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Investment Guru India 2019-08-13 09:44:10

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Soyabean

NCDEX Aug Soybean close with gains last week to touch near 3- week high of 3,652 rupees per 100 kg tracking firm trend in International prices. USDA cut soybean forecast to 10.3 million tonnes in its latest monthly report from 10.9 mt. It was trading in a range tracking monsoon revival, good supplies and lower demand for soymeal exports but increase suddenly on jump in edible oil prices. As per farm ministry, acreage under soybean is 109.8 lakh ha so far, down only 1 lakh ha from last year acreage of 110.7 lakh ha. Area in MP improved however in Maharashtra the area lower than last year. Government increase MSP price by 9% or 311 rupees to 3,710 per 100 kg for 2019/20 which also helps to increase acreage this year.

Soy meal exports provisionally down by 59% in July to 26,000 tonnes compared to last year. Similarly, exports in first 4-months of FY 2019/20 (Apr-Jul) are down by about 41.5% to 1.83 lt compared to 3 lt last year. In the 3 rd advance estimates, government increased production forecast of soybean to 137.43 lt (Vs 109.33). USDA kept soybean output forecast unchanged at 109 lt in 2019/20 but down 5.2% y/y. As per SOPA, the arrivals of soybean improved during June to 4.5 lt compared to Apr and May. Overall, arrivals this season is 89.25 lt compared to 75 lt last year.

CBOT soybean fell 1.4% on Monday mainly on technical selling by the market participants despite bullish USDA data. USDA pegged the 2019/20 soybean harvest at 100 million tonnes, down from its outlook for 104 mt in July.

Outlook

Soybean futures expected to trade sideways to higher tracking increase in International prices following China removing tariffs on edible oils. However, declining meal exports and revival of rains in central part of India may put extra pressure on Oilseeds on expectation of higher production prospect next year.

 

RMseed (Mustard seed)

NCDEX Mustard traded under pressure last week to close near 4- week low at 3,923 rupees per 100 kg due to higher stocks and steady demand. Nafed has commenced the sale of PSS Mustard seed rabi 2019-20 in Madhya pradesh from through NEML and MSTC portal. As per data released by MOPA, with the new season arrivals is close to 55 lt and stocks with farmers are on higher side at 43 lt. In its 3rd adv estimates, mustard production revises higher to 87.82 lt from 83.97 lt in 2nd estimate. USDA maintain export forecast of rapemeal to 9 lt and output in 2019/20 at 77 lt (Vs 80 lt ) in its monthly report. As per SEA, rape meal exports also down 11% to 3.58 lt during the first four month of FY 19/20 compared to 4 lt last year. However, for July, Mustard meal exports were 19% higher on year at 93,837 tn due to firm demand from South Korea.

Outlook

Mustard futures expected to trade sideways due to sufficient supplies and steady physical demand. Exports of rape meal is also not picking up as expected. However, good demand for mustard oil and increase demand for mustard crush may keep prices above 3900 levels.

 

Refine Soy Oil

Refined Soy Oil futures gain over 2% last week on firm International prices and weaker rupees to close at 753.20 rupees per 10 kg. Moreover, higher tariff value is also helping prices to gain in the domestic market. In a fortnightly notification, government increased tariff rate for soyoil to $705 for 1st half of Aug from 686 dollar earlier. According to monthly report released by SEA, Soyoil imports down 22.8% to 2.23 lt in Jun compared to 2.90 lt last year same month. Overall, imports are down 4.80% for the first eight months of OY 2018/19 (Nov-Jun) at 16.92 lt compared to last year same period.

Soy oil imports were down for the third consecutive month in June compared to last year while the import of refine palm oil increase more than 50% on year since November. As per latest SEA, edible oil stocks are at 21.5 lt as on 1st Jul, down compared to 25.18 lt last year same time. USDA kept domestic consumption and production unchanged to 51.50 lt and 17.1 lakh tonnes respectively for 2019/20 this month in its monthly report.

Outlook

We expect Ref Soy oil may trade sideways to higher due to increase in tariff rates above 700 dollars and improving physical demand for the coming festival season. However, expectation of increasing imports in coming months to keep prices steady.

 

Crude Palm oil

MCX CPO gain close to 5% last week to close at 549.10 rupees per 10 kg tracking firm trend in Malaysian Palm oil prices and higher tariff values. CPO futures now climb to 14-week high.

For 1st half of Aug, tariff value for CPO and RBD Palmolein increases by 5 and 7 dollar to 502 and 540 dollar per ton. Improving physical demand coupled with and sufficient stocks at ports is keeping prices in a range (490-515). According to SEA monthly press release, import of crude palm oil higher by 38.2% on year at 4.21 lt in June while import of RBD Palmolein up by about 44% to 2.56 lt due to lower prices in the international markets. Palm oil imports up by 40.5% on year at 6.77 lt. Imports of ref palm oil are likely to jump to a record 3 mt in the 2018/19 marketing year ending on Oct. 31, up 43% from a year ago. Malaysian palm oil edged higher to climb to nearly three-and-ahalf months, tracking U.S. soyoil on the Chicago Board of Trade (CBOT) and related oils on China's Dalian Commodity Exchange.

Malaysian palm oil edged higher to climb to nearly three-and-ahalf months, tracking U.S. soyoil on the Chicago Board of Trade (CBOT) and related oils on China's Dalian Commodity Exchange.

Outlook

CPO futures expected to trade sideways to higher due to improve price in Malaysian Palm oil. Moreover, tariff duty hike and good physical demand in the domestic market is also supporting prices.

 

Chana

NCDEX Chana closed lower for the third consecutive week and slipped to 5-week lows. It is trading in a tight range due to sufficient stocks in the physical market. NAFED is holding more than 12.8 lt of chana from last season. Currently, chana attract 60% import duty since Mar 2018 which restricted imports. In new season NAFED only procured about 7.76 lt compared to more than 23 lt last season. As per govt data, during first quarter of FY19-20, chana imports increase to 50,000 compared to only 13,500 t last year.. However, imports were down by 84% to 1.86 lt in 2018/19 (Apr-Mar) compared to 9.81 lt last year, while exported are about 2.28 lt compared to 1.28 tonnes last year. In 2018/19, chana output forecast revised slightly lower at 100.90 lt in 3rd advance estimate compared to 103.2 lt in 2nd advance estimate.

Outlook

Chana futures will trade sideways as government agencies holding major portion of Chana. Moreover, good stocks with physical traders due to higher production this year are pressurizing the prices. Procurement of chana at MSP by NAFED is slow and may pick up in coming weeks.

 

Cotton / Kapas

MCX Aug cotton edged higher last week by about 0.85% to close at 20,250 rupees per bale. The prices slipped to one and half year lows on expectation of proposing import duty on cotton by Maharashtra. Moreover, as on 5th Aug, area in Gujarat under cotton is lagging last year at 24.70 lakh ha compared to 26.6 lakh ha last year. As per farm ministry report, acreage under cotton in the country was 118 lakh ha so far, up from 112 lakh ha from a year ago. Since July, cotton futures slipped about 9.5% tracking higher cotton imports, good area and satisfactory monsoon progress in cotton growing districts in India. USDA increase production forecast for cotton in India by 1.75% this month to 29 million bales while the stocks jump by 17.8% to 8.93 m-bales. Trade data by Ministry of Commerce indicates that provisional shipments in the month of June 2019 are 88% lower at 60,000 (Vs 5 l bales) as compared to last year.

ICE cotton fell over 1% on Monday due to higher production estimates and slightly higher area. USDA monthly crop report projected higher ending stocks and production for the 2019/20 crop year, while lowering global cotton consumption. USDA data on Monday showed 13.903 million planted acres of cotton following USDA’s resurvey, up 180,000 acres from July.

Outlook

Cotton futures may trade sideways due to improved sowing, higher imports and weak international prices also weighing on prices.. Moreover, fresh spell of showers will limit damage to cotton crops and will ensure good production this season in India.

 

Spices

Jeera

Jeera Sep futures closed little higher last week after it slipped to 2 month low to close at 17,360 rupees per 100 kg. Since last week prices fall more than 5% due to profit booking at higher prices and good stocks with the traders. As per, Agmarknet data arrivals of jeera in Gujarat is about 30,000 tn during 1-30 July compared to 7,500 tn last year same period. As per Commerce Ministry data, the Jeera exports down to 18,165 tn compared to 22,000 tn last year in June. Overall, the export of Jeera has dropped 6.4% in the first quarter of FY20 to 71,000 compared to 75,800 tn in the same period last fiscal.

Outlook

Jeera futures expected to trade sideways as due to sufficient availability in the physical market pressurized prices at higher levels despite steady export demand. Prospects of good crop next season also pressurize the prices.

 

Turmeric

Turmeric futures closed higher last week due to fresh buying by market participants mainly on expectation of improving exports demand. Earlier prices were under pressure due to higher supplies and lower imports. Exports to Iran have come to a standstill since May with the expiry of the US sanctions waiver to India for six months.. The rain deficit in south peninsula down to currently at 2% from about 30% deficit in July. Turmeric exports in June, down 16.22% y/y to 11,883 tn (Vs 14,183 tn), as per govt data. However, turmeric exports in first half of 2019, up by 5.1% to 66,300 tn compared to 63,000 tn. In 2018/19, output is forecast at 10.77 lt in the 3rd advance estimates by the government.

Outlook

Turmeric futures expected to trade sideways due to revival of monsoon rains in turmeric growing areas. However, there is expectation of improvement in upcountry and export demand which may restrict any steep fall.

 

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