SMC Global Monthly Report on Oilseeds

Subhranil Dey

Sr. Research Analyst

[email protected]

Monthly Report (August)

Oil Seeds

August 13, 2014

2

Price movement of Oilseeds on NCDEX & MCX (July 2014) (% Change)

Source: SMC Research

Price movement of Oilseeds on Spot markets (July 2014) (% Change)

Source: SMC Research

®

-6.12-5.76

-5.48

-2.44

-0.35

2.39

-7.00

-6.00

-5.00

-4.00

-3.00

-2.00

-1.00

0.00

1.00

2.00

3.00

Soybean (CBOT) Crude Palm Oil (MCX) Soybean (NCDEX) Refined Soy oil Crude Palm Oil (BMD)

Mustard

(% Change)

-3.26

-2.46

1.13

4.65

-4.00

-3.00

-2.00

-1.00

0.00

1.00

2.00

3.00

4.00

5.00

6.00

Refined Soy oil (Indore) Soybean (Indore) Crude Palm Oil (Kandla) Mustard (Jaipur)

(% Change)

3

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Snap shot of World Agricultural Supply and Demand Estimates

·U.S. oilseed production for 2014/15 is projected at 113.7 million tons, up 0.6 million from last month mainly due to a higher soybean production forecast.

·Soybean production for 2014/15 is forecast at 3,816 million bushels, up 16 million due to a higher yield. Harvested area is forecast at 84.1 million acres, unchanged from July.

·The first survey-based soybean yield forecast is a record 45.4 bushels per acre, 0.2 bushels above last month and 2.1 bushels above last year.

·Soybean supplies for 2014/15 are projected slightly above last month based on the higher production forecast.

·With minimal supply gains, soybean exports and crush are unchanged, leaving ending stocks projected at 430 million bushels.

·The U.S. season-average soybean price for 2014/15 is forecast at $9.35 to $11.35 per bushel, down 15 cents on both ends.

·Soybean meal and oil prices are forecast at $340 to $380, down 10 dollars at the midpoint.

·Soybean oil prices are forecast at 35 to 39 cents per pound, down 1 cent at the midpoint. U.S. soybean balance sheet changes for 2013/14 include reduced imports and increased exports.

·Imports are lowered 5 million bushels to 80 million based in part on revised import data for September – December 2013 from the U.S. Department of Commerce.

·Exports are raised 20 million bushels to 1,640 million reflecting both revised export data for September through December 2013 from the Department of Commerce and inspections data for July 2014.

·These changes are offset with lower residual use, leaving ending stocks unchanged at 140 million bushels.

·With these changes, the 2013/14 soybean stocks-to-use ratio is projected at 4.2 percent, which if realized would be the lowest in more than 40 years.

·Global oilseed production for 2014/15 is projected at 521.8 million tons, slightly below last month.

·Gains for rapeseed and cottonseed are more than offset by reductions for soybeans, sunflower seed, and peanuts.

·Higher soybean production for the United States is offset by a reduction for India where the delayed monsoon results in lower planted area.

·Rapeseed production is raised for China, EU, and Ukraine. These gains are partly offset by a smaller crop projected for Canada with lower area resulting from flooding in parts of Saskatchewan and Manitoba.

·Other changes include lower sunflower seed production for Russia, reduced peanut production for China, and increased cottonseed production for India.

Sowing update on Soybean

·As per the official kharif oilseeds planting report (week ending 31 Jul 2014), the area coverage under Kharif oilseeds is reported at 137.35 lakh hectares, down 19.5% from 169.29 lakh ha previous year.

·Of the major oilseeds, soybean sowing is reported down by 29.3% at 95.39 lha compared to 117.0 lha during the same period last year.

Update on Crop Progress of U.S soybean

·U.S. soybean conditions unexpectedly deteriorated last week due to dryness in major production states such as Minnesota and Indiana, the U.S. Agriculture Department said on 11th August, 2014.

·USDA's weekly crop progress and conditions report showed that good-to-excellent ratings for soybeans were 70 percent as of Aug. 10, down 1 percentage point from a week earlier.

·In Minnesota, the third-biggest soybean state by acreage, the crop was rated 65 percent good to excellent. They were rated 67 percent good to excellent in Indiana, which is the sixth-biggest state in terms of soybean plantings.

Source: Agriwatch

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Market Movements AheadSoybean (Domestic market fundamentals)

�Soybean futures (October) is likely to consolidate in the

range of 3400-3700 levels.

�In the current scenario, there is dull demand owing to

favorable weather for soybean crop. Also, lower demand of

soy meal is adding to the selling pressure.

�Disparity in soybean crushing is already discouraging for the

crushers with improved cheaper imports in edible oils and

lower soy meal export sales this season.

�Weak soy meal export sales and international soy meal buyers

shifting to South-America for competitive price is pressurizing

domestic meal.

�The poor availability of soybeans for crushing has also made

Indian soy meal more expensive in recent months than

supplies from other origins.

�Indian soy meal shipments were $60-$70 a tonne costlier than

South American supplies, which were available at about $530 a

tonne.

�There are talks that poor supply of soybeans in India will curb

soy meal exports by Asia's top producer of the animal feed

until at least the new bean harvest from October

�In mandis across Madhya Pradesh, soybean quoted at Rs.

3,650-Rs 3,900 a quintal (down Rs. 100 from last week).

�In absence of demand in soy oil, plant deliveries of soybean on

Monday were also quoted lower at Rs. 3,875-Rs 3,900 a quintal

(down Rs. 200 from last week).

�Sluggish trend also continued in soy DOC on slack domestic

demand with its prices on the spot were being quoted at Rs.

35,500-Rs 36,00 a quintal ( Rs. 36,000-Rs 36,500 a quintal last

week).

Indian Oil meal Exports Scenario:

�The total export of oil meals during April-July 2014 is reported

at 721,577 tons compared to 1,038,819 tons i.e. down by 31%.

In July 2014 export of oil meals is reported at 115,094 tons

compared to 182,133 tons in July 2013 i.e. down by 37%.

�Export of soybean meal greatly reduced in last 3 months due

to high cost of soybean in local market lead to total disparity

for soybean meal in international market. However share of

rapeseed meal has increased from 267,461 to 408,410 in last 4

months.

South Korea, Iran and Thailand – Major Importers of Oil meals:

�Oil meal import by South Korea from India during April-July

is reported at 341,548 tons compared to 325,768 tons,

consisting 171,572 tons of rapeseed meal, 168,562 tons of

castor meal and 1,414 tons of soybean meal.

�Iran imported of 112,275 tons compared to 363,744 tons last

year consisting of 35,500 tons of soybean meal and 76,775

tons of rapeseed meal.

�Thailand imported of 76,208 tons compared to 86,233 tons,

consisting 73,801 tons of rapeseed meal and 2,407 tons of

soybean meal.

�Vietnam imported 45,032 tons compared to 49,967 tons last

year consisting of 17,726 tons of rapeseed meal, 3,462 tons of

soybean meal and 23,844 tons of rice bran extraction.

�Taiwan imported 26,438 tons compared to 32,509 tons of last

year consisting of 16,540 tons of rapeseed meal and 9,860 tons

of castor meal and small quantity of 38 tons of soybean meal.

�Europe imported 40,717 tons compared to 110,134 tons of

last year.

Port-wise Export: April-July 2014

The export from Kandla is reported at 544,827 tons (76%),

followed by Mumbai including JNPT handled 84,791 tons (12%),

Bedi handled 32,197 tons (4%), Mundra handled 35,786 tons (5%)

and Kolkata handled 23,844 tons (3%).

Soybean: (International market fundamentals)

�Private exporters reported to the U.S. Department of Agriculture export sales of 168,000 metric tons of soybeans for delivery to China during the 2014-15 marketing year.

�U.S. FOB Gulf soybean basis offers firmed again late Monday amid steady interest from Chinese buyers.

�China imported 7.47 million tonnes of soybeans in July, compared with 6.39 million tonnes in June.

�Argentina has completed a record 55.5 million-tonne soybean harvest despite having lost 860,000 hectares, or 4.2 percent of total 2013/14 planting area due to excessively wet weather, as reported by the the Buenos Aires Grains Exchange.

�Brazil Agriculture Ministry's Conab crop supply agency cut its forecast for the now-harvested soybean crop to 85.66 million tonnes from 86.27 million tonnes in July. Soy yields were 3.3 percent less than a year earlier due to problems with rain during harvest and a high incidence of pests. The record crop was only achieved due to increased area planted.

�U.S. soybean futures prices could fall in the fourth quarter from current values as a bumper U.S. crop this autumn from all-time high acreage and South American harvests combine to replenish global supplies.

Mustard:

�Mustard futures (Sept) is expected to consolidate in the range of 3450-3650 levels.

�In days to come, the counter may fall further on account of poor demand of mustard oil cake coupled and falling prices of mustard meals.

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�Weakness in other oilseeds owing to weak overseas market is adding to the bearish market sentiments.

�There is weak demand mainly due to disparity in crush margin parity at the prevailing prices.

�Mustard sowing area in the coming Rabi season in Rajasthan is expected to rise due to change in rain pattern. Sowing may also start around a month early.

�Mustard was sown in 27.82 lakh hectares during the previous Rabi season in the state of Rajasthan & and the production was 36.28 lakh tonnes.

�The farmers are thinking to plant early mustard crop. Normally, mustard sowing starts from mid October after harvesting of kharif crops. But farmers can sow the crop as early as mid September as well. Farmers are apprehending that they would be able to get better price for their crop due to early harvesting.

�In Jaipur, spot mustard seed prices declined to Rs 3,660/100kg on 11th Aug compared to 11th Aug price Rs.3,690.

�In Jaipur, rapeseed and mustard cake prices were down at Rs 15,400/ton on 11th Aug compared to 11th Aug Rs.15,600.

Edible oil complex (Domestic Fundamentals)

�Refined soy oil futures (Sept) is likely to trade in the range

of 640-680 levels, with a downside bias.

�CPO futures on MCX (Sept) is expected to slide down

towards 470 levels owing to higher global production and

ending stocks.

�India's palm oil imports rose nearly 10 percent to 657,750

tonnes in July from a month earlier, data from the Solvent

Extractors' Association of India (SEA) showed.

�Poor physical demand and bearish trend forced local refineries

to reduce their prices for palmolein and soyabean refined oil by

Rs.3-5 for 10 kg. The volumes remained thin and isolated in

resale on the spot markets.

�Soy oil also traded lower on slack physical demand, higher

imports and weak global cues with soy refined today in local

mandis was being quoted at Rs. 635-42 (down Rs. 8 from last

week), while soy solvent declined to Rs. 595-98 (Rs 612-15 for

10 kg last week).

Period-wise comparison of Soymeal & Rapemeal Exports (Qty. in M.T)

Source: SEA of India

Month-wise Soymeal Export V/s Average International Prices of Oilmeals & Exchange


Month-wise Rapemeal Export V/s Average International Prices of Oilmeals & Exchange


Markets Items 12/08/2004 11/08/14 Change

Kandla RBD Palmolein 558 560 -2

Kandla Crude Palm Oil 522 525 -3

Mumbai Palmolein 550 557 -7

Kakinada Palmolein 540 542 -2

Chennai Palmolein 555 555 0

Kolkata Palmolein 542 546 -4

Palmolein Spot Market prices (Unit Rs/10Kg)

Source: Commodities control Bureau

107,038

183,555173,381 182,724

503,269

451,314

364,443

183,550

223,204

89,883

8,226 2,637 6,635

$652

450

500

550

600

650

700

750

0

100,000

200,000

300,000

400,000

500,000

600,000

July '13 Aug '13 Sept '13 Oct '13 Nov '13 Dec '13 Jan '14 Feb '14 Mar '14 Apr'14 May '14 June '14 July '14

Price in US$ FAS/FOB/Tons/Indian PortQty. in M.T

Month-wise Soymeal Export Average International Prices of Oilmeals & Exchange

84,198

40,902

90,735

59,472

143,848

27,993

93,144

55,938

82,294

95,165

125,872

95,847

125,872

$267

200

210

220

230

240

250

260

270

280

10,000

30,000

50,000

70,000

90,000

110,000

130,000

150,000

170,000

June '13 July '13 Aug '13 Sept '13 Oct '13 Nov '13 Dec '13 Jan '14 Feb '14 Mar '14 Apr'14 May '14 June '14

Price in US$ FAS/FOB/Tons/Indian PortQty. in M.T.

Month-wise Rapemeal Export Average International Prices of Oilmeals & Exchange

738,999

805,748

516,545

107,381

453,812

251,704267,461

435,228

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

900,000

Apr '11- July '11 Apr '12- July '12 Apr '13- July '13 Apr '14- July '14 Apr '11- Mar '12 Apr '12- July '12 Apr '13- July '13 Apr '14- July '14

Soymeal Rape meal

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®

�Weakness in global vegetable oil markets added to the bearish

market sentiments as edible oil imports would be cheaper for India

and India is net the importer of edible oils.

Vegetable oil import scenario

�Import of vegetable oils during July 2014 is up by 25% and

reported at 1,109,674 tons compared to 889,493 tons in July, 2013,

consisting of 1,092,271 tons of edible oils and 17,403 tons on non-

edible oils.

�The overall import of vegetable oils during Nov. '13 to July '14 is

reported at 8,191,894 tons compared to 8,034,553 tons i.e. up by

2%.

�Import of Soybean Oil jumped to record level of 306,068 tons in

July 2014, highest in any single month since import opened up in

OGL in 1994.

�During Nov.'13-July '14, Import of refined oil (RBD Palmolein) is

reported at 1,200,566 tons compared to 1,758,107 tons during the

same period of last year. Import of crude oil increased to 6,847,537

tons compared to 6,058,516 tons during the same period of last

year, thanks to higher import of crude soybean, sunflower and

canola oil, which constitute nearly 35% of the total crude oil

import.

�Nov.'13-July'14 Palm Oil import has decreased to 5,588,845 tons

from 6,331,441 tons during the same period of last year due to

disparity in processing of CPO. However, to bridge the supply gap,

soft oils import have increased to 2,459,258 tons from 1,485,182

tons (up by 66%) during the same period of last year. Indian

refiners prefer to import crude soft oils over CPO in India, which

has reflected in pattern of import in last few months.

Stock Position at Port and in Pipelines

�Current stock of edible oils as on 1st August, 2014 at various ports

is estimated at 570,000 tons (CPO 250,000 tons, RBD Palmolein

50,000 tons, Degummed Soybean Oil 140,000 tons and Crude

Sunflower Oil 130,000 tons) and about 1,020,000 tons in

pipelines.

�Total stock, both at ports and in pipelines increased to

1,590,000 tons from 1,485,000 tons in previous months.

International Fundamentals

�Palm oil on the European vegetable oils market traded with a downside bias due to a slowdown in Malaysian palm oil exports during the first 10 days of August and growing Malaysian palm oil stocks in July.

�Cargo surveyor Intertek Testing Services reported that exports of Malaysian palm oil products between Aug. 1-10 fell 22.2 percent to 347,094 tonnes compared to the same period in July, as purchases to China and Europe fell. Another cargo surveyor, Societe Generale de Surveillance, showed that exports for the same period fell 19.6 percent.

�Malaysian palm oil futures sank to a more-than-one-year low on 11th August after an unexpected rise in palm end-stocks, with projections of a bumper crop of competing oilseeds sparking fears that supply would overwhelm global demand.

�The ongoing bearish sentiments in soybean oil as well as an expected recovery in palm oil production have piled pressure on prices that have tumbled more than 18 percent so far this year.

�In other markets, Brent crude oil slipped below $105 a barrel on Monday as U.S. intervention in Iraq eased concerns over the risk of disruption to supply from OPEC's second-largest producer.

Malaysia Palm Oil Industry Performance

�Palm oil stocks in Malaysia were higher at the end of July compared to the previous month, industry data showed on Monday, with strong output building inventories against expectations that stocks would drop.

�Data from the Malaysian Palm Oil Board (MPOB) showed that Malaysia's palm oil stocks rose to 1.68 million tonnes by end-July, up 1.5 percent from end-June.

�Production of crude palm oil for the month of July rose 6.1 percent to 1.67 million tonnes, above forecasts for output at 1.65 million tonnes.

�Exports of Malaysian palm oil declined 2.3 percent to 1.45 million tonnes, the monthly MPOB report showed.

Markets Items 12/08/2004 11/08/14 Change

Indore Refined Soy Oil 640 640 0

Soy Solvent 595 600 -5

Mumbai Refined Soy Oil 630 630 0

Akola Refined Soy Oil 675 675 0

Kandla Refined Soy Oil 610 610 0

Kandla Degummed Soy Oil 580 582 -2

Soy Oil Spot Market prices (Unit Rs/10Kg)

Source: Commodities control Bureau

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Calendar spread of Soyameal futures

Source: SMC ResearchAs per closing on 12th August 2014

Oct Nov Dec

Oct - - -

Nov -270.00 - -

Dec -520.00 -250.00 -


Calendar spread of CPO futures (NCDEX)

Aug Sept Oct Nov Dec

Aug - - - - -

Sept -4.10 - - - -

Oct -8.10 -4.00 - - -

Nov -11.60 -7.50 -3.50 - -

Dec -15.90 -11.80 -7.80 -4.30 -

Calendar spread of Mustard futures



Aug - - - - -

Sept -33.00 - - - -

Oct -76.00 -43.00 - - -

Nov -123.00 -90.00 -47.00 - -

Dec -167.00 -134.00 -91.00 -44.00 -

Calendar spread of Ref. Soy oil futures


Aug Sept Oct Nov Dec Jan

Aug - - - - - -

Sept 8.20 - - - - -

Oct 53.60 45.40 - - - -

Nov 58.60 50.40 5.00 - - -

Nov 52.80 44.60 -0.80 -5.80 - -

Dec 47.00 38.80 -6.60 -11.60 -5.80 -

Source: Malaysia Palm Oil Board




Calendar spread of CPO futures (MCX)



Aug - - - - -

Sept 19.10 - - - -

Oct 24.80 5.70 - - -

Nov 24.10 5.00 -0.70 - -

Dec 22.80 3.70 -2.00 -1.30 -

Calendar spread of Soybean futures


Oct Nov Dec Jan Feb

Oct - - - - -

Nov 217.00 - - - -

Dec 170.00 -47.00 - - -

Jan 106.00 -111.00 -64.00 - -

Feb 18.00 -199.00 -152.00 -88.00 -

1,569,684

357,295

174,726 192,966

1,665,612

406,093

171,352 189,052

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000

Crude Palm Oil Palm Kernel Palm Kernel Oil Palm Kernel Cake

Production ( in Tonnes)

Jun (r) Jul (p)

1,656,700

124,521

313,045 290,464

1,681,016

164,701

290,899 256,606

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000

Palm Oil Palm Kernel Palm Kernel Oil Palm Kernel Cake

Jun (r) Jul (p)

Closing Stock ( in Tonnes)

1,481,750

59,260

223,923 216,751

7,725

1,447,317

75,046

230,037 246,032

3,6100

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

Palm Oil Palm Kernel Oil Palm Kernel Cake Oleochemical Biodiesel

Jun (r) Jul (p)

Export ( in Tonnes)

26.38

25.5

25.00

25.20

25.40

25.60

25.80

26.00

26.20

26.40

26.60

Jun (r) Jul (p)Jun (r) Jul (p)

PRICE (1% OER) (Local Ex-Mill)

8

Forward Curves

Forward Curve of U.S Soybean futures (Cents per bushel)

Forward Curve of Soybean Futures (NCDEX) (Rs./Qtl.)

Forward Curve of Refined Soy oil futures (NCDEX) (Rs. 10/Kgs)

Forward Curve of Mustard futures (NCDEX) Rs./Qtl

Forward curve of U.S Soybean Oil Futures (Cents per pound)

Forward curve of CPO futures (MCX)

Source: barchart.com

Source: barchart.com

Source: NCDEX

Source: NCDEX

Source: MCXSource: NCDEX

As per closing on 12th August 2014






®

1290.00

1094.20

1059.401068.20 1077.00 1084.00

1089.20

1000.00

1050.00

1100.00

1150.00

1200.00

1250.00

1300.00

1350.00

Aug Sept Nov Jan Mar May July

34.88

34.64

34.71

34.98

34.40

34.50

34.60

34.70

34.80

34.90

35.00

35.10

August September October December

3575.00

3358.00

3405.00

3469.00

3557.00

3200.00

3250.00

3300.00

3350.00

3400.00

3450.00

3500.00

3550.00

3600.00

Oct Nov Dec Jan Feb

665.20

657.00

611.60

606.60

612.40

618.20

600.00

610.00

620.00

630.00

640.00

650.00

660.00

670.00

August September October November December January

3,502.00

3,535.00

3,578.00

3,625.00

3,669.00

3,450.00

3,500.00

3,550.00

3,600.00

3,650.00

3,700.00

August September October November December

507.10

488.00

482.30 483.00484.30

475.00

480.00

485.00

490.00

495.00

500.00

505.00

510.00

August September October November December

Disclaimer:

This report is for the personal information of the authorized recipient and doesn’t construe to be any investment, legal or taxation advice to you. It is only for private circulation and use .The report is based upon information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied upon as such. No action is solicited on the basis of the contents of the report. The report should not be reproduced or redistributed to any other person(s)in any form without prior written permission of the SMC. The contents of this material are general and are neither comprehensive nor inclusive. Neither SMC nor any of its affiliates, associates, representatives, directors or employees shall be responsible for any loss or damage that may arise to any person due to any action taken on the basis of this report. It does not constitute personal recommendations or take into account the particular investment objectives, financial situations or needs of an individual client or a corporate/s or any entity/s. All investments involve risk and past performance doesn’t guarantee future results. The value of, and income from investments may vary because of the changes in the macro and micro factors given at a certain period of time. The person should use his/her own judgment while taking investment decisions. Please note that we and our affiliates, officers, directors, and employees, including persons involved in the preparation or issuance if this material;(a) from time to time, may have long or short positions in, and buy or sell the commodities thereof, mentioned here in or (b) be engaged in any other transaction involving such commodities and earn brokerage or other compensation or act as a market maker in the commodities discussed herein (c) may have any other potential conflict of interest with respect to any recommendation and related information and opinions. All disputes shall be subject to the exclusive jurisdiction of Delhi High court.

For further any queries, please contact

Subhranil Dey Sr. Research Analyst [email protected]

Ph.: 011-30111000

Extn.: 674

®

SMC Global Monthly Report on Oilseeds

Economy & Finance

Transcript of SMC Global Monthly Report on Oilseeds