Ritesh Kumar Sahu

Soybean futures climbed to a 30-month high in January supported by increasing demand from the domestic oil mills amid higher meal exports coupled with good domestic demand for edible oil in the country.

Soybeans futures on National Commodities and Derivative Exchange (NCDEX) crossed Rs 3,900 per 100 kg but corrected due to profit booking to close at 3,838 levels.

It is a fourth consecutive monthly gain in the price for soybean despite 30 percent higher output on year during the 2018-19 season.

Moreover, there was concern over soybean output in South America, which has pushed soy oil prices in the International markets.

On Chicago Board of Trade (CBOT), soy oil prices jumped by over  9 percent in the month of January on concern over lower output in Brazil and Argentina due to erratic climatic conditions.

India consumes about 50 lakh tonnes of soybean oil out of which 75 percent to 80 percent is imported from Argentina and Brazil.

This year farmers of Madhya Pradesh, the largest soybean producing state, have higher bargaining power due to the implementation of Bhavantar Bhugtan Yojana (BBY) where the government pays a flat bonus of Rs 500 per quintal to farmers over any above its selling price who sell their crop on time.

However, during the last year’s Bhavantar Yojana, the government simply provide the difference between the selling price and the minimum support prices leaving no scope for the farmers to bargain for higher prices.

We have seen soybean futures jump of over 21 percent in January last year due to record hike in import duties on edible oil – palm and soft oils.

Soybean demand from the local oil millers was high due to its higher exports demand for soymeals. Soymeal exports have increased due to a surge in demand from Iran.

India exported about over 3 lakh tonnes of soymeals to Iran during the October-December period compared to only 22,910 tonnes last year for the same period.

According to monthly export data published by the Solvent Extractors’ Association of India (SEA), export of soymeals during December 2018, provisionally reported at 2.4 lakh tonnes compared to 1.6 lakh tonnes in December 2017, up by 42.4 percent.

Overall, Soymeal exports during the October-December quarter was up by 29 percent to 5.77 lakh tonnes compared to 4.48 lakh tonnes the previous year.

In 2018-19, soybean production is higher by over 30 percent due to a higher area and good climatic conditions. Soybean Processors Association of India (SOPA) in its latest press release forecast soybean output at 114.83 lakh tonnes for the 2018-19 season due to normal monsoon and higher acreage.

However, USDA in its latest report pegged the soybean output estimate for marketing year (MY) 2018/19 (October-September) at 110 lakh tonnes, up 31 percent from last year production.

In January, soybean futures climb over 12.5 percent but now corrected a bit due to profit booking. However, going forward, Soybean may trade positive towards Rs 4,100 per 100 kg (CMP: Rs 3,800) in the next 2-3 months if meal exports to Iran continue to rise during rest of the season.

The price movements would mostly be positive as per its seasonality until the announcement of monsoon forecast in April-May while the price may fall if monsoon forecast turns normal.

The author is Research Analyst- Agri- Commodities, at Angel Commodities Broking.

Disclaimer: The views and investment tips expressed by investment expert on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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