Soybean prices to trade with bearish undertone in 2019

Owing to higher domestic production and global output, soybean prices are expected to trade range-bound with bearish undertone in the coming months.   

The 2018-19 global soybean production is estimated to increase by 8.5 per cent at 367.49 million metric tonnes with production from the US, Brazil and Argentina at 125.17 million metric tonnes, 120.50 million tonnes and 55 million tonnes respectively.

Even in India, production could go up this year. As per the advance estimate for 2018-19 crops released by the Ministry of Agriculture, soybean production is estimated to be 10.35 million metric tonnes, significantly higher by 24 per cent as compared to 8.35 million metric tonnes in 2017-18 due to higher acreage of 109 lakh hectares in 2018-19 as against 104 lakh hectares in 2017-18, said Sanjay Kaul, MD & CEO, NCML.

Farmers chose to sow soybean in more area as the prices were comparatively higher last year. Lower production last year had

supported prices to some extent. In 2017-18, the country produced 8.35 million

metric tonnes of soybean, which was down from 10.9 million tonnes in the previous year. In 2017-18 most of the oilseeds witnessed lower production on the back of a decline in acreage and weather disturbances during the growth stage of the crops.

According to SOPA, the total availability of soybean in 2017-18 (Oct-Sept) was estimated at 9.65 million metric tonnes after adding 13 lakh metric tonne of opening stock.

Increased export demand too supported prices last year. Globally, soybean production was estimated to decline to 338.56 million metric tonnes in 2017-18 as against 348.94 million metric tonnes in 2016-17. The unfavourable weather conditions in Argentina resulted in a 32 per cent decline in soybean production. 

Lesser global production led to higher export demand for Indian soybean.  Due to the trade war with the US, China started increasingly importing soybeans from Brazil and this led to Brazilian prices shooting up and this, in turn, influenced Indian prices. Further, the Indian government hiked the import duties of edible oils in the first few months and soy oil duties too went up to 30 per cent from 10 per cent earlier.

Higher import duty for oil led to increased crushing demand for domestically available soybean. An estimated 80 lakh tonnes of soybean were crushed during the season, said Kaul.

“Similar to the trends in previous years, prices tend to rise during October and November as the domestic demand is high. Soybean prices trade lower between June and July as the prospects of a significant surge in global oilseed production leads to cheaper edible oil imports into India,” he said.

However, larger acreage and higher yield estimation are expected to put pressure on soybean prices in 2019. The prices last year had gone down below Rs 3000 during the peak arrival period. On the back of higher domestic and global production estimates, prices might remain range bound with bearish undertone between Rs. 3,050 to Rs. 3,700 till next crop season. However, the higher Minimum Support Price of Rs 3,399 per quintal is likely to support the commodity, added Kaul.