Q2 Soybean Report

April 15, 2013

MARKET SNAP: Indian Soybean prices rose by 12 percent during Q1 of 2013, albeit global soybean prices on CBOT havent shown any significant movement. Expect domestic prices to extend rally through Q2 of 2013. Indian Soybean growers are reluctant to sell beans as they are having sanguine feeling about rates. Previous year market saw Rs 5000 per quintal rate and most of the sellers believe prices would ride to Rs 5000 level this year too. Soybean prices gain in domestic market seems paradoxical, given the global and domestic demandsupply scenario of soybean. But two things could vindicate the recent rally, first better demand for Indian origin soya meal and second, delay in soybean shipment from South American countries. Historically, domestic prices usually rally during first half of calendar year and correction happen during later half, so expect history to repeat this year too. Currently soybean in Indore spot market trading around Rs 4025 per quintal. Yellow Soybean Meal for Export at kandla is trading at Rs 3625 a quintal (FOB $660 /MT for Iran and SEA). Refined soya oil selling at Rs 723 per 10 kg. NCDEX front month contract is trading at Rs 4000 a quintal. CBOT soybean for May delivery is trading at $14.10 per bushel (around $ 518/MT). U.S. (gulf coast) offering soybean around $544 per MT for Asia on FOB basis, while Brazil selling at $ 510 per MT FOB for May delivery. If CBOT stays near $14 a bushel while Indore spot moves above Rs 4100 a quintal, then Indian soybean market could come under import parity for soya bean.

SUPPLY Domestic Supply: Indian soybean production estimated to stand around 12.67 million tons during 201213. A 3.78 percent gain in production compared to last year. Lucrative prices during previous year diverted farmers to soybean. Madhya Pradesh, the largest soybean producing state seen rise of 6 percent in production.
8000 7000 6000 5000 4000 3000 2000 1000 0
MP Maharashtra Rajasthan AP Karnataka Chhattisgarh Gujarat

Soybean Production in '000 MT

2011-12 2012-13E

Global Supply: Last year drought hammered U.S. soybean output from 84.19 to 82.06 Million MT. South American countries expected to harvest record soybean, Brazilian farmers would harvest 83.5 MMT compared to 66.5 MMT while, Argentina would produce 51.5 MMT compared 40.1 MMT. Globally soybean production could total 269 MMT for 2012-13 against last year 240 MMT. World soybean beginning stock depleted to 55 MMT from last years 70.11 MMT. For the coming year soybean production in U.S.A is expected to rise given the rise in estimated yield even though there is not much change expected in area under soybean which could be around 76 million Acre. Global soybean production is raised by USDA, supported by larger crops in Paraguay and Uruguay. Soybean Meal: Out of total global production 230 MMT of bean expected to crush which will produce 181 MMT of meal. India could crush 10.76 million MT bean during 2012-13 to produce around 8.6 MMT of meal. Soybean Oil: India estimated to produce 2.14 compared to last year 1.76 MMT of oil while global soy oil production will stand around 43 MMT.

DEMAND: Global soybean consumption estimated to rise by 3 percent in 2012-13 and would total 263 MMT compared to last year 255 MMT. Previous years higher prices reduced demand for soybean and diverted many users to find substitutes. Given the fall in the prices from the peak to current level of $14 a bushel will attract some buying and also restocking in importing countries. Indian soya meal consumption estimated to rise to 4 MMT compared to last year 3.5 MMT. The soya oil consumption is expected to be around 3.3 MMT. Demand from meal importing SEA countries also looking bright. Overall demand for soybean in domestic as well as global market seems to be moving upside after last year setback. TRADE: Global soybean import export trade quantity estimated to be around 96 MMT during 2012-13. Brazil, US and Argentina exports 36.7,36 and 10.3 MMT of soybean respectively. These three countries contribute almost 85 percent of global export. China is the largest importer of Soybean with 61 MMT contributions while EU union stands second with 11.8 MMT. Mexico estimated to import around 3.7 MMT of soybean, while rest of import goes to SEA and Middle East countries. Indian meal Export: Export of Indian soya meal estimated to be 4.5 MMT as per USDA (Oct-Sep), while SEA of India says Export of meal is 3.4 MMT during April 2012 to March 2013. Indian meal enjoys the demand in SEA countries because of its non GM crop and quality. Indian exporters are offering Soya Meal around $ 710 per MT on FOB basis for SEA and Iran destinations. Indian Oil Import: India is estimated to import around 1.15 Million MT of soya oil compared to 1.17 Million MT last year. Domestic Crush Margin: Given soybean price at Rs 4100 per quintal, Soya Oil at Rs 723 per 10 kg, soya meal Rs 36250 per MT and conversion cost Rs 1200 per metric ton; crush margin will be Rs -343 per MT. All prices are for Indore location. GLOBAL BALANCE SHEET: 2012-13E Beginning Stock Production Import Total Supply Consumption Export Ending Stock World 55.13 269.60 95.48 420.21 269.00 97.86 62.63 India 12.60 1.15 13.75 7.50 4.50 1.75 U.S.A 4.61 82.05 0.50 87.16 47.07 36.74 3.35 Brazil 1.66 83.50 0.04 85.20 22.55 40.25 22.40 Argentina 5.20 51.50 0.01 56.77 25.10 10.45 21.22 China 15.92 12.60 61.00 89.52 63.69 0.00 12.39

PRICES: Domestic Price Seasonality: Soybean prices seasonally move in pattern where prices have been showing gain during first half of calendar year year. Usually prices start correcting in August and bottom out during October. As believing history repeat itself, we can witness some gains during second quarter, from 5 to 10 percent maximum.

PRICE OUTLOOK: Presently, the demand for Indian soya meal from SEA & Iran and Shipping delay in South American supporting the prices in domestic market. Market shall continue to move upside during Q-2 Q and could gain around 10 percent in domestic market. On supply front albeit, Indian production is higher than last year, arrivals are weak as farmers holding stocks expecting better prices. However overall demand and supply scenario is reasonably well balanced and once fresh crop sowing progress in July prices would witness correction. As far as CBOT soybean prices concern, prices initially could move higher to $15 a bushel but then eventually would fall back to $13.5 a bushel. If CBOT break below $13.5 then $13 per bushel is likely target. Q 2 Market Outlook SPOT INDORE NCDXE( Front Month) CBOT (Front Month) CMP Rs 4100 per Quintal Rs 4000 per Quintal $ 14.10 per Bushel By June 2013 4500 4400 15.00-13.50 Range 3600-4900 3500-4800 13.00-15.00