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Published on 13/06/2018 11:06:03 AM | Source: Angel Commodities Pvt Ltd

Soybean futures are expected to trade sideways to lower on expectation - Angel Commodities

Posted in Commodities Reports| #NCDEX #Commodity Tips #Angel Broking Pvt Ltd

Agri-Fundamentals

Soybean

NCDEX Soybean falls for second consecutive day this week and slipped to 5 months low 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 closed slightly higher on Tuesday amid bargain buying from 10 months low. The prices have been trading under pressure recently due to trade uncertainty and a strong start to the U.S. growing season. Elevated trade tensions between the United States and major trading partners like China, Mexico and Canada also weighed down grain prices amid concerns about slower export demand. Rains over the weekend and forecasts for the upcoming week held down the market. Monthly U.S. Department of Agriculture 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 edged lower on Tuesday due to long liquadation by the market participants amid forecast of normal rains in the country. However, the prices are still trading in range due to good meal and crushing demand. 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.

Outlook

Soybean futures are expected to trade sideways to lower on expectation of higher sowing data due to forecast of normal rains. However, improved domestic demand may support prices.

Mustard futures expected to trade sideways on little corrections but higher crushing demand and improved meal exports to support mustard prices.

Refine Soy Oil

Refined Soy Oil Futures slump to 22 weeks low on Tuesday due to higher stocks with the traders and sufficient 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 closed lower for the third consecutive session 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 dropped more than 1% on Tuesday, pressured by expectation of lower export demand after as government decision maintain an export tax for July. The prices are now trading at its lowest in nearly two years. 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.

Outlook

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

Chana futures continue to fall for fourth consecutive days and now trading lowest since Jan 2015 on concern about higher stocks in the country. 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 minimum support price scheme due to shortage of warehousing space and packaging bags. Government is trying to support prices by removing export restrictions and procuring at MSP. Government 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.

Outlook

Chana futures may trade sideways to lower on expectation further corrections due to higher stocks. But restricted yellow pea imports and MSP procurement in different states may support Chana prices.

Cotton / Kapas

MCX June Cotton edged higher on Tuesday on reports of lower closing stocks for 2017/18. The Cotton Association of India 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 over 1% higher on Tuesday, helped by concerns of dry weather in West Texas, a major producing region, and a supportive supply demand report by the USDA. Last week it traded over six-year high earlier in the session on expectations of an increase in buying from major importer China. USDA US and World supply and demand report showed old crop US ending stocks for cotton cut by 500,000 bales to 4.2 million bales. That came from an increase to exports, as the new crop carryout was down the same to 4.7 million bales. The Cotlook A index was up 150 points from the previous day to 99 cents/lb on June 7. The cotton AWP was updated to 81.27 cents/lb on Thursday, 1.39 cents/lb above the day prior.

Outlook

Cotton futures are expected trade sideways to higher on 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 jump higher on Tuesday due to short covering by the market participants. Heavy arrivals of jeera in physical market are keeping the prices sideways. Jeera arrivals during May are pegged at 21,713 tonnes compared to 11,000 tonnes last year for same month. 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 Turmeric futures closed little higher on Tuesday due to bargain buying by the market participants. It is trading in a range tracking good progress of monsoon rains in turmeric growing regions of Tamil Nadu and Karnataka and tracking steady demand in the physical market. 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.

Outlook

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 on good rains in turmeric growing areas and steady physical demand from up country buyer. Lower levels buying may support prices from the current levls.

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