Sharp fall likely in Indian Soybean Market in July-August 2015

Indian soybean market is likely to witness sharp correction in near future in the light of following facts.

1. Increment in the sowing area  
2. Good Monsoon Rains till date
3. Significant fall in the Indian soymeal export during recent past

  

Let us evaluate each of these factors one by one.

1. INCREMENT IN THE SOWING AREA

 As per the data released by Ministry of Agriculture, sowing of soybean is running far ahead from the last year. The total sowing area under kharif oilseeds has also shown increment. Table given below shows the khaif oilseeds sowing progress till 25 June 2015. Sowing is likely to gather momentum in near future in July.

The net result of early sowing would be early harvesting somewhere during early September. That would start pressurizing prices in the market.

Thus market would start witnessing new crop arrival a little bit early as compared to last year that would result in to weakness in the market during near future.

Table Source: www.seaofindia.com

1. GOOD MONSOON RAINS TILL DATE

 The overall progress of monsoon has remained satisfactory till date at country level. However it is feared that during July and August some weakness might be seen in the monsoon progress.

The major sowing areas of soybean are whole Madhya Pradesh and Vidarbha and Marathwada regions of Maharashtra.

As per the Picture shown below of Rainfall distribution in the India, it is clear that during last one month, the Madhya Pradesh has seen Normal monsoon rains, Vidarbha region has seen excess rainfall while the Marathwada region has seen deficient rainfall.

So first step i.e. sowing of the crop is likely to complete successfully in these areas.  The crop would need fresh spell of rains on periodic interval till maturity. 

Picture Source: IMD, India

1. SIGNIFICANT FALL IN THE INDIAN SOYMEAL EXPORT DURING RECENT PAST

As per the press release dated 5 June 2015 of the SEA of India (www.seaofindia.com) :-

(a)    The export of oilmeals during May 2015 is reported at 83,221 tons compared to 169,607 tons in May 2014 i.e. down by 51%.

(b)   The overall export of oilmeals during April-May 2015 is reduced and reported at 265,859 tons compared to 418,052 tons during the same period of last year i.e. down by 36%.

(c)    Soybean crushing is very much reduced due to continuous disparity and high price of domestic market, thanks to heavy speculation in future market vis-à-vis lower realization for meal and oil affecting overall domestic availability of both oils and meals.

(d)   In spite of 5% Reward Rate under new Exim Policy and rupee depreciation, the export of soybean meal is at a historical low and reduced and reported just 18,017 tons in April and 14,046 tons in May 2015.

(e)    Also the domestic demand for oilmeals has reduced adding to the woes of the industry. Capacity utilization is at the lowest and many plants are close down due to disparity in crushing.

Conclusion:

• It is clear from the above three points that till demand does not improves and Indian industry does not get good export orders of soymeal in near future, it would not be possible for the buyer to buy soybean at higher prices in Indian market.
• Soybean sowing area is likely to increase this year as a result of good monsoon during June and till first week of July. This factor is also likely to put pressure on the market prices.
• This year, the fresh crop arrival would be a little bit early in the Indian physical market.

Technical View on Prices for short term [ for July-  Mid September 2015 Period]

Currently in Indian futures market, the soybean October contract is trading at Rs. 3300/quintal.

Soybean prices in Indian futures market are likely to fall by around 10 -12 % from current levels.

The bottom price for the season 2015-16 seems somewhere near Rs. 2900/quintal. This level might be seen by Mid-September to Early October 2015.