Fear and Greed Push Soybean Prices in India

It is amazing to see the soybean market movement in the Indian physical and futures market during last 15 days. The futures and physical market prices during last fortnight have increased by around 22 and 14 % respectively in India.

As per the Indian government estimates, the soybean production during 2014-15 is estimated to remain at 10.53 million tons as compared to 11.86 million tons during 2013-14, down by around 11.21%. However, the trade sources say that the production is far less than the government estimates due to deficit monsoon this year.

Usually, soybean fresh crop arrival starts in the first week of October in the India’s biggest soybean producing state i.e. Madhya Pradesh and prices usually remain low during first fortnight of the October month. Thereafter they start increasing due to reduced arrivals and increased demand.

This year, many parts of the country including parts of Madhya Pradesh and Maharashtra witnessed early monsoon rains thus sowing was also done a little bit early consequently the market was expecting considerable increase in the fresh crop arrivals during last fortnight of September and early October.

Sharp Decline in Market Arrival leads to Spark in Prices

Let us examine why prices have seen such a significant jump in prices in a very short span of time.

The market arrivals and prices in the three major soybean producing regions of the Madhya Pradesh namely Indore, Ujjain and Dewas are examined and the answer is quite clear. [the data were taken from http://agmarknet.nic.in/]

In Indore region the soybean arrivals during 1-8 October have declined by around 10% as compared to the period of 24-30 September. This extent of arrival decline varies between 35 to 47% in few mandis.

The soybean market arrivals in the Ujjain region have declined drastically by 48.68 % during 1-8 October as compared to the 24-30 September.  The extent of this decline was as high as 85% in Mahidpur mandi.

However, in Dewas region, the soybean arrivals have seen considerable increment in many mandis. However Dewas mandi has seen slight decline in market arrivals.

Impact of Less Arrivals

Due to sudden and significant decline in the fresh crop arrivals, a panic buying by the traders and stockiest is seen in the market. This has led to a jump in the soybean prices in the physical market.

The immediate impact is seen in the futures market too where the hedgers and speculators both are believed to have built good quantity of buying positions in anticipation of further rise in prices due to less arrivals.

Thus GREED of the suppliers of the soybean by reducing supply in anticipation of further price rise and FEAR of the price rise by the actual consumers have suddenly spurt the prices of soybean in such a short span of time. The speculators have further aggravated the situation.

However, the current market situation is quite unsustainable, and market forces of demand and supply with sooner or later adjust the prices which will be sustainable in long run. 

Currently market is trading in overbought region and possibility of sudden price fall can’t be overruled.

A cautious trade is advised.

Congratulation Mr. Modi for Launching “DD KISAN CHANNEL”: Adopt 16 Points to Success

On 26 May Indian Government launched a dedicated television channel exclusively for the Farmers which is expected to fulfil various needs of the farming community.

We all know that “Time is money”.  Technology is “means” to achieve it.  Anything can wait but not agriculture. So without any time lag, how to reach to the millions of farmers remained a big constraint for the concerned departments of Agriculture in India.

Technology is changing faster than anything in most sphere of life and has become a part and parcel of our daily life.  Farmers of India have also been benefited from these technological innovations in one way or other. The green revolution took place due to technological breakthrough in seed technology of wheat and rice. This became a foundation stone of India’s self-sufficiency in food grain production. Since then India has seen remarkable growth in several arenas of agriculture.

Now with the Launch of the “DD KISAN CHANNEL” it has become easier to go from "Lab to Land". The government of India deserve the appreciation for it.

Now following are the 16 suggestions for making this Channel a grand success:

1. Extensive Advertisement of the “Kisan Channel” : Because India is a big country and We all know that it is advertisement which makes a big role in the success or failure of a particular product/institution/policy. 
2. Regional importance: Agriculture is highly diversified into regions and climates. Thus to make it more relevant it is important to include more and more focus on regional crops and issues.
3. Language issues: Programmes in the regional languages are must because in several parts of the country Hindi or English is yet not spoken and understood. In the later years, the same programmes may be translated in to regional languages and may be broadcast.
4. Participation of Research Institutions: Extensive participation of scientists is must for the success of this channel.
5. Programmes like “World of Agriculture”: In it, the best practices adopted by various countries should be broadcasted.  
6. PRIME TIME: The communication should be TWO way. This means that burning issues/problems should be taken up and discussed and farmers’ representatives should be made an integral part of this debate programmes.
7. Extension of the government programmes and schemes: Best way to spread government programmes and policies to the end beneficiaries i.e. farmers.
8. Private sector participation: Due time-slot must be provided to the private sector industry relating to agriculture so that they can also show their products through this channel. This can become a good revenue model to the Government itself for sustaining the financial viability of the channel.
9. Agribusiness and Market information: Real time commodities market information must be spread through Kisan Channel to the farmers. Live Mandi Prices and Arrival information is must to get the real benefits of their produce sale. Information on other agribusiness and small scale industry in agriculture can be spread.
10. Futures Market Information and Knowledge: Through this channel, farmers can have direct and live access to the futures market information. The basic objective of the futures market are (a) price discovery (b) price dissemination and (c) risk management. These three objectives can be easily attained through broadcasting the futures market information on the DD Kisan Channel. The decision making of the farmers regarding various aspects of the commodities viz. sowing area increase/decrease, current and future prices of a particular commodity, appropriate time of sale of commodity, supply and demand scenario across the country and factors affecting the market trend can be enhanced many fold through programmes specially formed for this purpose.
11. Weather Watch: Regular Updates on Weather is must to include.
12. Information about the International Market Trade/Export/Import: The kisan channel on daily basis can provide the international market demand, supply, production and other various aspects of international trade.
13. Lessons from Leading Business Channels: The leading business channels like CNBC Awaz and Zee Business are a great source of information and knowledge regarding the financial sector of the country. Likewise, the live updates/ programmes on crops/commodities markets can give a direct financial benefits and literacy to the farmers.
14. Programmes for Financial Inclusion: Programmes on banking system and current facilities available to the farmers can be broadcasted so that the objective of the financial inclusion can be met.
15. Success Stories: Stories of the Farmers/entrepreneurs successful in the field of agriculture/trade should be highlighted.
16. Man Ki Baat: Let farmer also do “Talk of the Heart” through this channel. Give 5 minutes time and take interview of one farmer and let him say what he wants from the Indian Government.

The programmes must be of high quality. For that the reporters and programmes team must have a minimum Level of agriculture knowledge.

I hope that these points can help to improve the quality of the DD Kisan Channel and will serve the purpose for which it is launched.

Rain Effect on Indian Agricultural Commodities Market

Recent unseasonal rains during March and early April month have caused significant damage to the standing crops which were ready for harvesting in states of central and north India.

As expected, agricultural commodities market has reacted sharply to this event.

In the first fortnight of April month, the prices rose significantly in some commodities. 

Table 1 and figure 1 given below show the extent of price rise in few important commodities in the Indian futures market.

Jeera(cumin), Chana (Chickpea) and Mustard seed have seen highest price rise among the Rabi season crops. 

The cascading effect is also seen in the commodities like soybean and soy oil.

However, in Wheat not much change is seen because the government of India has ample buffer stocks with it. Further government has also started wheat procurement at MSP.

Once the government procurement programmes end by June, the wheat market is also expected to witness significant price rise during this marketing season.

Soy oil trades down in Indian Market

11.00 PM IST
Soy oil Update

Soy oil trades down by more than 1% in Indian futures market due to subdued demand in the physical market. Weakness is also seen in the international market as soy oil prices at CBOT also trades down by 2%.

Yesterday when NCDEX Soy oil April Contract was trading at 588.50 level, we posted that market may fall from current levels.

Today till now market has made a low of 579.45. Thus we have seen a fall of Rs. 9. Currently market trades at 580 level.

Again if market close below 584-585 level, then next week also we may witness further fall... may be near 560 level.

NCDEX Soy Oil April Contract

Soy oil likely to correct from current levels in Indian Futures Market

After trading in a range bound to positive territory for the last 4-5 days, it appears that market is getting enough resistance on current levels in soy oil futures market in India.

we may go wrong in our view, but as we mentioned in our earlier posts that 591 is the major resistance for short term. And till now market was not able to close above this level in NCDEX Soy oil April Contract.

And today if market close near 584-585 level, then there are quite fair chances that market may start coming down again towards the levels below 560.

At the same time if market is able to close above 591 level then movement towards 600 may be seen in short term.

However likelihood of correction is very high.

Sugar Market Plunges due to Excess Supply in India

There has been a sharp correction of around 17 % in the sugar futures prices in India since the start of the sugar marketing season (sugar marketing season starts from October and ends in September).

The Futures prices of NCDEX Sugar May Contract have dropped from Rs. 2860/quintal during October 2014 to Rs. 2370/quintal till date.

In fact, Traders were having fair idea about the production rise and situation of ample supply world over. They utilized every rise in making selling opportunities.

The market seems still in the grip of the bears in the light of the facts and figures which were released by the Indian Sugar Mills Association (ISMA) recently.

The important points of the Press Release are given below.

·        The sugar mills in the country have produced 221.8 lac tons of sugar during the current season up to 15^th March, 2015.  This is 28 lac tons higher than the production up to the corresponding period in the last season of 193.8 lac tons.

·        As on 15^th March, 2015, 476 sugar mills were still under operation, which were 409 mills last year at the same time

·        The Government has revised its sugar production estimates to 265 lac tons, as compared to the earlier estimate of 250 lac tons.  They had previously estimated a surplus of 14 lac tons and, therefore, allowed incentives to export this 14 lac tons as raw sugar. 

·        However, the global sugar prices fell at the same time mainly due to the massive depreciation of Brazilian currency in comparison to the US dollar, making sugar exports from Brazil even cheaper.  The fall in global sugar prices, therefore, have restricted raw sugar exports from India.

·        With higher estimations of the sugar production by the Government by 15 lac tons and lower expected raw sugar exports, the industry has requested for creation of 20 lac tons of buffer stocks.  It will help the industry with some cash flows to carry the extra sugar and will check distress sales by some sugar mills.  This 20 lac tons can then be used by the Government next season for its PDS requirements.

Source: ISMA, Press Release, 17 March 2015.

NCDEX SugarM May Contract

Short term marginal Recovery then again Fall expected in Indian Soy oil Market

During last 10 days Indian soy oil market has fallen by nearly 4%. (from 600 to 575 level) till date.

Let us review the market movement for next couple of days.
Two things seem still clear --------
1.  MEDIUM term Outlook is still BEARISH.
2.  SHORT term MARGINAL RECOVERY might be seen


Right Now Soy oil April Contract trades at 576.50 at 12.33 IST.

Technical levels are given below for MEDIUM and SHORT term.

India: NCDEX Soy oil April Contract

Medium Term Technical Levels

S1: 548    S2: 530                   R1: 600           R2: 619

Short Term Technical Levels

       S1: 555    S2: 550                   R1: 590           R2: 600

Fundamentals have yet not changed. Physical market demand is still not picking up and traders are in wait and watch mode.

Some technical bounce back may be seen in the market. Higher levels may result in to fresh selling by the hedgers and speculators.


NCDEX Soy oil April Contract: 
Medium Term Chart View

Short Term Chart View

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.

Soy oil remains volatile ahead of the Union Budget in Indian Market

Weak global cues of soy oil and crude oil keeps Indian market sentiments subdued in physical as well as futures markets.

Physical markets traders however opine that sooner or later prices are bound to improve with the start of summer in north India after Holi Festival.

They seems downside limited in India market.

Union Budget in India is also scheduled next week on 28th Feb.

Oilseeds industry in India is in favor of gradual increase in the import duty on the refined edible oil. This is to be seen what happens in Budget.

Thus market will remain more speculative and will  follow less demand and supply fundamentals. 

A cautious trade is advised amidst high volatility.

NCDEX Soy oil April Contract

Indian Soy oil Futures Market trades 1% up tonigt

As mentioned in the last post, the Indian soy oil futures opened with a positive note in the morning on renewed buying interest in the physical as well as futures market.

Right now  NCDEX Soy oil April Contract trades at 611 level (1% up from previous close).

Overall trend is likely to remain positive today.

Soy Oil Prices Consolidates during Week ending 6th Feb 2015 in Indian Market

Bull and Bears remained equally active during first week of February 2015. The week started with a bullish undertone, but after the initial gains for first two days, prices hovered in a narrow range thereafter for most of the time throughout the week and finally closed in Red. However, on weekly basis marginal gains were seen during this week.

NCDEX Soy oil Feb Contract
Weekly Open = 618
Weekly High = 634.95
Weekly Low = 618
Weekly Close = 627.50
Difference between Open & Close = 9.5
%age weekly gains =( 9.5/618) *100 = 1.53%

This indicates that market is getting resistance on current levels and it needs some big news to push market up from current levels.
These gains were mainly seen due to sharp rise in international crude oil prices, and improvement in the CPO prices at BMD, Malaysia.

The next week may prove deciding in finding the direction of the market for medium term.

In India summer season is just starting from March onwards and demand of crude palm oil increases as compared to soy oil.

NCDEX Soy Oil Feb Contract as on 6 Feb 2015

Soy oil market sentiments improve in Indian Market

Today Soy oil market in India traded with a bullish undertone despite the fact that yesterday sharp correction was seen.

In fact, strong international market sentiments i.e soy oil at CBOT and Crude palm oil at BMD, Malaysia added to the bullish undertone of the Indian market.

Firm international crude oil sentiments also supported the market. Despite all these positive factors market was unable to break yesterday’s high price indicating that traders are still in dilemma regarding future movement of the market.

It may take some more time to witness the clear direction of the market. Let us wait for a day or two.

Today NCDEX Soy oil Feb contract closed at 631.30 (1.25 % up from previous close).

Soy oil Market update of Indian Futures Market

As described in the earlier posts, the soy oil market seems unable to sustain on higher levels. After witnessing a price rise for the three consecutive days, today market fell due to lacklustre demand in the physical market.

The earlier rise was mainly due to short covering and support from crude oil. Today crude oil has also seen some profit booking in international market.

In Indian futures market, the NCDEX feb soy oil contract is getting strong resistance near 632 level. Today if market closes below 626 level then market may further witness weakness towards 610 level. [current price level at 9.19 IST is 624.45]

At the same time closing above 632 will make market strong.

Current market condition seems weak.

Soy oil Weekly chart : NCDEX Feb contract

Learn to earn in Long Term Trade in Commodities through Technical Analysis

Commodities Market trading is a little bit difficult as it needs reasonable knowledge of the fundamental factors of demand and supply of the commodity under trade as well as some basic knowledge of the Technical Analysis to decide the entry and exit point.

There are numerous articles and study material freely available about Fundamental and Technical Analysis.

However here we will discuss about some basic concepts of technical analysis which we have found very useful and simple.

We will learn how  to use indicators to make a "DECISION MATRIX TO IDENTIFY A RIGHT TRADE" from a Long Term Trading Perspective. 



Before we start, few points must be noted down.

1. All known information is reflected in the price.
2. Market moves on the basis of expectations and emotions of the Traders i.e (Buyers and sellers). 
3. No Single Technical indicator is right all the time.
4. You too don't have to be right all the time.
5. Practice to learn about few reliable indicators and stick to them.
6. Be consistent and disciplined in your approach. 
7. Most of the money is being made in a TREND, especially as far as futures market is concerned.
8. Patience and discipline is needed as you must wait for clear trend in the market in order to succeed on the long run.
9. As long as the indicators are in neutral territory avoid to trade unless you are a very knowledgeable trader.

Terms used in Technical analysis

What is Technical Analysis

• In simplest words, it is the examination of past price movement to forecast future price movement.
• In Technical analysis, price refers to any combination of open, high, low and close for a given commodity over a specific time frame.
• The time frame can be intraday, daily, weekly or monthly or yearly etc.

Important Types of Technical Charts

Line charts, Bar charts, Japanese Candlesticks chart

Candlesticks Chart Pattern

Line Chart Pattern

Bar Chart Pattern

Market Trend

Up trend, Down trend, Sideways trend

Moving Averages (MA)

ØThese are some of the oldest and most useful indicators.

ØBasically moving averages show TREND.

ØA BUY signal is given when price crosses above the moving average and the MA is directed upward.

ØA SELL signal is given when price drop below the MA and MA is directed downward.

ØBuy or Sell signal is not given when MA changes direction but price does not cross above or below the MA.

ØTHE MOVING AVERAGES SERVES AS SUPPORT AND RESISTANCE.

Types of Moving Averages

ØSimple Moving Average (SMA)

ØExponential Moving Average (EMA)

ØWeighted Moving Average (WMA)

Typically 5 and 10 are used in EMA in most of the agricultural commodities.

Bollinger Bands (BB)

Bollinger Bands are a kind of trading envelope. They are lines plotted at an interval around a moving average.

Period: The period for which to compute the band.(Typically 10 is used in agricultural commodities)

Band Width: The half-width of the band in terms multiples of standard deviation. Typically 2 is used.

Bollinger Bands consist of a moving average and two standard deviations charted as one line above and one line below the moving average. 

USES:

ØTo determine overbought and oversold zones.

ØTo confirm divergences between prices and indicators.

ØTo project price targets.

ØThe wider the bands are, the greater the volatility is.

ØThe narrower the bands are, the lesser the volatility is. 

Volume

ØVolume can be a barometer of future activity and direction.

ØVolume measures the number of contracts that exchanged hands during the trading session.

ØIt measures market activity and liquidity. Higher volumes means higher liquid contract or commodity and vice-versa.

ØVolume is tracked on an individual delivery month and total symbol basis. 

Open Interest (OI)

ØOpen Interest is applicable for futures and commodities charts only.

ØOpen interest shows the total number of futures contracts that have been entered into and not yet liquidated by an offsetting transaction or fulfilled by delivery.

ØWhen both sides are new, open interest increase.

ØWhen only one side is new, open interest remains unchanged.

ØWhen both sides close out, open interest decreases. 

Relative Strength Index (RSI)  ------- (Range : 70-30)

ØIt measures market's strength and weakness.

ØA high RSI, above 70, suggests an overbought or weakening bull market. A low RSI, below 30, implies an oversold market or dying bear market.

ØIt works best when a failure swing occurs between the RSI and market prices. For example, the market makes new highs after a bull market setback, but the RSI fails to exceed its previous highs.

ØWhen price touches the upper BOLLINGER BAND, and RSI is below 70, it is an indicator that trend will continue.

ØWhen Price touches the lower BOLLINGER BAND, and RSI is above 30, down trend will continue.

ØIf a price touches the upper BOLLINGER BAND and RSI is above 70, the trend may reverse and decline.

ØIf a price touches the lower BOLLINGER BAND and RSI is below 30, the trend may reverse and move upward.

Stochastic  (Slow) - (Range : 80-20)

ØIt indicates OVERSOLD & OVERBOUTH market conditions.

ØIn an upward trending market, prices tend to close near their high.

ØIn a downward trending market, prices tend to close near their low.

ØWhen an upward trend matures, prices tend to close further away from their high.

ØWhen a downward trend matures, price tend to close away from their low.

Clusters

ØThe stochastic indicator attempts to determine when price starts to cluster around their low of the day in an up trending market, and cluster around their high in a downtrend. 

Moving Average Convergence/Divergence (MACD)

ØBuy when the oscillator crosses above the slower exponential moving average of the oscillator.

ØConversely, you sell when the oscillator crosses from above to below the exponential moving average of the oscillator.

ØLastly, divergence is possible with the MACD.

ØThe ideal signal would show divergence, clearly break a dominant trend line, and display the crossing of the MACD lines.

How to use the above technical Indicators ---- Learn 

Thus, Exponential Moving Average (EMA), Bollinger Bands (BB), Relative Strength Index, Slow Stochastic and MACD are five major technical tools which we can apply in finding initiation point and exit points. Most of the time you will have a winning trade in long term.