Weekly: Spot Soybean Gains On Low Arrival

MUMBAI (Commodities Control) :

International Soybean Market Recap

CBOT soybean futures on Friday fell for a seventh session, hitting a three-month low of $9.57 a bushel in March contract and gave weekly close of $9.60 down by 1.84% as improved weather across Brazil and Argentina boosted expectations for another bumper harvest in South America.



The soybean market is being dragged down by rains in Argentina's drought-hit producing regions and forecasts of all-time high output of 109.18 million tonnes in Brazil. Increased soybean production in South America is expected to stoke competition in the global market, with U.S. exports already running behind last year's pace.

In addition to it more stringent specifications for U.S. soybean imports in China, the top global buyer, are adding to the bearish headwinds for soybeans. U.S. shipments to China as of Jan. 1 will be required to have reduced foreign material content to expedite unloadings, the U.S. Department of Agriculture said on Wednesday.

U.S. soybean farmers in recent years have been battling herbicide-resistant weeds, the remnants of which show up in harvested beans.

China accounts for roughly two-thirds of global soybean imports, buying primarily from the United States, Brazil and Argentina. Exports of U.S. soybeans to China in 2016 were valued at more than $14 billion, according to USDA..

Ensuring soybeans contained only 1 percent foreign material could add 15 cents per bushel in costs for U.S. exporters, and processors in China will likely buy from South America to avoid any potential delays in unloading.

The USDA on Thursday said weekly U.S. export sales of 1.7 million tonnes of soybeans were at the high-end of estimates which market completely ignored it.

In other news, The National Oilseed Processors Association (NOPA), reported U.S November soybean crush have declined by 0.43% to 163.5 million bushels in November compared to 164.2 million bushels in October, but 1.71% higher than same time last year. This was also slightly above market estimate of 163.2 million bushels.

Soybean oil stocks was reported at 1.326 billion pounds, above market expectation of 1.270 billion pounds. NOPA, the largest U.S trade organization for soybean crushers and releases crush data on the 15th of each month.

Domestic Soybean Market Recap

Soybean prices in the benchmark Indore market during the week ending December 22, closed up by Rs 55 at Rs 3,080/100kg. Soybean price managed to trade above MSP for second consecutive week on declining arrival.

Total new crop arrivals during the week were reported at 3.1 to 3.9 lakh bags against 4.8 to 4.2 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 4-5 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.

As far as demand is concerned it is fading as millers have slowed down the bulk purchase of soybean as they are facing disparity of Rs 100/tonne in crushing of soybean seed.

In addition to it sales of soymeal is not improving as per millers expectation in domestic market which is keeping the market sentiment subdued.

SOYMEAL

Soymeal at the benchmark Indore market declined by Rs 100 to trade at Rs 22,900 per tonne amid subdued demand of Soymeal at higher price level from local poultry feed manufacturers for the commodity in domestic market.



In December soymeal price have gained by nearly Rs 700/tonne but on the other side price of wholesale broiler chicken were steady around Rs 88/kg in benchmark Delhi market.

Procuring soymeal at higher price level reduces the profit margin of poultry farmers so they have slowed down the purchase of soymeal in bulk quantities. Soymeal is the major constituent of feed which is given to chicks.

As far as export of soymeal is concerned it is likely to improve in December but that has already been factored in the soybean price.

India is likely to export around 250,000 tn of soymeal in December, tad higher than 240,000 tn in the year-ago period, traders said.

Bangladesh, France, Germany and Japan are among the major importers of Indian oilmeal. Export enquiries were also seen firm from southeast Asian countries due to the diminishing gap in prices of Indian and South American soymeal in last week of November.

Soymeal from India was quoted at $380-$390 per tn, almost the same as international prices. Non-genetically modified soymeal in India consists of higher protein than that produced in the South Americas, and is usually sold at a premium of $10.

India's soymeal exports in November quadrupled to 248,000 tn from 61,000 tn a year ago, while those during Oct-Nov were pegged at 325,000 tn, against 80,000 tn in the corresponding period last year, according to the data.

India's soymeal exports in the year ended October-September surged to 1.76 mln tn from 261,502 tn in the preceding year, the data showed.

A year back, Indian soymeal was attracting a premium of $30 per tn, while two years back, it was around $100-$150.The overall decline in exports in 2015-16 years was mainly due major buyers shifting demand to South American countries as they offered lower prices.

Now question arises weather the export of soymeal in January will be at the same pace of November & December as the Indian soymeal is now in disparity compared to Argentine soymeal.

Indian soymeal is tentatively priced at $389 per tonne CIF Rotterdam vs $368 Argentina CIF Rotterdam (December) as on December 22, 2017. India Soybean Meal is now in disparity of $21/MT in international market compared to Argentine soymeal which indicates that export demand of Indian soymeal may decline from January on wards.

SOYOIL

Refined soy oil in benchmark Indore market of Madhya Pradesh during the week declined by Rs 8 to trade at Rs 712/10kg 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 which means supply is exceeding demand.

Further sluggish CBOT soy oil futures has also weighed on local soy oil market. CBOT soy oil price is on a declining trend and it has plunged by nearly 1.19% during the week whereas it has declined by 2.86% in December.

If the demand does not improve in coming weeks and CBOT soy oil futures keeps declining, 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 also as the demand of commodity was 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.

During November 2017, Import of refined oil soy oil degum has increased to 2,73,928 tons from 2,20,200 tons in October 2017and 1,64,286 tons in November 2016.

Soy oil Degum price during the week ended on December 22, declined by $17 to trade at 695 per tonne in dollar terms (CNF) whereas it declined by Rs 8 to trade at Rs 685/10kg in rupees term at Kandla port.

Sun oil price in CIF term was trading at a discount of $2 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 January contract during the week on the National Commodity & Derivatives Exchange Ltd (NCDEX) ended down by 1.50% at Rs 718.35/10kg.

NEXT WEEK: Soybean prices are likely to trade range bound next week as declining arrival will provide support to soy oil price whereas sluggish demand from millers will weigh on the commodity at higher price level.

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