Agri Business

Soyabean futures on NCDEX on fire, rule 40% higher than CBOT

Subramani Ra Mancombu Chennai | Updated on April 14, 2021

Oilseed crushers say movement ‘unnatural’, demand SEBI action

An “unusual” movement in soyabean futures on the National Commodities and Derivatives Exchange (NCDEX) has led to a hue and cry being raised with oilseed crushers complaining to the Centre.

The current movement has resulted in Indian futures prices ruling at least 40 per cent higher than Chicago Board of Trade (CBOT) soyabean futures.

On Tuesday, soyabean for delivery this month ended at ₹6,910 a quintal, while May and June futures closed at ₹6,727 and ₹ 6,570, respectively. NCDEX spot soyabean (Indore delivery) was quoted at 7,070 a quintal.

On CBOT, soyabean is currently ruling at $13.91 a bushel (₹38,400 a tonne) after having hit a seven-year high of $14.44 (₹ 39,900) on March 8. Domestic prices then ruled at around ₹5,000-5,100 at various APMCs in Madhya Pradesh. On NCDEX, April futures were quoted at ₹ 5,168 then.

Currently, prices at APMCs in Madhya Pradesh are ruling at ₹6,500-7,000, as per Ministry of Agriculture and Farmers’ Welfare data. Prices in APMCs seemed to have picked up cues from the NCDEX futures.

Global prices

Soyabean prices surged in March on concerns over global supplies after domestic processors and importers led by China made huge purchases of grain and oilseeds. According to Trading Economics website, CBOT soyabean futures have gained 6.94 per cent since the beginning of the year but they have dropped about two per cent in the past month.

This, however, has not happened in India with prices heading only in one direction – north.

Particularly on NCDEX, soybean futures have been hitting the upper ceiling of six per cent over the last few sessions resulting in The Soyabean Processors Association of India (SOPA) seeking Government action.

The reason cited for this increase by players in the futures market is non-availability of soyabean stocks.

“Unprecedented bull run in NCDEX soyabean futures. Market rigged by speculators, with daily upper circuit. Unsupported by demand-supply fundamentals. Irrational prices disrupting physical trade. Request immediate stern steps to check soyabean futures rigging,” SOPA tweeted drawing the attention of Securities and Exchange Board of India (SEBI) besides Union Commerce Minister Piyush Goyal.

The tweet had an immediate effect on the market as prices that had topped ₹7,300 for April futures slid below ₹7,000 on Tuesday.

On Tuesday evening, NCDEX issued a circular raising the pre-expiry margins to three per cent from 2.5 per cent and that of lean period margin for July contracts to four per cent from two per cent.

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User industries upset

The abnormal rise in soyabean futures has resulted the poultry and aquaculture sectors protesting against the increase in soyameal prices. The poultry sector, especially, has been demanding that it be allowed to import 12 lakh tonnes of soyameal duty-free to tame the rising prices. It has also sought to bring in soymeal derived from genetically-modifies soyabean.

Both these demands are unlikely to be met, according to industry sources, who said the poultry and aqua sectors demand can be met from within the country without any problem.

“The futures market is in the grip of speculators which is directly affecting physical trade. The current bull run on NCDEX is irrational as it is without any fundamentals. We have ample stocks of soyabean in the country,” said Davish Jain, SOPA Chairman.

Crop figures

According to Jain, soyabean production for the current season (October 2020-September 2021) has been projected at 104.55 lakh tonnes (lt), besides an opening stock of 5.16 lt. This is against last year’s production of 93.06 lt and opening stock of 1.70 lakh tonnes.

The Ministry of Agriculture and Farmers Welfare, in its second advance estimates of agricultural production, had pegged soyabean output at 137.1 lt.

The SOPA Chairman said that out the total projected soyabean production, nearly 75 lt had arrived by March-end with 58.5 lt being crushed. Farmers could be holding 36.64 lt stocks.

“There can be some five per cent variations in the crop figures,” Jain said.

“The Centre has pegged the soyabean crop higher at over 130 lt and SOPA at over 100 lt. The actual figure could be somewhere between. So, the huge rise in soyabean prices seem unjustified based on speculation over supplies,” said Solvent Extractors Association Executive Director BV Mehta.

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Anand Singh Anjana, a farmer in Ujjain in Madhya Pradesh, said soyabean production had been affected due to a viral attack but he was not clear about the actual impact.

A few farmers now have stocks and most of them are only having soyabean for seed purpose, he claimed.

“The huge hidden stocks and those with farmers will come out soon. Currently, farmers seem to be holding stocks expecting prices to rise further,” Jain said.

SEA President Atul Chaturvedi told CNBC that the soyabean spike had resulted in soyameal prices rising higher than the landed price of imported soyameal.

“At current rates of soyabean, the prices of soyameal will be $850 a tonne compared with the imported price of $550,” he said.

According to SEA, soyabean prices are about ₹27,500 a tonne higher than the same period year ago, while soyameal prices free-alongside ship are $710 (₹53,375) a tonne compared with $441 (₹33,150) a year ago.

Jain said that the poultry and aquaculture sectors require 50 lt of soyameal annually and it would require 65 lt of soyabean. However, demand has dropped this year due to high meal prices.

Soyameal consumption for feed dropped during the October-March period of the current season to 27 lt from 29.25 lt in the same period a year ago. On the other hand, soyameal exports increased to 16.21 lt during the review period against 4.23 lt.

“I do not agree with the demand of the poultry and aquaculture sectors to import soyameal,” Jain said.

The SOPA President called for a strict vigilance by NCDEX and SEBI, besides the Union Government. SEA’s Chaturvedi concurred with the view.

“The rise in soyabean prices has got nothing to do with edible oils but they disturb the oilmeal trade and demand,” Chaturvedi said.

When contacted, NCDEX Executive Vice-President and agri-business head Kapil Dev said the exchange had imposed additional margins on soyabean futures. “We keep on reviewing and look for anything alarming,” he said.

He also urged market participants to hedge their positions in such volatile markets.

Published on April 14, 2021

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