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Last Updated : Oct 09, 2019 10:55 AM IST | Source: Moneycontrol.com

Soybean's rise and fall; is correction enough to lure the bulls outlook

Crop loss in Madhya Pradesh and bleak yield expectation from Rajasthan will reduce India's soybean output to around 95-100 lakh tonnes in 2019-20 season, which is considerably lower than the last year's production.

Moneycontrol Contributor @moneycontrolcom

Ravindra Rao

Soybean first month futures at NCDEX, which was ruling below Rs 3,550 per quintal till the first week of September, sky-rocketed by 14 percent in three weeks. However, profit-booking from higher levels dragged down the futures by nearly 7 percent in the next four corresponding sessions.

The reason for sharp rise could have been market expectation of a huge crop loss in Madhya Pradesh, India's largest producer of soybean, following heavy rains in key growing areas in August and September.

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According to Madhya Pradesh farm department officials, rains could have damaged 25 percent of the standing soybean crop. This means, we may see a soybean crop of not higher than 45 lakh tonnes from Madhya Pradesh this season, compared to 59 lakh tonnes in the 2018-19 season.

Huge losses in Madhya Pradesh and bleak yield expectations from Rajasthan will bring down India’s soybean output to 95-100 lakh tonnes, considerably lower than the last year's production.

But after a sharp rally of 14 percent, the market realised that the tales of crop loss in Madhya Pradesh might be exaggerated and the country might not witness a supply deficit amid a good carryover stock from last year. As a result, the market saw a long liquidation in the last four sessions of September, eroding almost half of the gains seen since the beginning of the month.

Moreover, Indian soymeal exports, facing a stiff competition from its North American and South American peers, will keep prices under check in the domestic market. As per data released by the Solvent Extractor's Association of India (SEA), soymeal exports in August were recorded at 32,226 tonnes compared to 76,558 tonnes in July 2019. Sharp premium of Indian soymeal compared to other major exporting nations has taken a toll on exports. As on first week of October, Indian soymeal was trading at $507 per tonne, while US soymeal was quoting around $335 per tonne, Argentina at $294 and Brazil at $363 per tonne.

With new soybean crop arrivals expected to go up further after the end of e festival season, we expect soybean to trade weak in domestic market unless the US and China resolve their trade dispute.

(The author is Head – Commodity Research at Kotak Securities.)

Disclaimer: The views and investment tips expressed by investment expert on moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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First Published on Oct 9, 2019 10:55 am
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