Strong spot demand boosts soybean rates in futures trade

• 19 Dec, 2018
• India

China may import soybean from India after non-basmati rice and raw sugar

In November, the Madhya Pradesh government had announced Rs 500 per quintal premium for soybean farmers over and above the minimum support price (MSP) of Rs 3,399 per quintal for soybeans sold in marketing year 2018-19. This led to average soybean price across major markets rising 12 per cent in September-October over the last year’s price. It also caused 45 per cent year-on-year increase in October market arrivals.

Madhya Pradesh is the largest soybean producing state in the country. But as there has been a change in the state government after election, it is to be seen if the new government led by Kamal Nath of the Congress keeps or reverses his predecessor’s decision.

However, according to analysts if soybean prices hold firm, acreage under soybean will increase next year. Acreage will also rise if strong demand for soy meal (for poultry) in local and overseas markets continues.

Meanwhile, the soybean production estimate for MY18-19 has been revised downward from 11.5 million tonnes to 11.3 million tonnes by the US department of agriculture, indicating slightly lower than expected area planted to beans. The yield estimates remain unchanged.

As per the estimates of the Solvent Extractors’ Association (SEA) of India soybean output in the country was originally set to jump 20 per cent to over 10 million tonnes in the 2018-19 crop year, which starts in October. SEA had attributed this higher production prospects to higher acreage and satisfactory rain in major growing states like Madhya Pradesh and Maharashtra.

In the domestic market, soybean prices have mostly stayed below the minimum support price (MSP) since harvesting began in mid-October, and started rising only after Diwali.

The government has increased soybean MSP by 11.5 per cent to Rs 3,399 per quintal in 2018-19 from Rs 3,050 per quintal in 2017-18 as well as a bonus of Rs 200 per quintal.

In the futures market, soybean rose by Rs 11 to Rs 3,431 per quintal on Thursday as speculators enlarged their positions supported by a strong spot demand. Tight arrivals from the producing regions further influenced the rates. At the National Commodity and Derivatives Exchange, soybean for the most-traded delivery in February was up Rs 11 (1.39 per cent) to Rs 3,431 per quintal.

On the exports front, shipments were down 20 per cent on-year to 328,000 tonnes in the last two months, while arrivals have been at higher side at 4.1 million tonnes, up 14 per cent over last year. Prices were steady during November on improvement in demand from oil mills, which expected a rise in soybean and soy meal demand from China. China is expected to open its doors to soybean from India after allowing the import of non-basmati rice and raw sugar. According to SEA, India shipped about 200,000 tonnes of soy meal to Iran between April and November against 23,000 tonnes in year-ago.

Meanwhile, traders have cancelled some export contracts, estimated at 100,000 tonnes, due to the appreciation in the rupee. But despite this cancellation, the industry has been able to maintain a good pace of soy meal exports in the first quarter, which began in October. This was possible since Iran has emerged as an unexpected buyer of Indian soy meal.

Source: http://www.mydigitalfc.com/fc-supplements/strong-spot-demand-boosts-soybean-rates-futures-trade