Soyoil futures drop on arrival of rains

Refined soyoil prices were down in the domestic futures market Monday over reports of monsoon entering central India "" country's key soybean growing belt and also on account of low demand in the physical markets.

Soymeal and soybean futures were also weak as reports of monsoon brightened chances of good soybean production in 2005-06.

"Reports of rains lashing several areas of central India, particularly key soy growing area of Malwa-Nimar in Madhya Pradesh, has raised hopes of a good soybean crop in 2005-06," a city-based trader said.

Increase in soybean production will keep prices down, as adequate soybean will be available for crushing and also for domestic consumption of soyoil. NBOT July soyoil was quoted at Rs 372.80 per 10 kg late on Monday, down Rs 5.60 from Saturday.

Met office sources said moderate-to-heavy rains lashed parts of Madhya Pradesh, particularly the Malwa-Nimar belt from Saturday.

Reports also said that soybean sowing that had been withheld till now due to late arrival of monsoon is also likely to start this week.

Traders said soyoil futures would be under pressure in the coming few days as sellers will liquidate their long-positions built in anticipation of delay in rains. NCDEX July soyoil was quoted at Rs 374.80 per 10 kg, down Rs 5 from previous close, late on Monday.

Spot soyoil rates were also weak today due to low demand from small traders and stockists. Spot refined soyoil rates were quoted at Rs 371 per 10 kg, down Rs 3 from previous close.

"Small traders and stockists stayed away from the markets today as storing soyoil during monsoon is difficult for them," another city-based spot trader said.

Soybean futures were down on hopes of good 2005-06 soy output due to revival of monsoon in central India. NCDEX July soybean was quoted at Rs 1,305.40 per 100 kg, down Rs 22.10 from Saturday.

"Bean futures may test Rs 1,290 on the downside if monsoon continues its march, which would also mean farmers can sown soybean within the stipulated time-period and get good per hectare productivity," a trader said.

Spot soybean rates were also weak as arrivals fell in the markets.

At 1636 IST, spot soybean plant rates were quoted at Rs 1,300-1,305 per 100 kg, down Rs 20 from Saturday.

"Arrivals fell as farmers could not bring their produce in the markets today from rural areas due to heavy overnight rains," another trader said.

Around 45,000 bags of soybean arrived in Madhya Pradesh mandis (markets) Monday. (1 bag=100 kg).

Soymeal futures also went down as traders anticipated an increase in crushing in 2005-06 due to easy bean availability.

"Rains have raised hopes that soymeal exports will grow this year as substantial amount of bean will be available for crushing," a soy industry source said.

NCDEX July soymeal was quoted at Rs 9,290 per tonne, down Rs 90 from Saturday.

Arrivals up in MP

Soybean arrivals in Madhya Pradesh mandis (markets) was 80,840.4 tonne in May, up 82 per cent from a year ago due to liquidation of stocks by farmers. Farmers sold their stocks of soybean as prices dipped sharply in comparison to last year, traders and analysts said Monday.

According to a data complied by the Soybean Processors Association of India, in March soybean market rates were Rs 1,304.17 per 100 kg, in April it was around Rs 1,303.04 and in May it slipped further to Rs 1,255.73 per 100 kg. Arrivals increased as farmers who were holding on to their stocks hoping for an increase in price started selling them.

Some traders feel arrivals will rise further as farmers would sell their remaining stocks ahead of monsoon due to storage problems.

"The new crop will arrive in the markets by September-October and if huge quantities of last year's crop are left with the farmers they will face acute storage problems and will sell beans even at low rates," another trader said.

Soybean is sown in June-July and the first crop starts arriving in markets by late September.

Market watchers said an estimated 45,000-50,000 bags of soybean would arrive daily in Madhya Pradesh from July, up 5,000 bags from previous year.

In 2004-05, around 3.46 million tonne of soybean was produced in Madhya Pradesh, of which farmers and stockists are still holding around 1.3 million tonne.

Market sources said 800,000 tonne will be kept by the farmers for re-use as seeds while the remaining 500,000 tonne will be sold in the open markets from July.

"Around 150,000 tonne of soybean is likely to arrive each month in Madhya Pradesh markets from July onwards," sources added.

LOW EXPORT
Traders feel that soybean prices in the open market were low this season due to fall in soymeal exports.

In April 2005 India's soymeal exports were 112,366 tonne, down 50.2 per cent from a month-ago.

"Indian soymeal price is not competitive in the overseas markets. Meal from South American countries like Brazil and Argentina is cheaper than Indian varieties," a soy industry source said.

Falling meal exports has led to a slowdown in domestic crushing pace, as exporters are not able to realise adequate price.