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Soybean futures edged higher on Monday supported by reports of heavy rainfall in Madhya Pradesh in coming few days that might affect standing crop. As per farm ministry, acreage under soybean is 111.5 lakh ha so far, up from last year acreage of 111 lakh ha. Area in MP improved so as in Maharashtra. Earlier, it was trading under pressure as monsoon revival, good supplies and lower demand for soymeal exports but increase suddenly on jump in edible oil prices. 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. As per SOPA, the arrivals of soybean this season is 94.25 lt compared to 80 lt last 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 4th advance estimates, government increased production forecast of soybean to 137.83 lt vs 137.43 lt in 3 rd estimate. USDA kept soybean output forecast unchanged at 109 lt in 2019/20 but down 5.2% y/y.
CBOT soybean fell on Monday after beneficial rains crossed the U.S. Midwest crop belt over the weekend, bolstering prospects for the 2019 soy harvest. The US soybeans crop progress data shows 90% of the crop blooming (96% avg), with 68% setting pods (85% avg).
Soybean futures expected to trade sideways due to sufficient stocks with the millers and traders. Moreover, declining meal exports and may put extra pressure on Oilseeds. However, above normal rains may affect output for next season to support prices.
RMseed (Mustard seed)
NCDEX Mustard slipped more than 0.6% on Monday on fresh selling by market participants to close at 3,936 rupees per 100 kg. It falls from strong resistance levels near 3970-3980. Mustard ouput last year is pegged at 93.4 lakh tonnes in 4th Advance estimate by Government, up 87.8 lt in 3rd estimate. Meanwhile, 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, mustard seed crushing increase 17% in July to 5.25% y/y. 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.
Mustard futures expected to trade sideways to lower in coming days due to expectation of better crop next year due to higher rains in Rajasthan and Madhya Pradesh. Rapemeal exports have been steady against higher stocks. However, good demand for mustard oil and increase demand for mustard crush may keep prices supported.
Refine Soy Oil
Refined Soy Oil futures fall more than 1% on reports of higher imports of soy oil and profit booking from near 8-weeks high. Weaker rupees and increase in tariff value by government supported prices last week. In a fortnightly notification, government increased tariff rate of crude soy oil by about 4.5% to $737 for 2nd half of Aug from 705 dollar earlier. According to monthly report released by SEA, Soyoil imports down 9.3% to 3.20 lt in Jul compared to 3.52 lt last year same month. Overall, imports are down 5.5% for the first nine months of OY 2018/19 (Nov-Jul) at 20.12 lt compared to last year same period.
Soy oil imports were down for the fourth consecutive month in July compared to last year while the import of refine palm oil increase more than 50% on year since November. As per latest as on 1st Aug., 2019 total stock at ports and in pipelines is reported at 19.50 lt down 19.4% on year. The stock were down 7.2% m/m. 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.
We expect Ref Soy oil may trade sideways to lower due to profit booking at higher levels. However, step increase in tariff rates dollars, lower stocks at ports and improving physical demand for the coming festival season may support prices. There are expectation of increasing imports in coming months to keep prices steady.
Crude Palm Oil
MCX CPO closed lower for the second consecutive session on Monday tracking weak trend in Malaysian palm oil to close at 537.70 rupees per 10 kg. Last week it climb to 18-week high (558.5 levels) due to increasing demand coupled with higher tariff value and lower stocks at port despite higher import volumes For 2nd half of Aug, tariff value for CPO and RBD Palmolein increases by 25 and 30 dollar to 527 and 570 dollar per ton. According to SEA monthly press release, palm oil exports up by 47.7% on year in July at 8.13 lt in July while overall palm oil imports are up by 13% on year at 69 lt during Nov-Jul period. Overall, CPO imports are higher in first 9-month of OY 2018/19 similarly refine palm oil imports are up by 40% at 20.90 lt compared to 14.95 lt.
Malaysian palm oil fell nearly 2% on Monday, weighed down by gains in the ringgit and tracking losses in related edible oils. The ringgit, palm's currency of trade, earlier strengthened to its strongest level against the dollar in two weeks before paring some gains. A stronger ringgit makes palm oil more expensive for holders of foreign currencies.
CPO futures expected to trade sideways to lower on weak international prices. Moreover, tariff duty hike and good physical demand in the domestic market is also supporting prices.
NCDEX Chana fell more than 1% on Monday due to profit booking and good supplies. However, it is still trading above 4,200 levels 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 higher at 101.30 lt in 4th advance estimate compared to 100.9 lt in 3rd advance estimate.
Chana futures will trade mostly 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 cotton edged higher for the 9th consecutive session on Monday to close at 20,910 rupees per bale as spurt in monsoon has affected cotton fields in western and central India. Prices recovered from one and half year lows touched earlier this month. As on 13th Aug, area in Gujarat under cotton is lagging last year at 26 lakh ha compared to 26.7 lakh ha last year. As per farm ministry report, acreage under cotton in the country was 121.6 lakh ha so far, up from 115.2 lakh ha from a year ago. USDA kept production forecast unchanged for India this month to 29 million bales while the consumption and Exports projections were down by 2% and 4.55% respectively for 2019/20 season. Trade data by Ministry of Commerce indicates that provisional shipments in the month of June 2019 are 88% lower at 60,000 (Vs 5 lakh bales) as compared to last year.
ICE cotton fell over 1% on Monday due to some rains in cotton growing areas in the US coupled with on concern over no progress in the U.S.-China trade war. Cotton has fallen more than 19% so far this year as the prolonged U.S.-China trade war hurt demand for the natural fiber. China is the world's top consumer of cotton, while the United States one of the biggest producers.
Cotton futures may trade sideways to higher due to improvement in physical demand but improved sowing; higher imports and weak international prices may weigh on price. Country is expected to produce about 10-15% higher cotton this year but higher MSP may be deterrent for exports.
Jeera Sep futures close little higher on Monday to close at 16,860 rupees per 100 kg after it slipped to contract low on bargain buying. Higher supplies and lower export demand is keeping prices lower. As per, Agmarknet data arrivals of jeera in Gujarat is about 16,500 tn during 1-15 Aug compared to 8,600 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.
Jeera futures expected to trade sideways to lower 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 futures closed lower on Monday due to profit booking but close above 7000 levels for the first time in last 4-weeks. There are reports of crop damage in Maharashtra and Karnataka due to heavy rains. . 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. Exports to Iran have come to a standstill since May with the expiry of the US sanctions waiver to India for six months. Turmeric exports in June, down 16.22% y/y to 11,883 tn (Vs 14,183 tn), as per govt data The rain deficit in south peninsula down to currently at 5% above normal rains from about 30% deficit in July
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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