Soybean – On a bumpy track!

By Ramlal Maheshwari, Senior Research Analyst, Fairwealth

Edible oil seeds witnessed sell off in the last couple of weeks on global as well as on domestic bourses, weighed down by the global economic uncertainty and falling crude oil prices. The rising concerns from the Eurozone pressurized long liquidation across the market. The upbeat USDA report was very much discounted and panic sell-off continued over the past couple of weeks alongside the rattled equity markets. However, the fundamentals of the crop both on domestic and the international front still suggest a bullish scenario in the coming weeks and investors should look for opportunities to enter the market.

In the global scenario, the soybean supply is expected to remain tight till the new US crop arrives i.e. near September 2012. South American soybean crop has been largely affected by drought, an aftermath of LA Nina. As per market sources, Brazil has sold out almost 80% of their 2011/12 crop due to record prices, strong demand. The sharp drop in production from Latin America has led to global supply tightness and thereby increased the dependency on the old US crop. To add to this, US 2012 prospective planting reports suggests a drop in acreage to 73.902 million hectares from 76.61 million hectares as farmers shift acreage towards corn this season. China, the largest soybean importer of soybean has been very active in their purchases over the last few months which is one the reasons that fueled the rally in global soybean prices.

While China is likely to import nearly 60 million tons of soybeans in the marketing year that began October 1, up from last year’s 52.34 million tons. Imports for the year 2012-13 are expected to be 60 million tons. They have also projected a 7% drop in soy production this year to 13 million tons as farmers shift to grow corn due to higher returns. This would underpin the exports by the largest buyer of oilseed in the world.

On the domestic front, India is going through a lean soybean season where the supplies in domestic markets coming down drastically till the new crop arrive. With improved soy meal exports and rise in global prices and weakness in domestic currency, we expect the tightness in the supply would flare up soybean prices in the coming months.


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We must also keep a crucial watch on the progress of the monsoon in the coming weeks which will play a pivotal role in governing prices in the medium term. Various meteorological institutions have forecast a deficit in northwest region of India which shall fuel a bull-run in soya complex. We believe that recent correction in Soy prices will represents a good opportunity to initiate a long position for Short term.


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