U.S. soybean futures climbed to a one-week high on Friday, buoyed by a light surge of buying in the closing minutes of trade following a dull, largely technical session.
Soybeans had modest support from rains in the U.S. Midwest this week that slowed fieldwork.
“You are probably not going to have big harvest yields over the weekend, if the weather is the way it is,” said Don Roose, president of Iowa-based U.S. Commodities.
Also supportive were worries about dry conditions in portions of Brazil’s soy belt. Soybean planting in Brazil was 5.6 per cent complete as of Friday, consultancy Safras + Mercado said, down from 10.4 per cent at this time last year as dry weather conditions for most of September delayed seeding.
However, the figure was in line with a five-year average of 5.3 per cent, Safras said.
Traders should focus next week on any changes in the weather outlook for Brazil and Argentina, as well as the U.S. Department of Agriculture’s monthly supply/demand reports on Oct. 12.
They will watch whether the USDA adjusts its estimates of U.S. 2017 soybean yields and harvested area. Brokerage INTL FCStone and research firm Informa Economics this week raised their U.S. yield estimates for soybean crop.
Domestic Soybean Market Recap
Soybean prices in the spot markets during the week ending 7th October closed down by Rs 45 at Rs 2,880/100kg, in line with our expectation. Total old crop arrivals during the week, were reported at 2.5 to 3.75 lakh bags against 1.75 to 2.50 a week ago.
Soybean Futures also exhibited the same trend of spot market which closed lower by 2.31% at Rs 2,955/100kg.
During the start of the week soybean prices increased on account of tight selling by farmers but towards the end of the week prices declined amid higher supply coupled with limited demand from millers.
New soybean crop arrival has started in the market yards of Madhya Pradesh, Maharashta and Rajasthan which has weighed on market sentiment.
According to traders quality of crop in Rajasthan is very good among the three states whereas in Madhya Pradesh and Maharashtra quality of crop is average. New crop arrivals are likely to increase in coming days which will weigh on soybean prices so millers are waiting for the lower prices to procure soybean.
With the prices of soybean ruling below minimum support prices (MSP) of Rs 3,050/100kg, procurement of the commodity at MSP under the Centre’s price support scheme (PSS) will begin from October 16 in Maharashtra by NAFED.
On the other hand in Madhya Pradesh most of the farmers are waiting for the Bhavantar Bhugtan Yojana(Price Deficit Financing Scheme) which will commence from 16th October.
The objective of the scheme is to provide the compensation for agriculture products whenever its price fall below the announced minimum support prices (MSP) by the central government.The farmers will have to register themselves with mandis to leverage the benefits of Bhavantar Bhugtan Yojana.
As of now the demand in soymeal is low both in international and domestic market so millers are in no hurry to procure soybean at current prices.
Further the soybean market will get direction from the SOPA conference to be held on 7th & 8th October where industry experts will reveal the soybean crop numbers.
Traders are expecting that soybean production in 2017-18 season may turn out to be 85-90 lakh tonnes and higher end stock of 2016-17 season will be sufficient to meet the demand so soybean prices are unlikely to rally sharply in near term.
If soybean production turn out to be 70-75 lakh tonnes then only market sentiment will turn bullish for soybean.
Soybean arrival were steady at 4.75 lakh tonnes in August compared to last month amid restricted farmer selling.
Crushing in month of August is estimated at 6 lakh tonnes up by 4.75% on previous month.
The silver lining is that we are having a carryover stock of 19.16 lakh tonnes, which will suffice the production deficit of 2017-18 season if crop number is below 80 lakh tonnes and also the availability of soybean seed for crushing will be sufficient.
SOYMEAL
Soymeal at the benchmark Indore market declined by Rs 600 to trade at Rs 22,700 per tonne amid lackluster demand from poultry feed manufacturers.
Poultry farmers have reduced the placement of chicks as demand of broiler chicken will decline in Diwali festival which starts from 19th October 2017.
Indian Soymeal is priced at $370 per tonne FAS Kandla Vs $363 Argentina CIF Rotterdam (October) as of October 7, 2017. The difference between the two origin is $7 per tonne down by $15 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 65.35 against the US dollar, its lowest since April this year. The Federal Reserve in September 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 1.87% 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.
There are chances that India may get good export orders in OND period as Indian soymeal is trading at premium of $7 in international market down by $58 in last one month, which will boost both soybean and soymeal prices.
SOYOIL
A bearish trend followed in refined soy oil in benchmark Indore market of Madhya Pradesh during the week which declined by Rs 10 to trade at Rs 663/10kg amid poor demand.
Traders are very much disappointed that demand of soy oil did not improved as per expectation considering the upcoming Diwali festival season.
Further the port stock of soy oil has increased to 2,48, 673 tonnes as of 3 October compared to 2,39,639 on 25 September which is sufficient to meet the near term demand.
Soy oil prices prices were lower by USD 4 to trade at 815 per tonne in dollar terms (CNF) at Kandla port and also declined by Rs 5 to trade at Rs 625/10kg.
On the other hand CBOT soy oil futures have gained by 0.33% during the week to end at 32.95 cents per pound which has provided little support to local soy oil prices.
In futures market, soy oil most active November contract during the week on the National Commodity & Derivatives Exchange Ltd (NCDEX) ends down by 0.75 percent at Rs 659.50/10kg.
NEXT WEEK: Soybean prices may trade sideways to negative as demand for soybean by-products is dull so millers won’t be interested in procuring soybean in bulk quantities and on the other hand supply of new crop will increase which will further weigh on soybean prices.(By Commoditiescontrol Bureau; +91-22- 40015516)
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