NCDEX Feb Soybean traded higher on Wednesday tracking good physical demand. Moreover, the supplies have been diminishing slowly in the physical market. The arrivals have been lower during December compared to last year. As per, Agmarknet, 7.82 lakh tonnes (lt) of soybean arrived in physical market in December against close to 8.6 lt last year for the same time period. The Soybean Processors Association of India (SOPA) has, in its first quarterly estimates, put the total supply of the bean at 104.49 lakh tonnes (lt) for the oil year 2017-18, with estimated carryover stocks of 3.99 lt.
SOPA increased its meal exports estimates for 2017/18 due to increased export incentives by 2% to 7% by government for all meals. Soymeal exports from the country in 2017-18 (Oct-Sep) are seen rising to around 20 lakh tn from previous estimate of 15 lakh tn due to a recent rise in export incentives.
US Soybean futures slip to four-month low on Wednesday, declining for the third straight session on expectations of higher U.S. stocks due to slower exports and a forecast of increased production in Brazil. Moreover, forecasts showing rain in drier parts of Argentina for the upcoming weekend are weighing on the market. Analysts polled by Reuters expected the USDA to show higher U.S. soy ending stocks and increased Brazilian soy output. Moreover, Brazilian consultancy on Tuesday raised its estimate for Brazil's soy harvest to 111.8 mt.
RMseed (Mustard seed)
Mustard Apr futures closed lower due to profit booking tracking weak physical demand. Market is still expecting for some demand side fundamentals as downside looks limited. Currently, mustard is trading lower than its MSP due to reports good progress in sowing season and steady demand. Currently the prices have been moving according to the winter demand but reports of lower acreage than last year and higher carry-over stocks are putting pressure in futures. The acreage of mustard was down 6% till last week at 65.3 lakh ha, as per latest rabi sowing report by the government. Rajasthan is the largest mustard growing state but the sowing pace is slower than last year at 20.9 lakh ha Vs 28 lakh ha.
Soybean futures are expected to trade sideways on reports of improved demand from the oil mills. However, technical selling at higher levels may keep the prices under pressure. Moreover, higher incentives for oil meal export, improved estimates for meal exports and slow arrivals of soybean in physical market will support soybean prices in coming months.
Mustard futures expected to trade sideways to higher due to mixed fundamentals good physical demand coupled with higher stocks with the oil mills. There is an anticipation of good physical uptake by oil mills on expectation of good winter demand may keep prices supported above 4000 levels.
Refine Soy Oil
Refined Soy Oil Feb contract traded positive due to improved demand from bulk buyers before the festival season starts. The prices were under pressure last fortnight due to higher stocks in the country and sufficient stocks in the pipeline amid improved domestic crushing and higher imports in November.
The government has slashed the base import price of all edible oils. For soy soil the base import prices were cut by $19 per ton to $813 for the first fortnight of Jan 2018. The government revises base import prices every fortnight based on global prices and changes in foreign exchange rate.
Prices were last revised on Dec 15. According to data released by the Solvent Extractors' Association (SEA), India vegetable oil imports rose around 6% on year to 12.5 lakh tonnes in November. Soyoil imports surged by 66.7% in November to 2.74 lt compared to 1.64 lt last year.
Crude Palm oil
MCX CPO closed higher tracking firm international palm oil prices. Recently the prices have recovered due to reports of good demand from the stockists. However, on anticipation that country will import more as Malaysia lifted export taxes may pressurize prices. Government cuts base import prices of palm oil by $25 to $678 per tonnes for the first half of Jan. As per SEA latest report, the stocks of edible oil in the country are higher by 24% compared to last year stocks at 22.67 lakh tonnes.
Malaysian palm oil futures rose nearly 1% on Wednesday, supported by strong export data from a cargo surveyor. The prices have rebounded from a sharp drop in the previous session. Malaysian palm oil exports rising 12.2% during Jan. 1-10 compared with the corresponding period last month.
Malaysia, the world's second-largest palm oil producer have suspend export taxes on crude palm oil for a three-month period starting on Jan. 8 to boost prices and reduce stockpiles. Industry regulator the Malaysian Palm Oil Board reported that palm oil stocks in Malaysia rose 7% on the month to a more than two-year high of 2.7 mt at end-December. Production fell 5.6% on the month to 1.8mt, while exports edged up 4.9% to 1.4 mt.
We expect Ref Soy oil to trade higher due to increase in soybean prices and good physical demand. Moreover, cut in base import prices good stocks may pressurize prices at higher levels. Reports of improved demand in physical market before the start of festival season is supporting.
CPO futures may trade sideways to down tracking weak international prices. Moreover, higher stocks and cut in base import prices by the government for first half of January may keep prices in a range. Appreciation in USDINR may also impacted negative for the CPO prices.
Chana Mar futures closed higher on fresh buying by the market participants at lower prices. Current futures have been trading at nearly 3 year low on reports on higher stocks and good sowing progress. As per government sowing data, area under the chana crop across the country was up 12.7% on year at 103.8 lakh ha as on last week. As per government data, India imported about 5.84 lakh tonnes of chana during Apr-Oct, up by 430% compared the last year imports.
Market participants will shift to Mar delivery contract as margins have been levied on the near month contracts. Earlier, NCDEX imposed a special margin of 5% on the sell side to support falling prices.
Chana futures may trade sideways on expectation of higher crop and acreage. Moreover, imposition of special margin on sell side may restrict some down trend.
Cotton / Kapas
MCX Jan Cotton closed higher on Wednesday tracking firm trend in International cotton and kapas prices in the domestic market. Good physical demand and improved exports are keeping the prices higher. Market arrivals of cotton in the first three months of the 2017-18 marketing season starting October are higher by around 43% over corresponding last year.
However, based on the healthy market arrival trend of cotton so far, the Cotton Association of India (CAI) has maintained the crop size for the 2017-18 season at 375 lakh bales (of 170 kg each) in its latest estimates. Cotton Corporation of India (CCI) has procured around 5 lakh bales this season of which 4 lakh bales have been procured at MSP and the remaining 1 lakh bales as part of its commercial operations.
ICE cotton rose over 1.6% on Wednesday, supported by speculator buying, as prices of the natural fiber crop hovered close to a 3-1/2-year high touched last week. US exports may see another increase in Friday’s USDA report, as total commitments are well above the average. However, that could be offset by the fact that actual exports are currently down from this time last year.
Cotton futures are expected trade sideways on expectation of balanced fundamentals of good arrivals, improved physical demand from the domestic mills and higher exports demand from neighboring countries. However, lower than expected production in the country may keep prices supported at higher levels.
Spices (Jeera & Turmeric)
NCDEX Mar Jeera slip more than 2.7% on Wednesday as market participants initiated fresh selling on expectation that jeera production may be higher in coming season on reports of higher acreage of cumin in the current season. In Gujarat, Jeera acreage is up by 38% to 3.83 lakh hectares as on 9-Jan-18. Last year, it was 2.88 lakh ha at that same time. Jeera arrivals during first 10 days of Jan 18 Dec were down to 879.5 tonnes on year compared to 3,944 tonnes due to tight supplies and lower stocks with the stockists. Moreover, good progress of jeera sowing in Gujarat pressurizes prices.
As per government data, Jeera exports during first seven month of FY 2017/18 (Apr-Sep) is 88,229 tonnes, up 11% compared to last year exports volume for the same period. India's jeera exports in October increase by 37% on year to 10,402 tn.
Turmeric Apr contract closed higher on short covering by the Market participants. The supplies from the new season turmeric have been lower during first 10 days of Jan at 4,118 tonnes compared to 5,527 tonnes last year, as per Agmarknet data. The export of turmeric is down by 17% to 63,395 tonnes for the first 7 month of FY 2017/18 compared to last years’ exports.
We expect Jeera Jan futures may trade sideways to lower today due to good sowing progress in Gujarat keeping prices under pressure. The demand is also waning for oil crop due to higher prices. Fresh exports demand may keep the prices supported.
Turmeric Apr futures expected to trade sideways due to improving physical demand and lower than expected supplies. However, expectation of improvement in up country demands for new season crop may support prices in coming weeks.
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