Global Demand Of Soymeal Will Decide Future Of Soybean Price

MUMBAI (Commodities Control) :

International Soybean Market Recap

U.S. soybean futures inched up further to $10 a bushel during the start of the week amid worries about poor weather threatening yield prospects in Argentina. However, towards the end of the week, on Friday, soybean futures fell to a one-week low. This is primarily due to the expectations of a bumper crop in Brazil threatened to cut into US exports.

Traders shrugged off signs of strong demand for US soybeans and dry weather in Argentina amid the improving outlook for harvests in Brazil. Consultancy AgRural on Friday raised its forecast for 2017-18 Brazil soybean production to 112.9 million tonnes from previous 110.2 million. Soymeal futures also fell but Soyoil rose, which traders attributed to unwinding of long soymeal/short soyoil spreads.

According to The US Department of Agriculture, the private exporters reported the sale of 2,68,000 tonnes of soybeans for delivery to China during the 2017-18 marketing year.

The government also disclosed another 129,000-tonne sale to unknown destinations for 2017-18 and a 66,000-tonne sale to unknown destinations for 2018-19.

Soymeal futures rose 0.7% this week. Soyoil futures posted a weekly loss of 0.2%.

Soybeans had managed an over 80 cent rally off from the August 16 low. However, it has given back more than 20 cents after failing to break out over the mid-October highs. This is primarily attributed to dryness concerns in Argentina and a long term La Nina forecast.

On the other hand, Argentinean growing season is still picking up with presently only 50% plantation of soybeans. It is very early in the growing season and Argentina will need to see consistent follow up rains. So, unless this is the start of a major change in the weather pattern this could just be a correction in soybeans and soybean meal before going higher.

Further, much of the recent strength in soybeans has come from soybean meal. The March soybean meal is also well off the mid-August low but in early November it escalated to the downside. However, a big reversal on November 17 had fueled upside follow through to new contract highs before selling off.

Future trend of CBOT soybean will depend on global soybean demand.


Domestic Soybean Market Recap

Soybean prices in the benchmark Indore market during the week December 9, closed up by Rs 100 at Rs 3,050/100kg. Soybean price touched MSP after trading below MSP for 8 consecutive weeks, and there are signs that soybean price will trade above MSP in long term.

During the week, spot soybean prices have rallied on the back of declining arrival coupled with hike in incentive for export subsidy on Soymeal by 2% to 7%.

Total new crop arrivals during the week have reported at 4.4 to 4 lakh bags against 5.5 to 5.2 a week ago.

Arrivals are still below market expectation which has raised the question on SOPA’s soybean production estimate of 91.45 lakh tonnes. According to traders, at current situation supply of soybean in the market should have been around 6-7 lakh bags so in coming week if arrival does not increase then we may not see any major drop in soybean prices.

As of now, traders are anticipating that soybean production can be around 80-85 lakh tonnes.

Last month, the government almost doubled import duty on all edible oils. This strategy has worked in favor of farmers and led to an increase in soybean prices.

Further, millers are having parity of around Rs 100/tonne so they won’t mind offering higher prices to farmers.

In addition to it, most of the millers are anticipating that demand of Indian Soymeal in international market is likely to improve as Indian Soymeal is trading at par with Argentine Soymeal.

India soybean arrivals during the first two months (Oct-Nov) of new season 2017-18 is edged higher at 34.50 lakh tonnes against 24 lakh tonnes during same time of the last year, state the Soybean Processors Association of India (SOPA)'s report.

The rise in arrivals are primarily attributed to Bhavantar Bhugtan Yojana in Madhya Pradersh. Under this scheme if farmer sells soybean below MSP, the difference between the MSP and model price would be paid by state government to farmers. This, however, tempted farmers to offload the stock of soybean to take the benefit of the scheme as price of soybean was trading below MSP.

SOYMEAL

Soymeal at the benchmark Indore market traded up by Rs 800 to trade at Rs 23,200 per tonne amid improved demand of Soymeal from local poultry feed manufacturers for the commodity in domestic market. Since they have increased the placement of chicks for upcoming peak winter demand of broiler chicken across India.

Price of broiler chicken in benchmark Delhi market traded steady during the week at Rs 93/kg.

On the other hand, international demand of Soymeal is increasing as Indian government increased MEIS on Soymeal from 5% to 7%. This step will make Indian Oilmeal more competitive in the global market and may result in the larger export of Oilmeals during current year.

Indian Soymeal is tentatively priced at $383 per tonne CIF Rotterdam vs $385 Argentina CIF Rotterdam (December) as on December 9, 2017.

India Soybean Meal is now in parity of $2/MT in international market compared to Argentine soymeal which is likely to boost soymeal exports in coming months.

India has shipped 2,07,630 tonnes of soybean meal in November 2017 compared to 97,750 in November 2016. Soybean meal exports during April to November 2017 have jumped to 7,68,981 tonnes compared with 2,04,860 same time of the last year, as per data compiled from Solvent Extractors Association of India(SEA).

Further, SEA has estimated India Soymeal Export to bolster by around 2 mln tn, from the previous estimate of 1.5 mln tn for the year 2017-18 (Oct-Sep).

SOYOIL

Refined soy oil in benchmark Indore market of Madhya Pradesh during the week declined by Rs 10 to trade at Rs 716/10kg amid poor demand at higher price level.

As of now, the monthly demand of soy oil is 3 lakh tonnes whereas availability from local crushing + pipeline+port stock comes around 3.50 lakh tonnes.

If the demand does not improve in coming weeks and CBOT soy oil futures will drop sharply along with appreciating rupee, then there is a possibility that soy oil may drop to the pre duty level of Rs 680/10kg.

Indian government hiked import duty on crude soy oil from 17.50 to 30% on November 17. Mathematically, the impact of duty hike is of Rs 70.50/10 kg on soy oil but in spot market soy oil price has gained by Rs 45 to trade at Rs 725/10kg. However, it could not sustain at that levels as the demand of commodity is not that good against the sufficient stock at port and in pipeline.

Even though import duty on soy oil has increased, soy oil imports for the full year is expected to remain higher than last year as local soybean seed supplies are limited which will not be able to meet the soy oil demand.

Importers have mostly cleared there pre duty inventories. Now they are waiting at what level price will stabilise in the local market before deciding about December & January imports.

Soy oil Degum price during the week ended on December 9, declined by $17 to trade at 812 per tonne in dollar terms (CNF) whereas it declined by Rs 17 to trade at Rs 685/10kg in rupees term at Kandla port.

Sun oil price in CIF term was trading at a discount of $12 to soy oil. Due to which, importers will try to import more of sun oil as it is considered as premium oil.

In futures market, Soy Oil most active November contract during the week on the National Commodity & Derivatives Exchange Ltd (NCDEX) ended down by 2.94% at Rs 723.45/10kg.

NEXT WEEK: Soybean prices are likely to trade higher on account of improving demand from millres amid strong sales of soymeal coupled with lower arriavl of soybean in market yards.

(By Commoditiescontrol Bureau; +91-22- 40015516)