Soybean set to follow seasonal trend

Soybean is the major oilseed crop cultivated during Kharif season. Sowing starts in June and the crop gets harvested in September.

It has been observed that prices start to fall during the sowing and planting stage, and continue to decline further during the crop development stages in July, August and September.

The price tends to improve during harvesting stages in October and November as fresh arrivals fetch premium prices – due to relatively higher oil content.

However, the prices tend to decrease and look to consolidate during December and January, after assessing the arrival and production data. During the off-season from February to May, prices tend to go higher as supplies in the physical market dwindle when stockists and traders hold on to their stocks in anticipation of higher realisation.

In 2016, soybean prices in the futures exchange were range bound and traded in the range of ₹3,600-3,800 per quintal.

In March, prices started to improve due to limited supplies and the increase in world oilseed and edible oil prices, to touch a high of ₹4,290 in second half of April, an increase of 19.1 per cent from the March lows.

As a result of higher prices, arrivals increase in the physical market which results in a fall in price.

Prices descend during the last week of April due to higher arrivals of soybean as prices have crossed ₹4,000. Moreover, forecast of above normal monsoon rains and record imports of edible oil has weigh on soybean prices. For 2016-17, the IMD has predicted monsoon at 106 per cent of the Long Period Average (LPA). LPA is the average seasonal rainfall over the country of the past 50 years.

Rainfall during June-September is crucial for soybean, as production is mostly dependent on the monsoon. In its first estimate by the USDA (US Department of Agriculture), soybean output in India may recover significantly by more than 50 per cent to about 11 million tonnes in 2016-17, on assumption of normal yield.

In India, marketable surplus soybean is crushed to produce oil and meal, which mostly gets consumed within the country. However, import of edible oil is allowed, to satisfy the consumption demand – this attracts import duty.

The government controls edible oil prices depending on oilseed production, by adjusting the import duty.

Domestic demand for soybean is mainly determined by the demand for meal exports, import price parity of soya oil and crush margin for the domestic oil mills.

In recent years, soy meal exports reduced drastically due to continue disparity in exporting in International markets and soyoil imports have increased, which reduce demand for soybean crushing.

Going forward, prices may depend on real impact of monsoon rains and acreage data in the second half of 2016. Any weather disturbances during sowing and growing periods or in the US, could trigger a sharp recovery in the domestic market. However, under normal weather conditions, prices will follow the seasonal trend.

The writer is Associate Director (Commodities and Currencies Business), Equity Research and Advisory, Angel Broking. Views are personal.

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