NCDEX Jul Soybean recover and closed higher on Wednesday after it slipped to 5 months low this week on reports of higher acreage for next season on forecast of normal rains and lower meal exports data from both SEA and SOPA. As per SEA, Soymeal exports in May slipped to 41,452 tn from 48,900 tn in the corresponding period last year. According to SPOA, India's soymeal exports plunged 64% on year in May to 47,000 tn. Soybean acreage is 20% higher than the last year acreage according to farm ministry report,. Bangladesh, one of the largest importers of soymeal from India, reduced the import duty to nil which may result into tough competition for the country from South American peers in soymeal exports to Bangladesh. The government is likely to raise the incentive under Merchandise Exports from India Scheme on soymeal to 10% of FOB value from the current 7%.
CBOT Jul Soybean futures fall 1.9% on Wednesday on concerns about trade tensions with China. The prices have dropped to 9 months low as funds begin to liquidate long positions due to good sowing progress in the US, the largest producer. Informa expect 2018 US soybean acreage to be 89.902 million acres in the June report, nearly 920,000 acres above the USDA Prospective plantings report. Monthly USDA supply and demand data was mixed for soybeans - an outlook for smaller U.S. stockpiles was supportive, but the agency also hiked output for soybean sin top exporter Brazil.
RMseed (Mustard seed)
Mustard Jul futures closed higher on fresh buying by the market participants due to good meal and crushing demand. However, prices have been trading in a range amid forecast of normal rains in the country. According to data compiled by the MOPA, mills across the country crushed 900,000 tn of the oilseed in May, unchanged from the previous month but the crushing is higher compared to last year. Overall mustard stock in the country were estimated at 53 lakh tonnes (70 lt production minus 17 lt crushed), out of which 42 lt is still with the farmers while 11 lt with the oil mills and stockists. As per latest SEA import data, mustard oil imports were down 14% on year in April which may lead to higher domestic crushing. According to SEA latest export report, mustard meal exports during first 5 months of 2018 is higher by 164% on year due to higher demand from South Korea. Exports are 209% higher at 6.64 lt for the FY 2017/18 compared to previous year’s export volume of 2.14 lt.
Soybean futures are expected to trade sideways to higher on expectation of improved domestic crushing demand. However, higher sowing data due to forecast of normal rains may keep prices sideways.
Mustard futures expected to trade sideways to higher on expectation of recovery from the lower levels. Moreover, higher crushing demand and improved meal exports to support mustard prices
Refine Soy Oil
Refined Soy Oil Futures recovers from slump to 22 weeks low but closed unchanged on Wednesday. There are reports of sufficient stocks with the traders and ample availability of oilseeds in the country. There was anticipation that government is likely to hike import duty of all soft oils to support prices of domestic oilseeds but because of no decision the prices are going down. Moreover, government has slashed the base import prices of crude soyoil for the second consecutive fortnight by $31 per tn to $769 per tonnes. Based on global prices and fluctuation in foreign exchange rates, the government revises base import prices every fortnight, it was last revised on 15th May. As per the data from SEA, crude soyoil imports during the April dropped 13% to 264,750 tons compared to 304,942 tons in the same period a year ago. Stocks of edible oil in ports and pipeline are estimated at 2.34 mt as on May 1 compared to 2.12 mt a year ago while higher than 2.1112 mt in April.
Crude Palm oil
MCX CPO recovers a little on Wednesday due to expectation of improved physical demand. Earlier the price falls to 13 weeks low tracking weak international prices and higher stocks of edible oil the country. Earlier, government has raised the base import price of palm oil. The government hiked the base import price of RMD Palmolein to $681 per tn from $672 per tn. The base import price of CPO has been hiked to $658 per tn from $655 per tn. India’s palm oil imports dropped in April due to higher taxes on shipments and weaker rupees making imports expensive. As per SEA latest report, CPO imports in March increased by 30.33% compared to same period a year ago despite the govt. imposed higher duty. However, Shipment of RBD palmolein dropped 25.56% to 163,222 tons compared to 219,270 tons last year.
Malaysian palm oil futures extended falls to a more than 22- month low on Wednesday, tracking weakness in related edible oils. Moreover, expectation of lower export demands due to continuation of export tax for July also weighs on prices. Malaysia's exports between June 1 and 10 stood at 324,947 tonnes, down 20 % from the same period a month earlier. Malaysia, the world's second-largest palm oil producer, kept its crude palm oil export tax at 5% in July. As per latest MPOB data release, Malaysia's palm oil exports fell 15.7% on month to 1.29 mt in May due to lower demand from China and the EU resulted in a fall in exports. Malaysia's crude palm oil production also declined 2.11% on month to 1.53 mt in May. Crude palm oil inventories were at 1.17 mt in the country at the end of May, down 2.08% from a month ago.
We expect Ref Soy oil to trade sideways to lower on expectation of technical correction as base import prices have been steeply reduced. However, reports of hike in import duty and improving demand from the stockists will support prices from lower levels.
CPO futures may trade sideways to lower weak international prices and higher domestic stocks. However, reports of hike in import duty of soft oils may support prices.
Chana Jul futures recover on Wednesday from the lowest levels since Jan 2015 due to short covering on expectation of improved physical demand. The government will procure around 200,000 t more chana from farmers in Rajasthan under the price support scheme. Recently, Maharashtra government discontinued procurement of the chana under the MSP scheme due to shortage of warehousing space and packaging bags. Government is trying to support prices by removing export restrictions and procuring at MSP. Govt restricted import of yellow peas, an substitute added in the Chana flour, till June end. Earlier, govt has announced of a 7% duty credit incentive on exports.
Chana futures may trade sideways to higher on expectation recovery from the lower levels. Restricted yellow pea imports and MSP procurement in different states may support Chana prices.
Cotton / Kapas
MCX June Cotton edged lower on Thursday due to short covering at higher levels. Currently it is traded at 22 months high on reports of lower stocks and good exports demands. The CAI today cut its estimate for 2017-18 (Oct-Sep) closing stock to 16 lakh bales from 21 lakh bales seen in April. Currently, cotton is trading at 22 months highs in the domestic market as Miller and traders are stocking up cotton for the lean season. Moreover, In its balance sheet for the 2017-18 cotton season, CAI has estimated total cotton supply the till September 30 at 410 lakh bales. This includes the opening stock of 30 lakh bales in October 2017. Domestic consumption has been higher, at 324 lakh bales, while exports, at 70 lakh bales, are higher than earlier estimates of 50- 55 lakh bales.
ICE Cotton settled with little gain in Wednesday ahead of a weekly exports sales report by the USDA. During the current quarter (Apr-Jun) prices have surged about 18% on concerns of dry weather in West Texas, a major producing region and trade war with China. Last week it traded over six-year high earlier in the session on expectations of an increase in buying from major importer China. World supply and demand report showed old crop US ending stocks for cotton down by 500,000 bales to 4.2 million bales amid increase to exports. Informa put their expected 2018 cotton acreage at 14.137 million acres this morning, compared to 13.469 in the March USDA report. The Cotlook A index was down 70 points from the previous day at 100.65 cents/lb on June 12.
Cotton futures are expected trade sideways at higher levels but report of good physical and export demand, higher exports, diminishing arrivals and expectation of lower sowing expectation in coming season may keep the prices supported.
Spices (Jeera & Turmeric)
NCDEX Jul Jeera futures closed higher on Wednesday mainly due to fresh buying initiated by the market participants. Heavy arrivals of jeera in physical market are keeping the prices 16,400 levels. Jeera arrivals during 1-10 Jun are pegged at 6,795 tonnes compared to 3,619 tonnes last year for same period. For the new season, the cumin futures have jumped 12.8% or Rs. 1,860 in the current quarter (Apr-Jun). According to export data released by government, Jeera recorded its highest monthly exports of 33,458 tonnes in March. During FY 2017/18, country exported about 1,60,479 tonnes of jeera, up by 24.5% on year.
NCDEX Jul Turmeric jumped more than 3% on Wednesday due to short covering by the market participants. It was trading sideways to lower during last 5 weeks due to steady demand and forecast of normal rains in south peninsula. In the last month, prices have fallen about 6% from its three months high levels due to profit booking by market participants. Supplies from the new season turmeric have been lower during May at 53,500 t (Vs 73,500 t) compared last year, as per Agmarknet data. The export of turmeric was down by 13% at 108,897 tonnes in FY 2017/18 compared to last years’ exports. Turmeric Exports in March was pegged at 10,410 tonnes is 22.4% lower on year but 31.58 % higher on month.
We expect Jeera futures to trade sideways to higher on expectation of improved physical and exports demand as prices are at lower levels as compared to last year. There is mixed signals from spot market which may keep the prices in a range. Turmeric Apr futures expected to trade sideways to higher on deficient rains in Telangana and Maharashtra turmeric growing areas and steady physical demand from up country buyer. Lower levels buying may support prices from the current levels.
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