Soybean likely to inch towards Rs 4,000 per quintal mark
With Monsoon getting active over North-West and Central India, this created a bearish impact on the agriculture market sentiments.
Most counters traded slight weak during the second half of last week even as Oil complex traded firm – supported by firmness in International markets.
Monsoon will keep playing a critical role in determining the near term market trend for the agri counters. If moderate rains occur in areas like Rajasthan, MP and Maharashtra, among other states, it may lead to short term corrections in prices. However, we need to take note of excessively heavy rains leading to floods that could damage the crops too.
Long term sentiments remain bullish with short term weakness likely.
Strength in RM seed and edible oils supported the trend but as usual upside was restricted. Reports of significant increase in sowing area versus last year keeps the upside restricted as of now. Monsoon performance has been quite satisfactory till now. The actual rainfall received in the country for the week ending July 16th is reported at 338.3 mm against a normal of 308.4 mm.
There has been an increase in 10 percent of Kharif sowing area during the period from 01.06.2020 to 16.07.2020. Oilseeds 154.95 lakh ha area against 110.09 lakh hectare area last year i.e. area coverage increased by 40.75 lakh hectare.
Soybean planted area as per current data indicates a significant jump to 109 lakh hectare versus 79 lakh hectare area covered previous year corresponding period. Demand in poultry products is showing improvement slowly and one has to observe whether demand for poultry products is able to favour prices to sustain above Rs 4,000 per quintal in the longer run. The egg market is stabilizing slowly and as per market views it will take a few more months for the situation to improve for the poultry product business.
The July month’s USDA reports conveyed that the US old-crop ending stocks were estimated at 620 million bushels versus the trade’s expectation of 585 million bushels and the USDA’s June estimate of 585 million bushels. For 2020/2021, the US soybean ending stocks were estimated at 425 million bushels versus the trade’s expectations of 424 million bushels and the USDA’s June estimate of 395 million bushels.
For soybeans, the world data saw increased production from Brazil, a negative surprise. There was actually no surprises, with the USDA accounting for the June Stocks and Acreage reports in today’s WASDE release. Of note is the projected decline in soybean stocks of almost 200 million bushels from this season to next, which leaves little margin for yield declines this year.
Soybean prices are likely to show upside movement with immediate resistance at Rs 3,950 per quintal mark and a support at Rs 3,700.
The author is VP – Retail Research at Religare Broking.
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