January 25, 2010

Indian soymeal export slump worrying

Soymeal exports have fallen by 50% in the first nine months of the fiscal putting severe downward pressure on soy futures at NCDEX.

According to the Solvent Extractors Association of India, 14.90 lakh tonnes (lt) of soymeal were exported in April-December against 30.56lt during the same period, a year ago.

The Indian rupee hit its lowest level in more than two weeks on Friday (Jan 22) morning, tracking a sharp drop in the domestic stock market, but some dollar selling emerged from exporters helping prevent a further decline.

Soy futures closed lower on account of weak overseas market and poor export demand of domestic soymeal. The Solvent Extractors' Association of India compiled the data for export of oil meals for 9 months (April to December 2009) is down by 44% as compared to same period during the last year.

Indian solvent extractors/millers say since oil and meal do not command good prices in the physical market and also the processing soy is economically unviable due to negative crush margins.

Meanwhile, talks of higher production estimates of Brazilian crop are also added bearish market sentiments. As per trader's estimates that it may hit 67 million tonnes this year.

The USDA had raised its estimate to 65 million tonnes in January from 63 million in December. Wet weather is expected to continue in parts of the soy belt in Brazil. This is generally considered beneficial, although this could cause some harvest delays in the north.

USDA's weekly export inspections for soy were 44.6 million bushels, down slightly from nearly 47 million bushels previous week.

Higher production estimates of global oilseeds for 2009-10 may provide support to bears. Global soy production is projected at a record 253.4 million tonnes, up 3.1 million.

China took further steps to tightening bank lending policy, it may lead to negative tone in equity and commodity markets. In the coming week, prices are expected to move southwards on account of weak fundamentals.