Edible Oils - Weekly Update

Indian markets rallied sharply inline with international cues, with a bullish Rabi oilseed sowings data helping the prices to maintain its momentum.

January 01, 1970 5:30 IST | India Infoline News Service
Bygone Week
Global edible oil markets exhibited high volatility in the midst of a shortened trading week with US, SE Asia and Indian markets sojourning for festival holidays. The week started with the last week’s USDA report hangover which depressed the sentiment. However, surprise in the form a bullish MPOB report sprang the markets up from their lows. Ideas such as end of peak season in SE Asian oil palm regions should restrict incremental supplies and hence stock build up could be curtailed led to speculative buying interest in BMD CPO futures. Technical factors such as the ability of the prices to recover from the recent lows of MYR2,230 restored the lost momentum. CME soy complex too rode this wave, while additional support emerged from the encouraging export sales and the fact that Chinese demand remained largely stable. A slightly weaker (steady) USD index acted as a lateral boost for all the dollar-denominated commodities. Indian markets rallied sharply inline with international cues, with a bullish Rabi oilseed sowings data helping the prices to maintain its momentum.   

Bhav Box

Markets Nov-15 Nov-08 Chg (%) High Low 30D-High 30D-Low
BMD CPO 3rd-month MYR/ton 2,434 2,336 4.2 2,436 2,220 2,615 2,220
CME Soy Oil Dec’12 US Cents/Lbs 47.5 48.8 (2.7) 49.2 46.5 52.5 46.5

MCX CPO Dec’12 440.9 430.7 2.4 451.4 416.3 540.5 399
NCDEX Soy Oil Dec’12 683.5 664.2 2.9 689.9 644.0 701.2 644.0

NCDEX Soybean Dec’12 3,258 3,347 (2.7) 3,365 3,216 3,435 3,102
NCDEX Mustard seed Dec’12 4,313 4,229 2.0 4,325 4,166 4,413 4,101
Source: Bloomberg, India Infoline Research, rounded off to the nearest decimal

Soybean new crop planting pace in Brazil advanced to 55% of the expected area as of this week. The pace of field work is slower compared to the corresponding period last year, when 66% of the area had been sown but is above the 5 year average of 51%. Almost all the major growing regions in Brazil surpassed their 5 year average sown area indicating improved filed conditions that aided faster planting pace.  In Paraná, 78% of the area was planted compared to 82% last year and average 71%. In Mato Grosso, 78% of the area was sown, compared to 86% in 2011 and the average of 72%. In Mato Grosso do Sul, the planting hit 83% compared to 94% last year and the 5 year average of 67%. Despite this, the overall progress stood lower by 11% across Brazil. Given that estimates indicate record high acreage and peak production targets, any anomaly could spark off a speculative rally in the oilseed complex.

At the CME front, Soybean futures sank near five-month lows earlier in the week, and were down 20% from their nominal record closing high of 1,771cents in early September. The declines were driven by US government forecasts projecting higher domestic production of soybeans this fall than analysts had expected. However, lower (attractive) futures prices uncovered fresh bargain hunting from users of physical soybeans such as grain-processing giants. The USDA also said private exporters reported sales of 120,000 tons of soybeans for delivery to China for the current marketing year. Robust US soybean export demand, particularly from China, has been a key driver of previous advances in soybeans. Furthermore, NOPA crush report showed US soybean crushers processed more soybeans last month than the market estimates had expected. NOPA said 153.5mn bu of soybeans were crushed in October, above the average estimate of 144.4mn bu. Seasonal factors such as tight global soybean supplies are likely to prompt importers to look for US beans to fulfill their demand needs until South American farmers harvest their crops next spring, augurs well for the firm tone.

At the palm front, demand occupies the center stage as exports are encouraging in recent months. This could be attributed to a couple of reasons, viz; relatively lower pricing of CPO as against soy oil as well as advance buying to cover uncertainty associated with SA so crop which is still being sown. Largely, the huge crop numbers from SA is already factored in and as seen from the retest of the recent lows in BMD CME and Indian markets (a higher low), markets could make an early seasonal low and then rally in the medium term. Indian markets are technically very strong except for the fact that a downside correction is due, within the medium term up trend. As long as INR moves in a constrained range of 54-55.5, positive oilseed fundamentals shall support the markets.    

BMD CPO 3rd month

BMD CPO futures extended its losses this week revisiting the low of MYR2,230 (and moving a tad below it), before bouncing back sharply. The ability of the prices to attempt a filling of the chart gap level of MYR2,450 shows that momentum is biased upside. Furthermore, recovery from identical lows, strengthens the impending price trend. Resistance lies at MYR2,520, break of which would turn the momentum positive.   

MCX CPO Dec’12
MCX CPO prices recovered smartly after falling below the previous week’s low of Rs421. Ever since the recovery during the first week of October, prices have been able to make higher lows, which keep the overall trend positive. As long as prices are not breaking below Rs425, the abovementioned uptrend remains intact. 

CME Soy oil Dec’12
CME soy oil futures drifted lower breaking the key support of 47.8cents and managed to take intermediate support around 46.5cents. As depicted in the chart, this week’s price action has led to a range breakdown that keeps the overall technical picture weak. Next support is identified at 44.5cents, and only a break above 50.5cents would lead to a turnaround. Prices might attempt to test 48cents and then turn lower.

NCDEX Soy Oil Dec’12
Soy oil prices exhibited high volatility moving in abroad range of Rs645-690. The ability to recover from the low of Rs645 during the last couple of occasions shows positive momentum. However, the price patterns nearing the resistance of Rs690-692 look vulnerable. Therefore, prices could turn lower towards Rs670 initially and then recover.

NCDEX Soybeans Dec’12
Soybean prices moved within a narrow range, after breaking the medium term trendline below Rs3,300. As the prices have been consolidating within Rs3,310-3,216a, no clear cut directional signals are seen on the chart. Nevertheless, sustenance above Rs3,350-3,370 has been limited and hence odds favour a weak trend to follow. Support rests at Rs3,200, below which trend shall turn bearish.

NCDEX Mustard seed Dec’12
RM seed prices managed to stay above to Rs4,200 and retest end October high of 4,320. The ability to hold above the intermediate support level of Rs4,250 keeps the overall outlook positive. But considering the fact that, prices have not been to hold above Rs4,350 during prior occasions, calls for a cautious approach in terms of gauging the upside potential.

Trend Tracker
Markets  CMP Trading range Remarks
BMD CPO 3rd-month MYR/ton 2,396 2,230 – 2,520 Prices continue to find support near recent lows and considering the fact they are making higher lows, despite any spillover weakness from external markets, overall trend could remain firm. 
CME Soy Oil Dec’12 US Cents/Lbs 47.1 45 – 50

MCX CPO Dec’12 439 425 – 450
NCDEX Soy Oil Dec’12 681 665 – 692

NCDEX Soybean Dec’12 3,241 3,180 – 3,320
NCDEX Mustard seed Dec’12 4,300 4,220 – 4,370 
Source: Bloomberg, India Infoline Research, rounded off to the nearest decimal

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