Soybean Finishes On Strong Note in 2021; What Will Happen In 2022?

10000 MARK ACHIEVED in 2021: Soybean has shown a massive escalation in 2021 and this price behavior was prominent between the months of February and August. The oilseed had attained record highs, surpassing the 10000 level!! There was an acute shortage in the supply line since most of the value chain participants such as stockists, processors had preferred bulk purchases, so as to maintain adequate inventory for combating against the supply disruptions.

The problem of supply disruption emerged in 2021 because of the lockdown restrictions, caused by the first and second waves of COVID -19 infections. The trend had reversed August 2021 onwards, as spot farmers and stockists offloaded their stocks in heavy quantities against record high prices. The price control measures such as allowing soymeal imports, and applying stock limits in oilseeds also contributed to the fall. A three-time reduction in import duty of edible oils has also pressured the markets. The abnormal price rise was considered to be unsustainable by the industry and it was adversely affecting the small poultry farmers in context to weakening demand and higher price risk. Soybean trended lower between August and October.

Markets recovered November onwards as the big farmers who were holding more than 75 percent of the harvest, were reluctant to sell at cheaper offers (Considering last year prices). When compared with December 2020 prices, soybean is up nearly 38 percent presently.  

UPSIDE TO REMAIN CAPPED IN 2022: For soybean it was an interesting story during the later part of 2021, since the prices had maintained a strong trend throughout November and December, despite the peak supply season. There was limited selling by the farmers, who were holding more than 75 percent of the harvest. Prices did correct after the stock limits were decreased, nevertheless the spot and the derivatives were supported as whatever supply arrived in the open market (Because selling was very less in the spot market), it was absorbed due to regular crushing of the seed. Market talks indicate that unless the big farmers do have a better price realization of their stocked produce, they will not prefer selling in the physical market.

Soybean prices are also influenced by the factors impacting soymeal and soya oil. Soymeal exports are expected to improve during the first quarter while edible oils like soya oil and palm oil are still facing a tight supply situation in the major markets of USA and Malaysia respectively.

However India will be harvesting a bigger crop this year resulting in higher carry stock year on year. Summing up, we expect a moderately bullish trend during the early part of 2021, and chances for a short term bearish reversal may be observed March or April onwards. It is quite likely that average prices will be below the 6500 level second quarter onwards.