March 16, 2012

India's soy prices trading high on firm domestic demand

Due to continued demand both in physical as well as futures market, Indian soy prices are also trading on contract high level with international market positively supporting the Indian market sentiments.

Earlier USDA released its WASDE report which indicated soy supply to remain tight in near future. But more or less market has discounted this fact to large extent. It appears that now the market would focus more on the demand front rather than the supply worry. Thus a volatile movement may be seen in near future.

Major highlights of the reports are as follows. Soy supply and use projections for 2011/12 are mostly unchanged this month. US soy exports are unchanged at 1.275 billion bushels as reduced supplies in South America raise prices reducing global imports.

Soy meal exports and domestic use are raised this month soy crush remains unchanged due to a higher soy meal extraction rate.

Global oilseed production for 2011/12 is projected at 445.7 million tonnes down 6.7 million from last month. Foreign production projected at 354.5 million accounts for all of the change. Brazil soy production is forecast at 68.5 million tonnes down 3.5 million tonnes from last month due to lower projected yields resulting from hot dry conditions in the southern states.

Argentina soy production is reduced 1.5 million tonnes to 46.5 million. Despite improved weather in recent weeks in much of the country lower yields are projected due to continued warm dry weather through February in north eastern growing areas.

Paraguay soy production is also reduced this month due to the effects of drought. With precipitation for November through February at the lowest level in over 25 years soy production is projected at five million tonnes down 1.4 million from last month and 34% below early season expectations.

On Thursday market is expected to remain volatile and movement in both directions may be seen. Initially upward movement is expected however later on some improvement due to short covering might be seen.