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Published on 5/03/2019 9:30:29 AM | Source: Angel Commodity Pvt Ltd

Soybean futures expected to trade sideways to lower on expectation - Angel Commodity

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Agri-Fundamentals

Soybean

NCDEX Mar Soybean future slipped further and fall for the 6th consecutive week to close at 3649 levels. The demand for soybean is low physical demand while sufficient stocks due to higher production this season is weighing on price. In the second advance estimates for 2018-19, govt pegged 2018-19 production at 136.9 lt, up 24.7% on year. However, SOPA forecast India’s soybean output is higher by 38% at 114.8 lt this due to increase in average yield across the country. However, demand for Indian soymeal is growing from Europe and West Asia higher stocks in the domestic market is weighing on price. Iran is emerging as one of the largest buyers. As per SEA press release, soymeal exports up by 98% on year in January to 210,166 tonne. Overall, Soymeal exports are higher by 16% at 10.66 lt for the Apr- Jan period compared to last year. Soymeal exports from India are expected to rise 25% on year to around 15 lt in 2018-19 (Apr-Mar).

CBOT Soybean prices climbed on Monday on reports that China and US are close to settling trade dispute, which will boost China demand. The USDA indicated that 843,925 t of soybeans were shipped in the final week of February, with a total of 337,598 t to China, down 35.48% w/w and 17.14% lower y/y. USDA January soybean crush totaled 182.85 mbu, slightly lower than December, but 4.7% larger yr/yr.

Outlook

Soybean futures expected to trade sideways to lower on expectation of more correction. However, reports of lower soy oil imports, which may need higher crushing in coming weeks will support soybean prices.

 

RMseed (Mustard seed)

Mustard Apr future closed lower for the 5th consecutive week last week and slipped to 10-month low on expectation of higher production prospect for the second consecutive year. Mustard production is forecast about 84 lakh tonnes, up 1% y/y, in second advance estimate for 2018-19 by Government. As per SEA, the production will be higher by about 19% this season to over 81 lakh tonnes due to better climate and higher area.

However, USDA pegged rapeseed production at 60 lakh tons for 2018/19 in its latest monthly report, down about 7% on year. Acreage under mustard is higher by 2.30 lakh ha this year at 69.4 lakh ha as on 22-Feb, as per government data. On the import front, rape oil imports in January are down by 43.5% on year to 9,434 tonnes. Rapeseed meal exports are higher by 37% on year in January to 34,270 tonnes. For Apr-Jan, India's rapemeal exports up by 84% on year at 8.98 lt. January and February months are lean season for rapemeal exports.

Outlook

Mustard futures expected to trade higher on expectation of improving demand for rape meal from China in the coming weeks. However, forecast of bumper crop production may keep prices under pressure.

 

Refine Soy Oil

Refined Soy Oil Futures recovered from 5-week low to close 0.55% lower last week after it falls to 7-week low. In a fortnightly notification, Government cut tariff value of crude soy oil by 5 dollar to $753 per tn for the first half of March.

USDA in its latest monthly update forecast India soyoil production revised down by more than 4% to 16.20 lt, however, production is higher y/y by 16.9%. Soyoil imports are unchange at 34 lt, but up 14% on year. Consumption pegged at 49.5 lt, up 7% compared to last year. There are reports of lower imports and declining stock positions for crude soy oil at ports.

According to monthly report released by Solvent Extractors Association, crude soy oil imports down 17.3% on year to 1.86 lakh tonnes (lt) in January 2019. For Nov-Jan period, soy oil import volume drop 17.8%. Moreover, stocks in the port pegged at 70,000 tonnes at the end of Jan compared to 200,000 tonnes last year.

Outlook

We expect Ref Soy oil to trade in a range on steady domestic demand and correction in soybean prices. Technical corrections expected at higher levels. Improved imports of edible oil in January may put pressure on prices in coming weeks.

 

Crude Palm oil

MCX CPO ends lower last week tracking weakness in Malaysia palm. It falls 2.3% in February after jumped about 12% in January. For first half of February, tariff value for CPO and RBD Palmolein cut by 3 and 9 dollar to 572 and 602 dollar per ton.

According to SEA monthly update, crude palm oil imports were down by 4.1% on year in Jan to 6.45 lt but there is increase in imports for RBD palmolein by more than 11% to 1.67 lt mainly on reduction in duty difference. According to USDA monthly report in February, India palm oil imports figures are unchanged at 10.5 mt, up 22% compared to past year imports. Domestic consumption for India is forecast at 10.6 mt, up 16.7% on year.

Malaysian palm oil fell on Monday on reports of lower forecast and forecast of higher production for 2018-2019 compared with the preceding period. Palm prices had declined 3% last week due to weaker exports and high inventories. Malaysian palm oil futures slipped almost 8% in February as rising inventories and declining demand weighed. Exports of Malaysian palm oil products for February fell 15.2 percent to 1,243,308 tonnes from 1,466,932 tonnes shipped during January, cargo surveyor Intertek Testing Services said on Thursday.

Outlook

CPO futures expected to trade sideways to lower tracking weak international prices. Moreover, higher tariff value and improving physical demand from the stockiest may further support edible oil prices. Need to watch out for import figures which may pressurize prices in second half of Feb.

 

Chana

Chana futures closed lower for the third consecutive week due to new season arrivals and higher carryover stocks with the government agencies. Chana production this season is forecasted at 103.2 lakh tonnes in second advance estimated by Government, down 8% on year due to 10% less area. Chana attract 60% import duty since March 2018 which restricted imports during last year. The govt have extended import curbs on all varieties of peas by 3 months until the end of March. As per government sources, the quantization restriction on yellow pea (substitute of Chana in flour production) may be relaxed in April due to lower pulses production this year. However, chana exports from the country increased by 218% to 1.77 lt.

Outlook

Chana futures is expectation to trade sideways on reports of diminishing stocks with the traders coupled with expecting higher crop production for 3rd consecutive year. Moreover, higher stocks with Government agencies may keep pressurizing prices when new season crops arrive in physical market.

 

Cotton / Kapas

MCX cotton closed higher for the third consecutive week on improving demand and diminishing supplies in the domestic market. In 2018/19, production of Cotton is estimated at 300.9 lakh bales (of 170 kg each), down about 7.4% compared to previous estimate of 324 lakh bales as per latest government advance estimates. However, FAS Mumbai estimates marketing year (MY) 2018/19 production at 27.3 million 480-lb bales (35 million 170-kg bales/6 mt), which is 300,000 480-lb bales higher than the official USDA estimate.

In its latest press release, CAI cuts 2018-19 production estimate further by 5 lakh bales to 330 lakh bales for the year 2018- 19 however, higher imports of 27 lakh bales (15) and lower exports of 50 lakh bales (Vs 69) for 2018/19 season is bearish.

According to data compiled by DGCIS, country exported 120,904 tonnes of cotton raw including wasted in January, down 27.4% compared to 166,546 tonnes last year. Imports in January up by 21.4% at 17,645 tonnes (Vs 14533 tonnes).

ICE May cotton fell nearly 1 percent on Monday on reports of speculative selling, weaker demand and stronger dollar. As of Feb 19, money managers in cotton futures and options increased their net short position by 4,713 contracts to 18,854 contracts. Total export commitments for upland cotton are down 7.8% from a year ago as of February 14.

Outlook

Cotton futures expected to trade sideways due to lower demand from the bulk industrial buyers. Prices have already factor for the lower production and slower exports in New Year. Higher cotton stocks with farmers and fear of imports may keep prices under pressure in coming weeks.

 

Spices (Jeera)

NCDEX Jeera Mar futures closed higher last week on support of improving physical demand for new season crop. Sufficient supplies and subdued exports demand along with good carryover supplies keeping prices under pressure for the 4th consecutive month in February. According to the latest crop estimates released by the Federation of Indian Spice Stakeholders (FISS) and Agriculture Produce Market Committee, Unjha, India’s cumin seed (jeera) output is set to touch 4,16,000 tonnes for 2019, about 9% higher than the previous year, supported by a sharp jump in production in Rajasthan. Jeera production in Gujarat is likely to dip to the tune of 3% to 1,66,640 tonnes. Exports of jeera is down 5.6% on year in December at 9,085 tonnes compared to 8,600 tn last year but jeera exports in 2018/19 (Apr-Dec) is 1.37 lt, up 25% compared to exports last year, acc. to DGCIS.

Outlook

We expect Jeera futures to trade sideways to positive on expectation improving domestic demand for new season crop. However, higher availability in the physical market amid slowing export demand may still pressurizing prices.

 

Turmeric

NCDEX Apr Turmeric jumped more than 1.8% last week after it falls for 6 consecutive weeks on lower level buying and some improvement in turmeric demand. We have seen some fresh buying in May contract. Higher supplies prospects from new season crop are putting pressure on turmeric prices. Production is forecast at 11.5 lakh tonnes in the 1st advance estimates by the government little higher then to last year production. As per Commerce Ministry, turmeric exports during the month of Dec 2018, up 5% on year to 9,301 tonnes (Vs 8,854 tonnes). Turmeric exports in 2018/19 (Apr-Dec) is up 12.4% at 102,347 tonnes compared to 84,523 last year for the same period.

Outlook

Turmeric futures expected to trade sideways to higher due to improving physical demand. However, new season arrivals and good production prospects due to higher turmeric areas may keep prices sideways.

 

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