Soybean Prices Up More Than 20% in One Month –Is Further appreciation Still Possible?

Soybean ended with new highs this Friday and the market has been trending upwards since the last few weeks. The August contract of NCDEX soybean closed near the 8600 mark. Just one month back, the contract was trading below 7000 – a noticeable price appreciation of 22% approximately.

Gains in edible oil markets such as soybean oil, palm oil and sunflower oil favored the rise in prices, in addition to limited availability of soybean in the country. Already the inventories had started tightening from early part of 2021, and with 20 Lakh tonnes of Soymeal export this season, the supplies have exhausted to a great extent. In India the delayed monsoon has been a matter of concern and the planting activity of soybean is adversely affected due to deficient rains in central India.

Year on year, acreage of soybean is currently down nearly 9 percent. All these factors helped soybean in maintaining the upward trend and attaining new highs. Global fundamentals for soya oil and palm oil remain optimistic from a pricing perspective. The tight supply situation may continue till the end of September i.e. till the closing of this marketing season. It implies that as long as the production prospects of this year will be lower, chances for further rise in the price levels shall remain high. For the week ended July 22, area sown under soybean had reached 102.52 Lakh hectares versus 112.34 Lakh hectares in the corresponding period last year.  

Globally, the return of China as a major demand driver for commodities like corn, and soy complex products shall be one of the key factors in supporting the upward trend. Regular building of the food reserves amongst different nations shall continue especially in India where the threat of third wave corona is looming. Market talks had suggested a few months back that U.S. exporters may have to supply 30-35% of China’s total soybean requirements, as compared with 17% last year. Once the pandemic threats reduce lockdown restrictions are lifted, an increase in consumption can be expected globally as restaurants reopen across different nations. To sum up, soybean fundamentals still appear convincing for further upside despite soaring prices and new highs.

Chart Analysis of NCDEX first/active month contract:

As viewed on the charts August Soybean at NCDEX shall trade with a positive bias this week unless it fails to close above 8100/8125 level. From a broader perspective, say for the next 2-3 months the benchmark contracts of NCDEX may not sustain below 7500. On the other hand, the price appreciation may be near to, or more than 9500 for the same period.