Soybean prices on the rise after stock limit removal

Soybean prices in the benchmark market of Indore gained by 12.4% month-on-month and around 2.3% week-on-week. Prices have given a bullish breakout after trading bearish for 5-month.

On November 1 2022, the Ministry of Consumer Affairs, Food & Public Distribution issued a notification on the removal of stock limits on edible oils and oilseeds. The wholesale dealers and the big retail chain are exempted from the stock limit order with an immediate effect.

The soybean prices gained support after this news and came out of the thin sideways range of Rs 5,000-5,300 per quintal, which we saw in the last fortnight. Soybean prices have given a bullish breakout after trading bearish for 5 months.

Meanwhile, the removal of the stock limit on edible oil and oilseeds will increase the bulk demand for oilseeds, thus would have a positive impact on the prices.

Soybean Indore prices are expected to remain Bullish for an upside target of Rs 5,800-6,000 in short to medium term. Prices would trade bullish unless it is trading below the trend reversal point of Rs 5,015.

The arrivals of new crops in Indore mandi are around 10,000 bags (1bag=90 kg) on November 4, 2022. Arrivals are expected to surge from next week with increasing demand from crushing plants. This year, the harvest got delayed due to the unseasonal rains and the arrivals are yet to gather momentum in the coming days.

Meanwhile, we expect the arrivals of new soybean crops would be around 10 Lakh MT in November and 15 Lakh MT in December 2022, while demand from the crushing plants will remain strong for both months.

Soybean Production Estimate 2022-23

In our preliminary estimates, our projected production is estimated at 12.48 MMT for the crop year 2022-23, 4.51% higher than the previous year’s production of 11.95 MMT. However, due to unseasonal rains in October 2022, about 0.34 MMT crop has been damaged, with around 0.15 MMT loss in Rajasthan and about 0.19 MMT loss in Madhya Pradesh. This would drag our final estimates slightly lower.

Apart from the domestic fundamentals, the strong sentiments in the global edible oil complex market also kept the domestic edible oil and oilseeds prices firm.

Soybean November Future prices in CBOT (Chicago Board of Trade) have gained by 4.6% week-on-week amid lower US production coupled with volatility in the Black sea grain corridor deal, while Soybean Oil December Future prices in CBOT gained by 7.7% week-on-week and gained 12% during the October month.

Crude Palm oil November Future prices in BMD (Bursa Malaysia Derivatives) gained by 9.3% week-on-week and gained 16% during October, owing to firm demand and expectation of lower output in November.

The reflection of higher global prices is seen in domestic edible oil prices also as soy oil in Indore gained by 5%, Crude palm oil in Kandla gained by 5.6%, and Mustard oil in Jaipur gained by 3.6% week-on-week.

Indrajit Paul, Senior Manager (Commodity Research), Origo Commodities