Soybean to trade above minimum support price in coming weeks

As per the government data, the retail prices of edible oils have risen over 62 percent in over a year.

On August 10, Soybean November futures at Chicago plunged to 870 cents amid worries of weak oil and oil meal demand, apprehension over a trade deal between the US and China and improved crop prospects in the United States. However, it has since bounced back by nearly 200 cents to reach a multi-year high of 1,069 cents following strong imports by China and improved demand for oil meal from that country.

The major reason for the staggering rally in the international market was because of falling supply from Brazil, the world's biggest producer, increasing demand for oil meal in global market, especially from China, and extremely high temperatures in the US mid-west.

The conditions saw USDA reduce soybean output estimates for 2020-21 season to 117.4 million tons in September WASDE report compared to 120.4 million tons pegged in the August report. Due to adverse weather—hailstorms and cyclones in some regions and stark dry conditions in others—market expect USDA to again reduce soybean production projection for this year to 116.7 million tons.

However due to good shipments to China in the past many weeks, US soybean ending stock estimate is expected to be reduced by over 20 percent in October month WASDE report at 363 million bushels.

At a virtual global oil meet on October 9, industry analysts were bullish on soybean following firm cues from soymeal. One of the analysts also elaborated on how quickly Chinese pig— the main source of meat and consumer of soymeal)¬— numbers had revived after COVID-19 and African Swine Fever.

As a result, soymeal futures at Chicago have gone up by more than 30 percent in the last couple of months, with no signs of cooling in the near future.

We expect the sharp rally at CBOT to also partially reflect in domestic soybean prices in the coming weeks as rising prices in the international market will certainly benefit Indian soymeal exporters. We expect soybean to trade above its minimum support price in the coming weeks in spite of peak arrival season.

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