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.

Good beginning is half done: Indian Kharif crop sowing progress analysis

Kharif crop sowing in India gradually picks up due to good monsoon rainfall till date in country as a whole.

However monsoon is yet to gather momentum in many parts of north and north –western India.

The latest data released by the Ministry of Agriculture, the kharif crop sown area has crossed 165 lakh hectares so far as compared to 134.18 lakh ha at this time last year.  Remarkable progress is seen in case of Pulses and Oilseeds where area increment is far ahead as compared to the last year’s figures. In Pulses this increment is around 80% while in case of oilseeds around 427% increment is seen.

Rice and sugarcane area has seen marginal decline.

The sowing of different crops is underway and will continue till July end. If monsoon remains fairly active and its spatial distribution also remain good then country can expect better production.

This is a matter of great relief that in the commodities like pulses and oilseeds the sowing progress is good because India is import dependent in many pulses and edible oils.

Monsoon Progress:

Till date the Indian monsoon rains have remained good enough. It is clear that majority of the regions have received normal /excess rainfall during 1-28 June 29, 2015 barring a few regions of Uttar Pradesh.

The actual cumulative rainfall is also fairly above the normal rainfall for the country as a whole.

Now a lot will depend upon the further progress of the monsoon during crop growth stage.

Figures Source: IMD, New Delhi

Impact Assessment: Deficit Monsoon likely to hit hard on Crop Production and Commodity Prices in India

The latest forecast of Monsoon rains in India by the Indian Meteorological department has worried the Indian farmers as well as the consumers. The goodwill of the government is also on stake as it will have an uphill task to contain inflation if the forecast come true this year.

This article analyses the previous trend in the monsoon rainfall, changes in production of commodities and wholesale price index to gauge the likely impact on the common man.

First of all let us highlight the main features of the Latest Monsoon Forecast for India for 2015 which was released by IMD on 2^nd June 2015.

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Ø Rainfall over the country as a whole for the 2015 southwest monsoon season (June to September) is likely to be deficient (<90 lpa="" of="" span="">

Ø Quantitatively, monsoon season rainfall for the country as a whole is likely to be 88% of the long period average with a model error of ±4%. [THAT MEANS AROUND 12% DEFICIENT RAINFALL]

Ø Region wise, the season rainfall is likely to be 85% of LPA over North-West India, 90% of LPA over Central India, 92% of LPA over South Peninsula and 90% of LPA over North-East India all with a model error of ± 8 %.

Ø The monthly rainfall over the country as whole is likely to be 92% of its LPA during July and 90% of LPA during August both with a model error of ± 9 %.

Ø  The rainfall over the country as a whole is likely to be 92% of its LPA during July and 90% of LPA during August both with a model error of ± 9 %.

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·            Thus, as of now, there is clear indication that this year’s monsoon is likely to remain deficient by around 12% on country level.

·            States like West UP, Punjab, Haryana, Rajasthan, Madhya Pradesh and Maharashtra are likely to be affected more than the other parts of the country. The deficiency may remain in the range of 15 to 10 percent in these states.

·            Last year too, country witnessed a 12% deficient rainfall. Thus this will be the second consecutive year which will witness less rains in the country.

·            This indeed is  a matter of worry despite the fact that the country has ample foodgrain buffer stocks with the government and Sugar supply is ample.  

Market react more on the future event rather than the current facts. Thus in spite of comfortable food grain availability, the possibility of commodities price rise has increased sharply.

Here we will see empirically what has happened during past years when such type of situation emerged. Based on that we will try to draw some conclusions about the likely production scenario and expected price rise for this year for some important commodities.

A :  IMPACT OF RAINFALL ON PRICES OF COMMODITIES

In India a vast part of the cultivable land is totally dependent upon monsoon rains. The monsoon rains are one of the most important factors that determine the production of crops. Thus supply and demand factors determine the prices.

Table1 and Fig. 1 present the trend in the rainfall departure and percentage change in the Wholesale Price Index in India for the last 9 years.

Observations:

1. From 2005 to 2008, not much deviation in rainfall from the normal range was seen. Thus prices in general (with some exception) have remained more or less stable or even declined in Cereals, Pulses, eggs, meats & fish, condiments and spices and sugar. However in Oilseeds the prices remained very high.
2. In Year 2009, where rainfall deficiency was very high (-21.8%), the immediate impact on prices of the commodities was seen. Prices of Cereals witness a moderate rise, while a significant jump in prices of Pulses, Vegetables, Eggs, Meat & Fish, Condiments & Spices was seen.
3. SUGAR PRICES ROSE EXCEPTIONALLY HIGH BY 48 %.
4. In year 2010 and 2011 monsoon rains recovered and were in surplus, the prices came down in cereals, pulses, and sugar.
5. In Year 2012, again prices rose substantially in Cereals, Pulses, oilseeds and sugar.

Inference:

• Thus prices of Cereals, Pulses, Oilseeds and Sugar have seen more and direct impact of deviation in the monsoon rainfall.

• The vegetables are perishable and nature and spices are mostly perennial, thus the impact of rainfall deficiency/surplus cannot be generalized. 

B: IMPACT OF RAINFALL ON PRODUCTION OF COMMODITIES

Table 2 presents the trend in the rainfall as well as the production of important commodities for the last 10 years. The %age change in the production with respect to the previous year is also given.

Observations:

1. The production years 2009-10, 2012-13 and 2014-15 have seen deficient monsoon rainfall in India. The extent of deficiency has remained in the range of  -21.8%,  -7.1% and -12% respectively in these years.
2. The production of Cereals, particularly Rice and Wheat, Pulses, Oilseeds and Sugar has seen significant decline in the deficient rainfall years. The extent of production decline has roughly remained in the range of 5-16% in these commodities.
3. In year 2014-15 which witnessed around 12% rainfall deficiency, the  significant production decline in Cereals, rice, wheat, Pulses and Oilseeds was seen.. Herver sugarcane area witnessed marginal increase.

Inference:

• Even a rainfall departure of around 10% from normal rains results in to production fall in the range of 5 to 15 Percent in many commodities.

• Given the fact that this year’s rainfall deficiency in the range of 12% (equal to last year’s range), we assume that production of cereals, rice, wheat, pulses and Oilseeds may reduce by -5. -4, -5, -10, -16 % respectively as compared to last year’s figure. [ i.e fall in production of these commodities may be at least in the same proportion as was seen during 2014-15].

• However, we expect that sugarcane production may decline by more that 5% as compared to last year’s figure because this crop requires more water and is largely grown in the North-west UP and Maharashtra where the expected monsoon deficiency is around 15%.

  

Conclusion:

• The agricultural commodities production is expected to decline straight in the second successive year due to weak monsoon rains. The extent of production fall may vary in the range of 5 to 15% among various commodities including cereals, rice, wheat, pulses, oilseeds and sugar. This figure may further rise if the  monsoon deficiency range further increases in the June – september period.

• The prices of agricultural commodities are likely to increase substantially during 2015-16 period due to less production and increased demand.

• Oilseeds and Pulses seems more vulnerable in terms of price rise. If sugarcane area substantially reduce this year then Sugar prices will start witnessing improvement and sugar will emerge a major commodity which will witness significant price rise in 2015-16.

RICE GROWING SEASONS AND REGIONS IN INDIA

Knowledge Series :

Rice is the main food item of Indian Diet. 

Rice (Paddy) sowing/transplanting and harvesting periods have a great variation in different parts of India due to variation in temperature, rainfall, soil type and other Agroclimatic conditions.

Three Main Seasons for Rice/Paddy which are classified according to season of harvesting of the crop.

Rice Seasons	Sowing Time	Harvesting Time	Interesting Facts
Autumn Rice	May to August	September to October	·      Known as Pre-Kharif rice. ·   The time of sowing differs among states due to variation in weather condition and rainfall pattern. ·  Autumn rice crop is known as 'Aus' in West Bengal, 'Ahu' in Assam, 'Beali' in Orissa, 'Bhadai' in Bihar, 'Virippu' in Kerala and 'Kuruvai/kar/ Sornavari' in Tamil Nadu.
Winter Rice [This is the main rice growing season in India]	June to July	November to December	·      Known as Kharif rice. ·     Winter rice is known as 'Aman' in West Bengal, 'Sali' in Assam, 'Sarrad' in Orissa, 'Agahani' in Bihar and Uttar Pradesh, 'Sarava' in Andhra Pradesh, 'Mundakan' in Kerala and 'Samba/Thaladi' in Tamil Nadu. About 84% of the country's rice crop is grown in this season.
Summer Rice	November to February	March to June	·      Known as Rabi rice. ·      It is known as 'Boro' in Assam and West Bengal, 'Dalua'in Orissa, 'Dalwa' in Andhra Pradesh, 'Punja' in Kerala and 'Navarai' in Tamil Nadu and 'Garma' in Bihar.

Due to favorable temperature conditions in the eastern and southern regions of the country, two or three crops of rice are grown in a year.

In northern and western parts of the country, due to sufficient rainfall and fairly low winter temperature, only one crop of rice is grown during the month from May to November.

 RICE GROWING REGIONS   

Sl.No.	Rice Growing Regions	Facts
1	North-Eastern Region	·         Major States are Assam and North eastern states. ·         In Assam rice is grown in the basin of Brahmnaputra river. ·      North-eastern region receives very heavy rainfall and thus rice is grown under rain fed condition.
2	Eastern Region	·         Major States: Bihar, Chhattisgarh, Madhya Pradesh, Orissa, Eastern Uttar Pradesh and West Bengal. ·         Rice is grown in the basins of Ganga and Mahanadi rivers. ·       This region has the highest intensity of rice cultivation in the country as it receives heavy rainfall thus rice is grown under rain fed conditions.
3	Northern Region	·   Major States: Haryana, Punjab, Western Uttar Pradesh, Uttrakhand, Himachal Pradesh and Jammu & Kashmir. ·         Low winter temperature. ·         Single crop of rice from May-July to September-December is grown.
4	Western Region	·         Major States: Gujarat, Maharashtra and Rajasthan. ·         Rice is grown under rain fed condition during June-August to October - December.
5	Southern Region	·         Major States: Andhra Pradesh, Karnataka, Kerala and Tamil Nadu. ·        Rice is mainly grown in deltaic tracts of Godavari, Krishna and Cauvery rivers and the non-deltaic rain fed area of Tamil Nadu and Andhra Pradesh. ·         Rice is grown under irrigated condition in deltaic tracts.

Source of Data/ information: http://drd.dacnet.nic.in/  (Directorate of Rice Development, Patna)

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.

Agri commodity prices may rise due to sudden Fuel Price rise.

In Mid night today, the fossil fuel price will rise by significant amount.

Agri commodities prices in general will witness a upward movement because of rise in the transportation cost due to hike in Diesel price and Petrol prices.


Diesel price hike  = Rs. 2.37/litre
Petrol Price hike = Rs. 3.96/litre

Soy oil close down in Indian Futures Market

Soy oil close down in Indian market due to profit booking and fresh selling pressure.

As discussed in earlier post this afternoon that short term correction might be seen in soy oil.

The NCDEX Soy oil June contract closes at 584.

Tomorrow some more correction might be seen.

For 22 April 2014 the following short term Technical Levels seems valid.

Support = 580   Resistance = 587

Short Term correction likely in Soy oil in Indian Market

After witnessing a positive movement since start of the April month, it seems that short term correction is due in Indian soy oil market.

Prices are getting resistance on current levels.

NCDEX Soy oil June contract :
Resistance = 591     Support = 582

Selling near current levels i.e 587 may result in to some gains in short term.

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.