Support for Soybean at Rs 2050-2060: Kotak Commodity

The underlying trend for Indian oil and oil seed futures in medium term is expected to remain weak on higher oil seed production estimates and increasing arrival pressure. Also weighing down sentiments are fears of global economic meltdown and weak cues from CBOT soy beans on improved yield forecast by USDA. We recommend traders to remain on the short side in entire edible oil complex.

Soy beans at the cash market traded weak with the onset of new crop arrivals. Domestic demand for oil is expected to gain pace for the upcoming festive season however new crop arrival pressure will keep the upside capped. In Indore Madhya Pradesh market, soybean traded at Rs 1,700- 2,000 per 100 kg and in Nagpur, Maharashtra at Rs 1,900- 2,191 per 100 kg (Nagpur). Arrival in MP was 60,000 bags and around 20,000 bags in Maharashtra. This year Indian soy bean production estimates are expected to be higher and touch nearly 10.5-10.7 million tons as compared to last year’s production of 9.687 million tons. The rise in production is mainly due to higher acreage this season. (KCSL research). Meanwhile, this year soybean output in the country is expected to be around 10 million tons on good monsoon and higher acreage. According to first advance estimate of Ministry of Agriculture, oil seeds production in the Kharif season is likely to be 20.89 million tons as against 20.85 million tons last season. India's soybean production in the next crop year that starts Oct. 1 is likely to rise about 15% to 11.65 million metric tons, the Soybean Processors' Association of India said Friday, following good monsoon rains in key growing regions.

Forward Curve and Spreads: As per our expectation the backwardation has turned to Contango. Increasing arrivals pressure is weighing the near month contract prices. On Saturday the October and November spread eased slightly to 22 from 24we now revise our target from 20 to 30 as new crop arrivals will further put pressure in October contract. We now recommend traders to trail stop loss to cost. One can sell October and Buy November at -8 to -13 target +30 stop loss -25.

OUTLOOK:
Soybean: Indian soy bean futures are expected to trade weak during the session tracking losses in CBOT Soy beans during initial hours. The undertone for the complex is expected to remain weak on increasing arrival pressure in domestic market amid higher production prospects. Also weighing down sentiments is broad based sell off across the global markets. The NCDEX October contract is getting support near Rs.2050-2060/qtl while resistance is seen near Rs.2190-2195/qtl. ACE October contract is getting support near Rs.2050-2060 and resistance is seen near Rs 2190-2195.

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