Mumbai (commoditiescontrol) - India oilseed market witnessed bearish tone during the week ending on Saturday thanks to higher production estimates against subdued domestic demand.
MUSTARD SEED:
Spot mustard seed at the benchmark Jaipur market dropped to 11-month low amid prospects of bumper production compared to last four years amid higher sowing and favorable weather. Poor inquiry in mustard oil and mustard oilcake has also weighed on prices.
Mustard seed dropped 2.4 percent to settle at Rs 4,070/kg this week in Jaipur largely due to low demand for mustard oil and larger than expected production.
India agriculture ministry in second advance estimates released on Wednesday pegged domestic mustard seed crop sharply up at 79.12 lakh tonnes versus 67.97 lakh tonnes a year ago.
Industry experts have estimated mustard crop between 65-70 lakh tonnes against 55 lakh tonnes previous year.
Apart from big production size, new crop seen better than expected and oil content is said to be 40-42 percent due to favorable weather condition after good monsoon season last year.
However, demand mustard oil is weak as prices are uncompetitive in the complex and too high to attract millers for crushing or blending with other cheap oil. Crush margins has improved in the recent weeks, but it is still in negative territory and thus crush activity is slow.
Mustard oil at present is premium by Rs 6/kg to refined soy oil and hence demand shifted to other edible oil attractive in terms of price.
Demand for the other by-product mustard cake was as per requirement as crushing were low due to negative crush margin as prices of raw material were high.
Mustard cake eased by 3.19 percent this week as domestic and overseas inquiries were said to be sluggish, while mustard oil Kacchi Ghani lost 3.16 percent.
According to analyst, mustard oil should have to correct by another 3-4/kg in order to get competitive with other edible oils.
However demand for mustard oil in the coming weeks unlikely to rise due to sufficient availability of other edible oil at competitive rates, the said.
Crushing of mustard seed is likely to hurt significantly in case demand for mustard oil doesn't improves soon. Not only mustard oil will suffer but mustard seed is also likely to feel the pressure.
Mustard seed in Jaipur market may fall up to Rs 3,800-3,850 per 100kg for crush to be in parity with mustard oil trade at Rs 730-740/10kg to be competitive with other edible oils, whereas and If mustard cake prices remain steady at Rs 1,820/100kg.
According to market participants carry over stock of mustard seed is around 3.5-4 lakh tonnes which will weigh on prices when the new crop arrivals starts in full swing.
In coming days, outlook for mustard seed is sluggish as arrivals likely to rise ahead, whereas demand for mustard oil and cake is expected to remain laggard in the spot markets.
In futures market this week, mustard seed most active April contract dropped 0.84 percent lower on the National Commodity & Derivatives Exchange Ltd (NCDEX), while forward May contract eased 0.85 percent.
SOYBEAN:
A downtrend was witnessed in soybean market on higher than expected crop forecast by authorities and low demand for by-products.
India likely to produce 141 lakh tonnes of soybean in crop year 2016-17 against last year 85 lakh tonnes, said Ministry of Agriculture in its second advance estimate for oilseed production.
The estimate is too large for the country to digest as the market was expecting soybean output around 115 lakh tonnes, whereas demand is very poor for by-products due to heavy volatility in futures market and weak global cues.
U.S soybean futures dropped 2.5 percent this week and soybean meal lost 0.73 percent largely due to improving harvest condition in South America, triggering high possibilities of demand shift from U.S to Latin America.
In latest development, Mexico Agriculture Minister is planned to visit Brazil, Argentina to make deals for Agri-Commodities as demand shift program from U.S To South America due to U.S changing policies under newly elected president Trump.
In domestic market, demand for soybean meal is reducing or as per requirement as local poultry farms have a general feeling that supply wont be disrupted due to high production of raw material in the country. Demand for soybean meal is also weakening as other poultry feeds are available at cheaper rates.
In export market, demand for soybean meal is not picking as expected and limiting crushing capacity and price movement of raw material.
However, demand for soybean meal should triplet to support soybean seed from a big fall, and if not then a big amount of raw material will be carry-forward to next year.
According to CC-Analyst, nearly 100LT crop still available with all segments of market, which is large enough to meet any demand till new crop arrivals in Sept-Oct.
Soybean prices likely to remain under pressure, as farmers may loose patience of holding their produce and become aggressive sellers due to tepid demand for soybean meal, falling prices of soy oil and big crop in hand.
Currently soybean arrivals are around 2.6-3 lakh bags on daily average across the country, which is absorbed by crushers to keep their units operational despite negative margin.
The analyst continues to say, India has to export nearly 4-5 lakh tonnes soybean meal with regular local demand to support and pushup prices of raw material.
Monthly data released by The Solvent Extractors Assoc. of India (SEA), the soybean meal export has slump 35 percent to 1.55 lakh tonnes in month of January'17 against 2.41 lakh tonnes in December'16.
In coming weeks, soybean may witness some panic selling as farmers, traders are facing losses in other agri-commodity prices coupled with weakness in global market for soybean seed.
Soybean prices were dropped Rs 50 this week in range of Rs 2750-2950/100kg versus Rs 2800-3000 on Previous Friday, while soybean meal lost Rs 400 per tonnes at Rs 23000 against last week Rs 23400 on low demand.
In futures market, Soybean most active March contract dropped 3.53 percent while forward April contract was lower by 3.58 percent on the National Commodity & Derivatives Exchange Ltd (NCDEX) this week.
NEXT WEEK: Outlook for oilseed market seen dismal on weak global cues and focus will remain on demand for by-products.
(By Commoditiescontrol Bureau; +91-22-40015516)
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