Be Ready for Sharp Movement in Soy oil in Indian Market in near future

With no change in the duty structure in the Union Budget  on edible oils, market will now start following fresh demand and supply fundamentals in Indian market.

International crude oil prices have also shown some improvement in short term.

In India, the central and northern parts which are the major oilseeds producing states, have received widespread rains which may delay the Rabi oilseeds crop arrivals a little bit delay particularly the Mustard seed crop.

With the start of summer season, demand is likely to pick up gradually.

Please note that for the past 7-8 days soy oil market moves in range of 10-12 rupees with no clear direction.

Right now Soy oil April Contract at NCDEX trades at   593.75.

As discussed earlier, there are signs of some improvement in the physical market demand. But there is still some skepticism over long term outlook in the light of amply world edible oil supplies.

This is the very reason why speculators are a little bit quite and waiting for some clear trend to emerge to make their fresh bet.

The chart pattern suggest that in the next couple of days some clarity must come in the market about the medium term.

The downside seems limited from current levels.

On Daily Chart of Soy oil April Contract at NCDEX following technical levels seems valid for next couple of days.

Support = 585  Resistance 1 = 596  Resistance 2 =604.
A closing above 597 will lead the market towards 604.

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.