Soybean Turns Range Bound in US and Indian Markets

In the US futures market, i.e. at CBOT, soybean futures trade participants appear satisfied to continue in this pattern, i.e. trading in a narrow range, at least for the short term until fresh fundamental news emerges and decides futures course of price action. The recently released USDA report was slightly positive with respect to expected price behavior from longer term. Overall it comprised both bullish and bearish data, with slightly more numbers on the bullish side. This would explain why soybean is trading in a narrow range currently. Similarly is the price pattern seen in Indian futures i.e. at NCDEX soybean futures prices. The June soybean has turned range bound between 3750-3850 since last few weeks.  

Market continues to gather transparency regarding proper understanding regarding net impact on commodity demand for this year owing to the Corona spread problem. With many states looking to reopen economies, or business activities retail end demand may recover in coming months.  USDA has projected global Soybean production to rise by 26.6 million tons to a record 362.8 million tons, less than 3 million tons above the previous record set in 2018/19. Global Soybean meal production is expected to grow in 2020/21.  

The USDA expected demand from China to turn strong gradually amid decline in Corona affected cases and normal trade operations resuming slowly. Therefore Global protein meal consumption is also forecast to rise. India’s meal exports are forecast to reach 1.9 million tons, up 420,000 tons from 2019/20’s level, which were quite lesser than 2018-19. The most surprising from the latest WASDE report was the increase in global feed demand estimate by 25 million bushels to 5.7 billion for this year and over 6 billion for next year, which had encouraged industry persons and global commodity experts to expect relatively better prices this year as compared to a gloomy price outlook, observed during Feb-March months.  

Prices in Indian markets are expected to trade with moderate fluctuations but the offers are unlikely to remain lower for long durations. Means – in case of any marginal decline in prices, there will be takers for this commodity since retail demand is stable while arrivals are limited. Hence spot prices will tend to bounce back just after marginal depreciation. At NCDEX June Soybean seems to find resistance in moving upwards and sustain above 3850, as per analysts. But they also maintain that any fall towards 3650-3675 levels shall be followed by immediate pull backs. For next few weeks, as long as June Soybean fails to trade above 3850, tendency to move towards 3950 will not be seen.  

Back to WASDE 

India suspended 39 import licenses for more than 452 KMT of refined palm oil due to growth in duty-free purchases from Nepal (+314% year-on-year) and Bangladesh (+500%) under the South Asian Free Trade Area (SAFTA). 

The restriction will give support to domestic crushers and oilseed growers in India. 

The impact on the world market: a shift in India’s demand towards soybean and sunflower oils, pressure on Malaysian palm oil futures. 

Circling back to the WASDE report, one thing to point out is the projected stocks-to-use for soybeans compared to the USDA estimate of average farm price. USDA has not projected a stocks-to-use ratio below 10% for soybeans since 2016’s estimate of 7.17%; the report released this week indicates a 9.39% stocks-to-use ratio. 

While the projected 20/21 ratio is not quite as low as the 16/17 projection, the 20/21 average farm price of $8.20 is significantly lower than the 16/17 average farm price of $9.47. It stands out even more when compared to the 18/19 and 19/20 projections of 22.89% and 14.87% respectively which were accompanied by average farm price projections of $8.48 and $8.50. 

Maybe we need to keep in mind the drag soybeans will likely feel from low corn prices. 

With all that being said, let’s hope the Chinese don’t neglect soybeans moving forward.