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Upside in soybean prices likely to remain capped: Kotak Securities

Date: 24-08-2020
Subject: Upside in soybean prices likely to remain capped: Kotak Securities
Soybean September futures at National Commodity and Derivatives Exchange ( NCDEX) that slumped more than 3 percent in the second week of August recovered more than 2 percent to settle a tad below Rs 3,800 per quintal on August 21.

A good run in edible oil prices in domestic and international markets, lower supply in physical markets due to heavy rains and substantial discount from mustard lifted prices.

Soymeal prices have surged more than Rs 30,500 per tonne in Jaipur last week, whereas soya oil prices are also ruling on a strong note due to good demand ahead of festivals. However, concerns over supply pressure from the new crop, expected in the coming weeks, and expectation of a bumper crop could keep soybean gains in check for the week.

Following an improved rainfall activity and acreage, the Soybean Processors Association of India (SOPA) has pegged Indian soybean output to reach a historic high of more than 122 lakh tonne this year.

Having said that, increased MSP near Rs 3,880, demand from edible oil institutions to curb cheap overseas imports and huge discount from mustard may support soybean at lower levels in coming weeks.

CBOT Soybean November contract continued with marginal weakness on August 21 and it settled near 905 cents/bushel, down by 0.1 percent from the last session but up by 0.7 percent from last week.

Earlier in the week, it reached multiple-weeks high of 919.5 cents/bushel. Despite considerable soybean imports by China, improved prospects of higher yields in US ahead of harvesting and recent upward revision of US soybean production and stock estimates by USDA have kept CBOT soybean gains under check.

Against steady tone in BMD CPO, CBOT soya oil continued to trade strong during the third week of August as it rose by nearly 2 percent to settle near 31.7 cents/pound on August 21.

Lower soybean stock in Brazil and good demand by China lifted soya oil in the last couple of weeks. However, profit-booking in soybean and expectation of a bumper crop in the US might keep the oil rangebound with negative bias for the week.

Overlooking strong run in the international market, soy oil September contract at NCDEX remained steady for yet another week and settled near Rs 869/10 kg on August 21. Due to mixed cues from the domestic and international market, soy oil futures have been trading near Rs 870 kg since the beginning of August.

Huge imports of soy oil by India in July and upcoming soybean crop against lower stock in Brazil and US, lower palm oil inventories, good demand by China are keeping soya oil supported at current levels.

However, demand rationalisation from higher price levels and expectation of bumper oilseed output in India may keep soy oil range-bound with negative bias for this week.

Steady tone prevailed in BMD CPO as all the gains of the first three sessions were erased by profit-taking on August 21. Palm oil third month futures at Malaysia (Nov) settled near 2,681 MYR/ton on the day, down by 2 percent from the last session and 0.2 percent from last week.

Palm oil futures, which fell by 2.6 percent in the second week of August amid lower exports in first 20 days of the month and higher than expected stocks in Malaysia in July, recovered almost all the losses in the first three sessions of last week on the back of strong cues from Soy oil.

However, profit-booking from higher price levels and expectation of lower imports by India in the coming months due to higher imports in July and bumper oilseed crop may keep BMD CPO range-bound with negative bias this week. However, labour shortage is likely to trim palm oil output in Malaysia in the coming months, which could support CPO at lower levels.

Against steady tone in BMD CPO, MCX CPO August contract rallied by 1.7 percent last week to settle near Rs 758 per 10 kg on August 21. Higher imports (8.2 lakh tonne in July) and over performance from international peers may keep MCX CPO range-bound with negative bias this week.

September mustard futures continued to outperform edible oil complex and surged by more 2.5 percent to settle above Rs 5,200.

After falling by 0.7 percent in the second week of August, mustard strongly bounced back amid reports of strong demand for oil even at higher price levels. Mustard supply during August 1-20 fell by 40 percent MoM. However, new crop arrivals of soybean and reports of higher edible oil imports last month may cap the gains.


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