Is Soybean going to trade Up or waiting for fresh Fall in World Market? Know the Fundamentals

Is soybean going to trade up in near future ? Do Current Supply and Demand Fundamentals allow any major price rise? or will it continue to trade sideways to weak?

From July 2014 to till date, the soybean prices in the international market  (CBOT Soybean) have fallen by nearly 28%. It is to be seen how much downside is still there. 


Here an analysis is made to know all these factors. 
World Soybean Supply and Demand Fundamentals : 2014-15: 
If we look at the market fundamentals, It appears that no major upside is expected in near future.

The later months of April, May and June will decide the long term trend depending upon the sowing progress in its major growing countries.

Let us have a look at the current supply and demand fundamentals of the World Soybean Market.

The data for Analysis is taken from FAS, USDA.

Top exporting nations and world is estimated to have significant increment in supply as well as ending stocks as compared to major importing nations during 2014-15 vs 2013-14. [Table 1 & Fig. 1]

World Soybean Supply Scenario: 2014-15 vs 2013-14

Bearish Supply Fundamentals [Table 2 & Fig. 2]

1. The Beginning Stocks higher by 16%.

2. Production higher by 11%.

3. Imports higher by 3%.

4. TOTAL SUPPLY HIGHER BY 10%  as compared to 2013-14, & 18% vs 2012-13.

5. Exports higher by only 4%.

6. Crush higher by 6%.

7. Consumption higher by 6%.

8. ENDING STOCKS HIGHER BY 35%. vs 2013-14, and by 56%  higher vs 2012-13.

9. Stock to use ratio (stock/total domestic consumption) has increased indicating that the pace of increment in consumption is slow as compared to addition in stock.

Supply Scenario in 2014-15 for the Major Soybean Exporters

US, Brazil and Argentina are the three major countries accounting for around 88% of the total world's soybean exports.

Comparative changes in Demand and Supply are presented in the Table 3 & Fig. 3 for major exporters and world.

1. Total supply is 12% more in these three top exporters as compared to world where total supply is more by 10%.

2. United State (US) which is the biggest exporter of the soybean has 14% higher supplies as compared to last year.

3. For 2014-15, in US, the production, supplies, and ending stocks are high by  18, 14 and 319 % respectively as compared to 2013-14.

4. On the cummulative basis, the ending stocks of these top three exporters are significantly high by 46% as compared to 2013-14. World ending stocks are up by 35%.

Demand and Supply Scenario in the Top 10 Importing Nations.

[Table 4]

1. China: It's Production, Imports, total Supply, Domestic Consumption and Ending Stocks are estimated to change by 1, 5, 6,7 and -1% respectively during 2014-15 vs 2013-14. All this means that consumption has increased and ending stocks will fall. This will result into increased demand for the 2015-16.

2. European Union: This is the second largest country in term of imports. Due to significant rise in the production (40%), the imports are estimated to reduce by 2%. In the absence of rise in consumption, its ending stocks are estimated to rise significantly by 57%.

3. Imports are estimated to remain low for countries like Japan, Taiwan, Turkey.

All the analysis made here suggest that there seems no major uptrend in soybean in near future.

However, as we stated in the introduction section, that a lot will depend upon the assessment of sown area in the major soybean growing countries in next season particularly in India where sown area is largely dependent upon monsoon rains and a lot of fluctuation in prices might be seen from May onward in prices if there is any disruption in the monsoon progress. 

So in short to medium term, weakness might persists, but to judge the long term movement, we have to wait for two months.

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Suggestions and opinions are welcome.

World Vegetable Oils Fundamentals for 2014-15

Major Highlights:

In this report, the supply and demand of vegetable oil is assessed for world. The data for analysis were taken from FAS, USDA website. There may remain some variation from source to source, but the broad picture remains more or less same. Thus the results do not vary much.

Below are the major findings of the Analysis.

Ample Supplies:

• The production and supply of Vegetable oils during 2014-15 is quite comfortable as compared to 2013-14 as well as 2012-13 as is evident from the graph shown below.
• The Production during 2014-15 is estimated to increase by around 3.88 with respect to (w.r.t) 2013-14 and 9.73% w.r.t to 2013-14.
• The Total Supply is also estimated to improve by around 4.18 % during 2014-15 vs 2013-14.
• Thus there seems comfortable supply situation of vegetable oil for 2014-15.
• In consumption also there is increment but at the same time, ending stocks are also expected to increase by around 1% as compared to last year.

Further bifurcation of the Total Vegetable oils Supply in to major oils, it is clear that the major increment in the supply is seen in Palm oil (6.1%), Rapeseed oil (6%) and soybean oil (3.2%). However the supply of coconut oil and sunflower oil is expected to shrink during 2014-15.

Please note that Palm oil and soybean oil are the two major vegetable oils jointly accounting for around 71% of the total vegetable oil supplies in the world.

Thus a joint increment in supply of soybean and palm oil reaches near 5.1% for 2014-15 as compared to 2013-14. This seems quite significant increment.

Now let us have a look at Table 3 which shows the soy oil supply scenario in the world, major importers and major producers.

1. India and china are the major importers of soy oil. So far as the India is concerned, it started its marketing season 2014-15 with increased beginning stocks (3% higher), the production also increased by 1%, imports have also seen increment of around 5% till date as compared to 2013-14. However, the domestic consumption is estimated to witness an increment of around 5%, the ending stocks are estimated to decline by around 11%.
2. China’s Soy oil production during 2014-15 is estimated to increase significantly by around 8 %, reducing the depending on imports by around 26%. However the pace of consumption increment remains at 4% as compared to 2013-14. There seems no major change in the ending stocks.
3. All the major producers of soy oil i.e. China, US, Argentina and Brazil started the Marketing Year 2014-14 with significantly low beginning stocks. The major production increment is seen in China and Argentina which helped in improving the world production by 5% resulting an increment of around 3% in total world supply.
4. The domestic soy oil consumption of US is estimated to decline by around 3% during 2014-15 however in others it is estimated to improve.
5. Despite a short fall in the ending stocks of Indian by around 11%, and Argentina by 12%, the US is estimated to be left with huge ending stocks of around 23%. The world will be having 4% higher ending stocks as compared to 2013-14.

Table 4 presents the Palm oil supply and demand scenario of its major importers as well as producers.

1. China and India, the biggest importers of palm oil,  both started Marketing year 2014-15 with significantly down beginning stocks of palm oil (china -41%, India -38%).
2. Thus considerable increment in imports of around 13% is estimated for both of these countries thus improving the supplies by around 9% for 2014-15.
3. The domestic consumption is also estimated to increase by 8 to 10 percent in these countries.
4. One the one hand, china is expected to end this season with improved ending stocks, the India may finish the season with less ending stocks as compared to 2013-14.
5. The Major Producers of Palm oil, i.e. Indonesia and Malaysia both started the year 2014-15 with ample beginning stocks from 9 to 17 percent.
6. The production is also estimated to increase considerably in Indonesia and Malaysia by 8 and 5% respectively during 2014-15 as compared to 2013-14.
7. Total world palm oil supplies are estimated to increase by around 6% resulting in to an increment of around 7% ending stocks at world level.

The supply and demand fundamentals so far has remained in favor of BEARS, however, in coming days a lot will depend up on the MONSOON situation in India. We will have to watch this year's monsoon onset and its further progress. if any deviation from its normal onset appears then Indian edible oil market can see significant upside. 

As of now not much supplies concerns are there.