Market Review (21th Sep 2011 to 05th Oct 2011)
Refined Soya oil prices were on loosing spree during last fortnight both at Indian markets as well as in the international markets. Uncertain global economic situation and broad based sell off in most of the commodities drove this steep fall in prices. MCX near month contract closed at 617.20/10 kg with gain of Rs. 37.75/10Kg.
Refined soya oil prices plummeted sharply due to weak global cues, fresh arrivals in the domestic market. Domestic market tumbled on weak global markets due to global economic woes and higher production estimations. But lower imports and weak Indian rupee supported prices from steep fall during the period. The prospects of prolonged economic and financial problems raise serious concerns about commodity demand.
USDA's September production forecast exceeded the August forecast. Recent sharp price decline primarily reflects the continuation of poor economic performance and concerns about financial conditions in Europe and the U.S. Global oilseed production for 2011/12 is projected at 453.0 million tons, up 1.5 million tons from last month. Oilseeds production in the kharif season is likely to be 20.89 million tonnes as against 20.85 million tonnes last season. India's soybean production is raised 0.7 million tons to a record 10.5 million due to higher planted area. Domestic edible oils are under pressure as new arrivals have started coming in at more producing areas under clear weather conditions. Carryover stocks in Brazil and Argentina are forecast to be record large in 2010/11.
In India soybean arrivals are gaining momentum and harvesting is in full swing across major growing regions of Maharashtra, Madhya Pradesh which is impacted prices to fall steeply. Oilseeds have been sown in 179.59 lakh hectare, 4.79 lakh hectares more than last year. Higher area coverage has been reported from Maharashtra, Madhya Pradesh, Uttar Pradesh and Rajasthan. Millers and stockiest are awaiting for prices to further decrease.
Soybean oil prices will continue to trade lower across our forecast period due to record?high carry?over stocks in Brazil and Argentina, harvest pressure in the US, and weakness in the broader economy . US soybean ending stocks in 2011/12 are likely to reach the second highest point since 2007/08 and a slowdown in global growth will weigh on demand. There is an increased risk that investors' 'flight to safety' will cause liquidation in the speculative net long position in CBOT soybeans or further rise in the value of the US dollar.
The Indian government has decided to extend the ban on edible oil exports by one more year up to 30th September, 2012, that the ban on exports will not be for the betterment of farmers as they would receive lower price for their produce. Moreover next three months would be peak season of arrivals of soybean in India, china and U.S where in crushing and oil production would also be higher which might keep prices under pressure.