turn out to be much lower than what USDA estimates and also the demand of soybean is good from major importer i.e. China.

SOYOIL
A bullish trend followed in refined soy oil in benchmark Indore market of Madhya Pradesh during the week which increased by Rs 2 to trade at 670/10kg amid improved demand.

During the start of the week demand of soy oil was sluggish but as soon as Navratri festival commenced on 21st September demand of soy oil started to pick up. Further the import of soy oil is still costlier by around Rs 5/10kg so importers have stopped bulk purchases which may create supply shortage in medium term keeping the soy oil prices steady to firm. However sharp rally is not expected as edible oil stock in pipeline as of 1st September is around 15,90,000 tonnes which is higher by 22% compared to the same time of the last year. Soy oil prices were higher by USD 9 to trade at 844 per tonne in dollar terms (CNF) at Kandla port and also gained by Rs 30 to trade at Rs 660/10kg. On the other hand contradictory trend has been observed between CBOT soy oil futures and Indian soy oil futures . CBOT soy oil December futures have declined by 1.52% during the week to end at 34.22 cents per pound whereas NCDEX soy oil October futures have gained by 1.63 percent to end at Rs 682/10kg. Indian soy oil future have rallied due to depreciation of rupee which makes the import of soy oil costlier and also they are trading below the import parity.


NEXT WEEK: Soybean prices may trade higher on detoriating crop prospects.