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Fundamental Analysis of Soy Complex & RM seed: Price Direction Appears Upwards

Abhijeet Banerjee
Abhijeet Banerjee
Edible Oils

Soybean & Soya Oil:

The week ended with a positive mood in the soy complex markets and currently there is no major bearish trigger – be it the Indian market or the global markets. Palm oil fundamentals remain favorable for further price rise while Holi demand shall persist for the next 10-12 days at least.

In context to this month’s USDA report, the Department has left U.S. ending stocks unchanged,     lowered the crop guess for Argentina, and raised production for Brazil’s crop size. Despite the hike in the world stocks (due to increase in Brazilian soybean output estimate), consistent growth in world soybean usage, are most likely to keep ending 2020/21 supplies at the tightest level in twelve years.

This would imply that average soybean prices in India and other leading world markets shall maintain higher levels much above last year’s, in the coming months.

Combined with the increase to Brazilian soybean output, the current level of global soybean stocks appears slightly better versus previous estimates. However, as long as the Brazilian soybean shipments remain delayed, markets may continue to factor in the prevailing tight supply conditions.

In Brazil not more than 25 percent of the planted soybean crop could be harvested till first week of March and wet weather situation is the major cause of slower harvest pace. The crop size is estimated higher by 36.7 million bushels for the Brazil’s soybean.

Total soybean crush for the 2020/21 marketing year is expected to reach 2.2 billion bushels, with exports coming in around 2.25 billion bushels. Estimates for ending stocks of US soybean were left unchanged at 120 million bushels. Still the current stock for the USA are seen historically lower for now.

In Argentina, the prolonged dry weather condition in the producing regions has prompted the USDA to lower its forecast of 2020/21 Argentine soybean production to 47.5 million metric tons. Summing, price direction for soy complex I,e. Soybean and Soya oil appears positive for this week.


Mustard/RM seed:

Earlier, the market was anticipating a decent fall in prices after February considering the approaching new arrival season and down correction in edible oils and soybean. But international cues were positive constantly, therefore edible oils and soy complex markets continued rallying even after the February month, and the situation still favors price rise possibility in these commodities.

At the same time, the new season arrivals are unlikely to intensify till March end and Holi demand continues.  Also, there will be no significant deposit in the accredited warehouses of NCDEX till March-end. As per market talks, the harvested supplies from Rajasthan shall increase after the Holi, and gather momentum only after the first/second week of April. All in all there are better chances of Mustard/RM seed prices to maintain firm levels this week.

Technical Analysis Of Soy Complex & RM seed

NCDEX April Soya Oil: The most active month of NCDEX Soya oil fell on Friday and closed at 1275.5, but the weekly price view is positive. In case the contract holds or gives closing above 1250 for a day or two then there will be better chances of prices to move towards 1320-1325 level this week.

NCDEX April Soybean: April Soybean at NCDEX closed at 5280 on Friday, and is expected to trade with a positive note this week as long closes or holds above 5220-5230 level. Under this scenario the April contract may climb towards 5375-5400 levels this week.

NCDEX April RM seed: April RM seed at NCDEX closed at 5810 on Friday, gaining more than 6 percent week on week. The contract is expected to trade with a positive note this week as long closes or holds above 5700-5720 support region. If this behavior is observed then the April contract can appreciate towards 5940-5960 this week.

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