Weekly: Spot Soybean Declines on Weak Global Cues & Sluggish Demand

MUMBAI (Commodities Control)-

International Soybean Market Recap

CBOT soybean futures fell on Friday, with forecasts for beneficial crop weather across key growing areas in U.S. sparking a fresh round of fund liquidation ahead of the weekend.



A warming trend is finally on the way for the first time in April after one more cool five-day stretch across most major U.S. crop regions, which will hasten the planting pace in much-needed fashion.

Concerns about a trade spat with China threatening U.S. exports cast a bearish tone across the agricultural sector.

For the week, soybean futures have fallen 2.4 percent, to $10.40/bushel.

Domestic Soybean Market Recap

Soybean price in the benchmark Indore market declined by Rs 75 to trade at Rs 3775/100kg during the week ending 21st April.



Total crop arrivals during the week were reported at 0.6 to 1 lakh bags against 0.45 to 1.25 a week ago.

Domestic soybean market came under pressure due to sluggish demand of soybean from mills in spot market.

As per traders, demand of soybean from mills has declined during the week due to slow offtake of soymeal in domestic as well as international market.

Amid poor demand of soymeal, millers have been compelled to sell soymeal at lower price level which has affected their crush margin. Soybean crushing has turned into disparity of Rs 80/tonne against parity of Rs 250 last week.

Meanwhile, millers are also not getting the required quantity of soybean seed from the market yards. Daily crushing requirement by millers is 16,000 tonnes whereas they are able to procure around 12,000 tonnes on daily basis.

As of now millers are fulfilling their crushing requirement by mixing soybean held in inventory+daily procured soybean but if slow pace of arrival continues then sharp fall in soybean price will be ruled out.

On the other hand, farmers and stockists are still reserved sellers which can be confirmed by tracking arrivals week on week, as most of them are anticipating higher prices in near term. They are expecting soybean prices to rise to Rs 4,000/100kg in near term and then they might gradually liquidate their stock.

From current scenario it seems that soybean price of Rs 4,000 is a distant dream so farmers and traders are running out of time.

In futures market, Soybean most active May contract during the week on the National Commodity & Derivatives Exchange Ltd (NCDEX) ended down by 2.38% at Rs 3,760/100kg.

SOYMEAL

Soymeal at the benchmark Indore market during the week declined by Rs 1000 to trade at Rs 30,500 per tonne on sluggish demand from poultry feed manufacturers at higher price level.

Traders are reporting that demand of soymeal from poultry feed manufacturers has declined as poultry farmers are gradually reducing the placement of chicks. From April onwards summer season starts and conumption of broiler chicken declines which leads to slow placement of chicks.

Further poultry prices have declined by as much as 22 per cent since the beginning of February, on weak seasonal consumer demand. Besides, consumers have also stayed away from aggressive buying due to a bird flu scare.

As far as intenational soymeal market is concerned Indian soymeal is tentatively priced at $481 per tonne CIF Rotterdam vs $428 Argentina CIF Rotterdam (April) as on April 21, 2018. India Soybean Meal is now at premium of $53/MT in international market compared to $50 last week.

Overseas buyers are ready to pay premium of around $10-15/tonne for Indian soymeal which is non genetically modified whereas the Argentine soymeal is genetically modified.

SOYOIL

Refined soy oil in benchmark Indore market of Madhya Pradesh during the week declined by Rs 2 to trade at Rs 766/10kg amid sluggish demand at higher price level.

On 1st of March, Indian government increased the import duty on palm oil to 44% from 30% and RBD palmolein to 54% from 40% as result of which the palm oil prices have gained by nearly Rs 80/10kg.

Post duty hike spread between RBD palmolein and soy oil has reduced to Rs 40 from Rs 85 of pre duty hike so some of the RBD palmolein demand has shifted to soy oil which has limited the fall in soy oil prices.

CBOT soy oil futures declined by nearly 0.59% during the week to end at 31.56 c/lb on account of higher soy oil stock in U.S. due to higher crushing of soybean seed.

NCDEX May future is trading above the spot price by 10 points. The market continues to quote at a premium in expectation of duty hike. As demand seems to be weak and vessel arrival of imported soy oil seems to be good so trades should use sell on rise strategy for next week.

Around 1,30,250 tonnes of CDSBO will arrive till 25th April. On the other hand stock of soy oil at port has declined to 51,741 as of 16th April vs 63,702 on 9th April. So overall supply side seems to be comfortable.

The only factor which is bullish for the soy oil is depreciating rupee. The rupee was a bundle of nerves at the open on Friday as it sank 24 paise to a 13-month low of 66.06 against the dollar, hit by rising crude prices and fiscal deficit worries.

It breached the 66 level for the first time since March 14, 2017. Weaker rupee makes the import of edible oil costlier.

Soy oil Degum price during the week ending April 21, declined by $7 to trade at 807 per tonne in dollar terms (CNF) whereas it declined by Rs 9 to trade at Rs 716/10kg in rupees term at Kandla port.

Soy Oil April futures on National Commodity & Derivatives Exchange Ltd (NCDEX) ended up by 0.25% at Rs 776.65/10kg.

NEXT WEEK: Domestic Soybean prices are likely to trade lower on weak global cues and sluggish local demand from millers. However fall will be limited on account of slow supply.