MUMBAI (Commodities Control) : International Soybean Market Recap
Ongoing pressure from large supplies and lack of a weather threat kept markets on the defensive this week. Weather forecasts looked relatively favorable for Midwest soybean crops, although there was still uncertainty as to whether showers would reach all of the areas affected by very dry conditions earlier this summer. August is a critical time for soybean development as pods are filling and rain now falling in many soybean-growing areas will boost crop conditions.
One factor helping to support soybean prices has been Chinese buying, especially for the nearby September contract. Soybeans have been underpinned this week by renewed export demand, suggesting a window for U.S. exports despite record harvest supplies in rival exporter Brazil.
CBOT November Soybeans traded steady in the previous week creating the Lows of 921, high of 941 and closing at 938 making a doji candle on the charts. This indicates a possible change of trend in the short term with prices to rise from hereon.
Domestic Soybean Market Recap
Soybean in the spot markets was bullish during the week ending 19th August, in line with our expectation and closed higher by Rs 100 at Rs 3,075/100kg amid concern of crop losses in Maharashtra. Total arrivals during the week, were reported at 0.95 to 1.15 lakh bags against 0.75 to 0.90 a week ago.
Weather : Market sentiment turned bullish during the week, as weather concerns increased in Maharashtra amid dry spell since last one month which eventually become the center of attraction in the market.
Marathwada and Vidarbha in Maharashtra are the key producer of soybean and accounts 90% of total production in the state, while rest 10% contributed by Madhya Maharashtra. Deficit rainfall in Vidharbha and Marathwada region,has led to an uncertainty among market participants about the productivity of soybean crop. In order to clear doubts, commodities control spoke to farmers and Krishi Vigyan Kendra Scientist to know the current status of the crop.
According to KVR scientist, late sown soybean crop is in flowering stage, whereas early sown variety has entered podding stage. The crop is now at a very crucial growth stage and was in need of good rains at regular interval during past one month, which has been absent in both the regions.
Rainfall in Vidarbh and Marathwada during the current season so far was in deficiet of 30% and 32% respectively.
In most districts the situation is getting critical, the crop is damaged substantially on the field despite resowing due to lack of rainfall. There were no rains for a month in most districts of Marathwada and Vidharbha. Since soybean is short duration crop, farmers are no longer in a positions to resow and they have lost a season earnings amid prolonged dry spell.
According to KVR scientist around 30-40% of the crop has been damaged in Marathwada, whereas around 40-50% of the crop has been hurt adversely in Vidharbha region.
Moreover, major soybean producing state of Madhya Pradesh is also suffering from dry spell since last fifteen days but crop situation is not that critical as compared to Maharashtra as the moisture in the land has not detoriated sharply. According to market sources, there may be crop loss of around 10-15%. Rainfall in Madhya Pradesh during the current season is reported deficient by 23%.
However, some sign of relief is likely for farmers as IMD has forecasted heavy rains across Maharashtra and Madhya Pradesh in next two days, which may provide some relief to soybean crop and may cut the losses earlier caused by poor rain.
The quantum of crop damage will decide the trend of soybean prices in long term. If crop damage in Maharashtra is below 30-40% percent then it won’t have any bullish impact on the market as the carry over stock of soybean are estimated to be around 2-3 million tonnes from last year’s crop.
Maharashtra and Madhya Pradesh produced around 39.45 & 53 lakh tonnes of soybean respectively in 2016-17 kahrif season against 22 & 34 lakh tonnes in 2015-16.
Kharif Soybean sowing in the country continued to lag behind last year due to shift in farmer’s interest amid sharp slump in prices.The drop in acreage was sharp in Madhya Pradesh, Rajasthan, Maharashtra and Telengana as poor realization prompted farmers to shift to other better alternative.
Sowing window for soybean has closed so soybean acreage is unlikely to change in coming weeks. Soybean planting reached 102.327 lakh ha as of August 17 compared to same period last year at 112.510 lakh ha according to Ministry of Agriculture. Soybean planting has declined by 9.05 percent over last year.
Heavy speculations on the magnitude of crop damage in Maharashtra is looming over the market which tempted the bulls to create long positions on the futures market which rallied nearly 3.15 percent during the week at Rs 3,185/100kg in the new crop October contract.
SOYMEAL Soymeal at the benchmark Indore market gained by Rs 900 to trade at Rs 25,300 per tonne tracking positive movement of the soybean prices.
It’s not due to the demand that soymeal price have rallied. Amid limited availability of soybean at lower prices in spot markets, millers were unable to procure soybean as per their requirement. Hence, they started offering higher rates to farmer which was pressurizing their crush margin and to maintain the viable crush margin they increased selling price of soymeal. Demand from poultry farmers is gradually increasing amid rise in the placement of chicks, however, the international market is subdued with weak exports weighing on meal prices.
Indian Soymeal is priced at $417 per tonne FAS Kandla Vs $345 Argentina CIF Rotterdam (August) as of August 19, 2017. The difference between the two origin is $72 per tonne up by $13 compared to a week ago making Indian Meal less attractive.
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 645/10kg on account of slack demand at higher price level.
Stocks of soy oil at Indian ports has increased to 2,34,995 as of 18th August from 2,18,782 tonnes as of 7th August which is sufficient to meet the near term demand.
The import of soy oil is in disparity of around Rs 22/10kg keeping the importers on the sidelines and post the Import duty imposition, traders have refrained themselves from any bulk purchases. In futures market, soy oil most active September contract on the National Commodity & Derivatives Exchange Ltd (NCDEX) ends up by 0.11 percent at Rs 655.70/10kg.
NEXT WEEK: Soybean prices may trade volatile next week due to uncertain weather in key soybean growing areas of Maharashtra and Madhya Pradesh with a bullish bias.
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