Commodity Update: January 30, 2010

Soybean
Market Commentary:
Soybean (NCDEX February contract) futures fell more than 5% in the last week as compared to previous week and it breached 13 weeks low because of weak overseas market and poor export demand of domestic soy meal. The contract recorded weekly high and low of Rs 2193 to 2065 a quintal respectively. As per the Solvent Extractors' Association, India's oil-meal exports in the first nine months of the fiscal year (April-December) declined to 22.86 lakh tonnes from 40.70 lakh tonnes a year earlier (down by 44%). Indian solvent extractors/millers say since oil and meal do not command good prices in the physical market and processing soybean is economically unviable due to negative crush margins. Soy meal prices are currently quoting at Rs 18,000 a tonne against Rs 18,800 during the October-December period. There has been a $40/tonne drop in prices from the peak levels, we witnessed earlier. Stock of soybean is 22844 metric tonnes at NCDEX accredited warehouses as on January 25, 2010. India imported edible oils during the first 2 months of oil marketing year (Nov-Dec 2009) was 14.75 lakh tonnes as compared to 12.38 lakh tones last year during the same period, which is up by 19%. Higher production estimates of South America also added to bearish market sentiments.

International Market:

Talk of further increases in the Brazilian soybean crop also helped to dampen buying enthusiasm. According to traders, Brazil's production figure may hit 67 million tonnes. The USDA had raised its estimate to 65 million tonnes in January from 63 million in December. USDA projected 2009 U.S. soybean production at 3.361 billion bushels. The average yield per acre is estimated at a record high of 44.0 bushels/acre from 43.3 bushels/acre. The USDA's weekly export sales were in line with trade expectations in soybeans and meal. Net sales for soybeans came in at 673,500 tonnes for the current marketing year and 183,600 for next year for 857,100 tonnes. As of January 21, cumulative soybean sales stand at 92.4% of the USDA forecast for 2009/2010 versus a 5-year average of 72.4%. Sales need to average just 90,000 tonnes each week to reach the USDA forecast. Net meal sales were 254,100 tonnes for the current marketing year and 14,100 for next year for 268,200 tonnes. The Indonesian Government has kept the tax on crude palm oil export at 3 per cent for February, as the international CPO is stable at US $ 795.84/tonnes.
Outlook:
In the coming week, prices are expected to trade lower on account of poor export demand of domestic soy meal and higher global oilseeds production estimates for this year as compared to last year. NCDEX February Contract shall find strong support at 2025/1980 levels and resistance at 2155/2240 levels.
Technical Indicators:
Prices closed below its 10 Day EMA (2144.80) and 20 Day EMA (2201). Daily MACD-Histogram is in negative territory and 14-Day RSI is at 16.79, which is in oversold zone.