NCDEX Soybean futures continue to trade positive on Monday taking clues from the spot market. There are reports of good physical demand from the oil millers after hike duty on in edible oil imports. Moreover, reports that government is likely to double the incentive on export of oilmeals to 10% to support domestic oilseed prices. As per Agmarknet data, the arrivals in Nov increased to 15 lt compared to last year arrivals of 8.33 lt for the same period. Total exports of soy oilmeal in the first seven months of the fiscal started April is almost 5 times higher to 5.37 lakh tons compared to 1.07 lakh tons last year.
US markets rose to a three-week high on Monday on concerns that dry weather in Argentina will hurt crop yields. Dryness concerns in southern Brazil and Argentina are generating some support. Soybean exports during the week of 11/30 rose to 1.8 mt, that was an increase of 4.47% over the previous week but 6.5% lower than the last year at this time.
U.S. Department of Agriculture data released after the close of trading on Friday showed the U.S. soy crush in October at about 176 million bushels, above analysts' estimates and a reflection of strong domestic soy demand.
RMseed (Mustard seed)
Mustard Dec futures closed lower on Monday as market is stabilizing at the current levels due to steady demand and higher inventories with the traders. The prices have recovered from 3800 levels in Nov to current levels on improved winter demand and increase in import duty for the edible oils.
As per rabi sowing report from the government, The acreage of mustard, another major rabi crop, was at 56 lakh ha, down from 61 lakh ha a year ago. Rajasthan is the largest mustard growing state but the sowing pace is slower than last year at 20.3 lakh ha Vs 27.3 lakh ha. The lower mustard acreage can be attributed to poor rains in Rajasthan that led to low soil moisture and hampered sowing.
According to data compiled by Mustard Oil Producers Association of India, country is still holding about 20 lt of mustard from the last year as it is estimated that millers have crushed about 48 lt last year against the marketable surplus of 67.8 lt.
Soybean futures are expected to trade sideways to higher on good demand for new season crop for crushing as edible oil import duty is hiked. Moreover, higher incentives for oil meal export also support soybean prices.
Mustard futures expected to trade sideways to lower on higher stocks with the oil mills and good start to rabi sowing. However, anticipation of good physical uptake by oil mills on expectation of good winter demand may keep prices supported above 4000 levels.
Refine Soy Oil
Refined Soy Oil Dec is trading in a narrow range after it jumped higher when government increase the import duty of all edible oils. The government raised the duty of the crude soy oil to 30% from 17.5% to support domestic oilseed industry and farmers. The physical demand also increased from the bulk buyers on anticipation of further rise in prices.
For the first half of December, government cut the base import price of soy oil, by $18 per tonnes. The government revises base import prices every fortnight, based on global prices and changes in foreign exchange rate. Prices were last revised on Nov 15.
As per latest SEA import report, Soybean oil imports slumped 21% to 220,200 tons in October from a year earlier while imports dropped during the oil year ended Oct. 31 by 22 % to 3.32 mt. Moreover, firm international prices, higher import duty and good demand from the stockists is supporting edible oil prices in India despite higher stocks and record oilseed production.
Crude Palm oil
MCX CPO closed lower weighs down by weak overseas prices and strength in rupees. The government today reduced the base import price of all edible oils, with the steepest plunge of $26 per tn in crude palm oil. The prices have jumped higher in Nov when centre has raised the import duty on crude palm oil to 30% from 15% and on refined oil to 40% from 25% in a bid to curb cheaper shipments and boost local prices for supporting farmers and refiners.
For the second half of Nov, base import price for crude palm oil and refined, bleached and deodorised palm oil were raised by $8 per tn each.
Malaysian palm oil fell from a one-week high on Monday evening, weighed down by a stronger ringgit, which makes the tropical oil more expensive for holders of foreign currencies.
` The ringgit, palm's currency of trade, was trading at over one-year highs on Monday evening, and closed 0.7 percent higher at 4.060 against the dollar. Year-end monsoon rains which lead to floods could hit palm oil production in the short term by disrupting the harvest.
We expect Ref Soy oil to trade sideways as prices now stabilized due to strong rupees and higher stocks. Good steady demand from the bulk buyers may keep the prices consolidate at higher levels as government hike import duty of edible oil including crude soy oil.
CPO futures may trade sideways due to weaker international palm oil prices and stronger rupees. Increase in import duty to 30% and 40% for crude palm oi and refine palm oil respectively has kept the prices at 10 months high.
Chana Dec futures continue to trade lower Monday due profit booking as gram sowing progress is encouraging coupled with higher stocks in the country. Recently, government removed export curbs on all varieties of pulses to ensure farmers get remunerative prices as domestic rates have crashed below MSP in view of record production.
As per government sowing data, area under the rabi chana crop across the country was up 7.8% on year at 84 lakh ha as on last week. The acreage of chana in MP and Karnataka, the largest and the second-largest grower of pulse, was up 15.7% on year at 30.4 lakh ha, and up 44.6% on year at 12.7 lakh ha, respectively. To encourage farmers, govt. increase MSP by 10% to Rs. 4,400 per quintal. According to the target estimate released by government, India’s chana production target estimate for 2017-18 is 97.5 mt.
Chana futures to trade sideways to down on good sowing progress. However, removal of export curbs, higher MSP. However, sufficient stocks and good start to rabi sowing in the country may put pressure on prices.
Cotton / Kapas
MCX Dec Cotton prices continue to trade higher on Monday on expectation of big fall in output due to pink bollworm attacks in some states, even though there is little clarity yet on the extent of the damage. Concerns about crop quality have also impacted prices. Of late, instances of rejections of cotton bales by buyers have increased. According to trade sources, about 60 lakh bales have arrived in the Indian markets this season compared to 47.3 lakh balses last year till Dec 1. Production of cotton in India in the current season started Oct 1 is likely to decline 7-8% to around 350 lakh bales (1 bale = 170 kg), primarily due to severe pink bollworm attacks in Maharashtra, Gujarat and telengana.
ICE cotton fell on Monday on profit booking after the contract trudged into overbought territory, amid a stronger U.S. dollar. However, the International Cotton Advisory Committee increased their projection for 2017/18 world cotton production 0.18 MMT to 25.74 MMT. That would be 2.74 MMT larger than the previous year, as ending stocks were raised 0.34 MMT from last month to 19.24 MMT.
Cotton futures are expected trade higher on reports of loss of production due to pest attack in three biggest cotton growing states. Moreover, good physical demand from the mills and traders and commencement of procurement by CCI also keeping prices supportive as it is expected to procure about 100 lakh bales.
Spices (Jeera & Turmeric)
NCDEX Dec Jeera closed higher on Monday as market participants see some improving physical demand and diminishing stocks. NCDEX has raised the pre-expiry margin for December and January futures contracts of jeera to 2.5% per day from 1.5%. In Gujarat, jeera sowing reached about 1.914 lakh ha this year compared to 1.4 lakh ha last year as on 27 th Nov. As per government data, Jeera exports during first six month of FY 2017/18 (Apr-Sep) is 77,827 tonnes, up 8.4% compared to last year exports volume for the same period. India's jeera exports in Sep increase 110% on year to 14,742 tn. On the import front, country imported about 998 tonnes of jeera during the month of Sep and now the imports this FY is higher by about 60% compared to last year.
Turmeric Dec futures hit upper circuit on Monday mainly on improved demand and created fresh positions in April contract. Prices may be supportive on expectation of up country demand. There are reports good supplies from the government auctions but due to end of season the stocks are diminishing with the physical traders. The export of turmeric is down by 15.2% to 56,900 tonnes for the first 6 month of FY 2017/18 compared to last years’ exports. The arrivals increase in November this year to 9,431 tonnes compared to 7,211 tonnes last year same month according to Agmarknet data.
We expect Jeera futures to trade sideways to positive on reports of improved physical as well as export demand. Moreover, diminishing stocks with the traders and improvement in demand for Indian cumin for overseas market is supporting prices. The prices may be pressurized at higher prices on profit booking.
Turmeric futures expected to trade down on expectation of arrival of new season crop and lower than expected exports figures. Supplies from the government auctions and arrivals of medium quality supplies may keep the prices sideways.
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