04th April Monthly Report On. Oilseeds. April 2017

Transcription

1 Monthly Report On Oilseeds April th April 2017

2 Domestic : Soybean (NCDEX) Forward Curve of Soybean Futures (NCDEX) Historic return of Soybean futures (NCDEX) in the month of April % % % 10.81% % 3.29% % 0.15% % % Source: NCDEX Closing as on 03rd Apr Soybean futures (May) is expected to consolidate in the range of levels. Soybean meal is witnessing positive tone in most of the spot market across the country on account of improving demand & declining arrivals. Soy bean arrivals may continue to remain thin during the coming weeks mainly due to ongoing Rabi harvest. Soybean meal at the benchmark Indore market is Rs 24,000 per ton on account of improved demand from poultry feed manufacturers. However, in days to come demand may be a concern, the demand of broiler chicken is likely to decline as most of the consumers don t prefer eating non-veg during summer season. So going ahead, demand of soy meal poultry sector is likely to remain steady to down as profit margin is less on sales of broiler chicken. India soymeal is priced at $377 per tonne FAS Kandla Vs $362 Argentina CIF Rotterdam (Apr) as of April 3, The difference between the two origin is $17 per tonne. India soy meal is in disparity of $17 compared to Argentina soy meal and the parity has been drastically reduced in last one month from a high of $40 due to appreciation of Rupee and trade experts believe that now India may receive less export orders in coming months. Lower supply of soybean was mainly due to farmers engagement with wheat harvest and its marketing. Good quality soybean which contains 10 percent moisture traded in the range of Rs 2,900-2,950/100kg. India soy meal parity to Argentina soy meal should be above $10 then only India will be able to receive good export orders. India should export around 3-4 lac tons of soy meal every month for around 5-6 months period which will offset the bumper supply of soybean. India's soy meal exports may get a boost in the coming months with Bangladesh extending the South Asian Free Trade Area agreement. 2

3 Soybean (CBOT) Forward Curve of U.S Soybean futures (COBT) Historic return of U.S Soybean futures (CBOT) in the month of April % 12.11% % % 5.15% % Source: COBOT Closing as on 03rd Apr U.S soybean futures (May) is expected to trade on a bearish path & can extend its downtrend towards $9.15 a bushel and face a resistance near $9.85 a bushel. U.S soybean prices fell to the lowest close in nearly a year on expectations of higher U.S. plantings and a record Brazilian crop. The speculative long on CBOT soybeans underwent its sixth straight week of declines and is now the smallest it has been since right before the spring 2016 futures rally really started to heat up in April. Funds are now just 37,916 contracts long on the oilseed, down from last week s 65,669, and the new net position includes 78,407 shorts, the most since mid-march In the latest prospective plantings report, USDA cited that U.S. farmers plan to seed a record amount of soybean acreage this spring, even with supplies trending near alltime highs. U.S. soybean plantings were expected at million acres. If realized, that would top last year's soybean acreage of million, which is the biggest to date. In February, the USDA initially penciled in soybean acres at 88 million acres, up 5.5% from a year ago. If realized, that would be record acreage for soybeans, surpassing Since only 2 million acres separate the two crops, any planting delays could possibly push soybean acres above corn by summer, when the USDA re-surveys producers. If that happens, it will be the first time since 1983 that corn has ceded the top slot. Farmers are in a tight spot whatever they choose to plant. Farmers may prefer soybeans for a few reasons prices on a relative basis are higher than corn, and upfront costs to plant beans are cheaper since growers don't need to buy fertilizer. This season, larger issues loom for farmers this year, no matter what crop they grow. The ethanol demand has plateaued and the future of bio-fuels policy in the US under the Trump administration may be questionable, especially if changes come to the Environmental Protection Agency. There's concern over what might happen to international trade under Trump; US farmers rely heavily on the export market, especially soybeans, where they face competition from South America, and Brazil may harvest a record soy crop. Then there's Mother Nature, who is never predictable. Crush margins for imported soybeans in China's Shandong province slid to negative 166 yuan, the lowest since August. Negative processing margins could impact China's booming soybean demand. However, in the long term the good news is that according to USDA China s oilseed consumption is forecast to rise to MMT in MY17/18 from the estimated MMT in MY16/17. Annual imports from the United States are expected to stay strong at about 30 MMT in MY16/17 and MY17/18. However, U.S. soybeans still face fierce competition from South American suppliers. 3

4 Mustard: Forward Curve of Mustard futures (NCDEX) Historic return of RM Seed in the month of April 4, , , , , , , , , , , % 2.25% 5.77% 3, Apr May Jun Jul Aug 0.3 Source: NCDEX Closing as on 03rd Apr Mustard futures (May) is expected to take support near 3835 levels & witness some recovery towards levels. Mustard seed is observing a positive tone at the benchmark Jaipur market on amid improving demand from local millers due to strong sales of mustard oil at lower level. Stockiest have also become active and they are sourcing the commodity in moderate quantity. Prices of mustard meal are gaining amid improving export demand. Mustard meal is trading at a discount of Rs 8,700 per tonne over soymeal and core demand of mustardmeal is likely to increase when the spread rises to Rs 9,000 per tonne. So in coming days mustard meal prices are unlikely to fall sharply. Also the market participants are anticipating that export demand is likely to improve in coming days. Mustard meal exports by India are expected to jump over fourfold in (Apr-Mar) due to a bumper crop in the country. India may sell around 10 lac ton (1 million ton) of mustard meal this year ( ). There is good demand for mustard meal from Bangladesh and as per market participant in coming days export orders are likely to increase. India Mustardmeal prices are trading at $233 FAS kandla vs $218 Hbg ex. Mill(Apr) which is in disparity of $15. India's mustard output in is estimated at 72 lac tons (including 1.2 lac tons of taramira and toria), up from 58 lac tons a year ago as favorable weather led to better yield, the Solvent Extractors Association of India said citing a report on a field survey conducted by Neilsen India. Mustard output in Rajasthan, the largest producer in the country, estimated at 33 lac ton, up from 26 lac ton last year, the report said. The country is likely to import 2.6 lac tons mustard oil in due to rise in domestic mustard seed production amid favorable weather conditions. Domestic mustard oil production is estimated at 21.2 lac tons this year, up from 16.4 lac tons previous year. Total mustard oil supply in the country is set to rise to 23.8 lac tons against lac tons last year, while consumption is expected higher at 23.3 lac tons from 19.9 lac tons a year ago. 4

5 Edible oil complex (Domestic ) Forward Curve of Refined Soy oil futures (NCDEX) Historic return of Soybean Oil futures (NCDEX) in the month of April % 4.53% 1.85% -0.19% 2.07% Apr May Jun Jul Aug Sep Oct Nov % -3.0 Source: NCDEX Closing as on 03rd Apr CPO futures (April) is expected to trade with a positive bias in the range of levels. Domestic buyers have discounted all negative factors in crude palm oil and focused on bargain buying as they anticipate consumption to increase ahead of marriage season. Also usually demand for RBD palmolein remain on the higher side in the summer season. In domestic market, demand for palm oil is as per requirement as supply of edible oil seen higher from local production itself. Market participants are staying away from big commitments on outlook of further price depreciation in coming weeks, coupled with anticipation of availability of edible oil will be easier. Refined soy oil and mustard oil supply has increased due to bumper oilseed production in the country. Investors will be watching out for crucial crop data on production, exports and inventories to be released by the Malaysian Palm Oil Board on April 10. Refined soy oil futures (May) is likely to trade in the range of levels. Inventories with traders and stockists are sufficient and they have opted to buy as per requirements to cater retail demand. In addition soy oil port stock at various ports of the country totaled at March 20 at 1.21 lac tons from 0.94 lac tons a week ago, which is sufficient to meet the demand. The Directorate General of Foreign Trade (DGFT) issued a notification allowing bulk export of edible oils such as Groundnut oil, Sesame seed oil, soybean oil and Corn oil. Earlier export was allowed in branded consumer pack of 5 kg. 5

6 Edible oil complex (International market fundamentals) Forward curve of U.S Soybean Oil Futures Historic return of Soybean Oil futures (CBOT) in the month of April % % % -1.35% -0.83% % Source: CBOT Closing as on 03rd Apr CPO futures (June) will possibly witness a consolidation in the range of Traders begin preparing for Ramadan demand, which begins in mid April. Any gains in palm oil, however, will continue to be tempered by softness in the soy complex, held down by the looming record harvest in Brazil. Palm oil prices is losing ground, mirroring falls across the broader market with oil prices also under pressure. Oil prices are under due largely to moves in the US dollar. Much of the focus for palm oil is now turning to the release of Malaysian Palm Oil Board data on April 10, as investors want to see whether there has been a clear pick up in palm oil production. The government has set export duty for April on crude palm oil at $3 per ton, lower than $18 per ton for March. China s MY17/18 palm oil imports are forecast at 5 MMT, unchanged from the previous year estimate. This level is higher than MY15/16 as a result of increased global supplies which may lead to more favorable prices. With increases in palm oil prices, the blending of palm oil with other vegetable oils for cooking also decreases. As mentioned above, the food processing industry in China uses large amounts of palm oil in processed foods, especially instant noodles. However, due to more choices for consumers, China s rapid growth of instant noodle production has leveled off since 2014 and the 2015 production was down by 8.54 percent compared to the previous year. Soybean oil (May) may witness sell on rise as fundamentals are bearish. In days to come, it can test cents a pound on CBOT, while face resistance near cents a pound. In MY17/18, China s soybean oil imports are forecast to be weak at 500,000 tons due to adequate domestic production. Imports of U.S. soybean oil are expected to be 100,000 tons in MY17/18. On CBOT, funds are slightly retracted their bearish view on soyoil to 19,748 contracts short from 25,165 in the previous week. This is a significant change in pace for the vegoil, which took a beating from the funds last month as they cut their position by over 50,000 contracts in a two-week period. 6

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