INDIAN SOYBEAN - IS THE BULL RUN TO STAY? Report Highlights: Indian exporters are signing fresh Soymeal export contracts at record prices of $330-$340 per tonne, including cost and freight, to destinations in Southeast Asia and China; the highest ever price for Soymeal contracts. Indian freight to China and other Asian Countries remains relatively down making it competitive India had so far contracted to export close to 500,000 tonnes of Soymeal from the new crop, harvest of which begins in October. By a strange coincidence, freight costs are up, while simultaneously, production has slumped in both the US and China. Monday, September 17, 20
SOYBEAN Processed soybeans are the largest source of protein feed and vegetable oil in the world. The United States is the world's leading soybean producer and exporter. Farm value of U.S. soybean production in 2003/04 was $18.0 billion, the second-highest value among U.S.-produced crops, trailing only corn. Soybean and soybean product exports accounted for 43 percent of U.S. soybean production in 2003. Soybeans equal about 90 percent of U.S. total oilseed production, while other oilseeds such as cottonseed, sunflower seed, and peanuts account for the remainder. (Thousand Metric Tons) SOYBEAN PRODUCTION 2003/04 2004/05 2005/06 2006/ Aug 20/08 Sep 20/08 United States 66778 85013 83368 86770 71448 71272 Brazil 51000 53000 57000 59000 61000 61000 Argentina 33000 39000 40500 47200 47000 47000 China 15394 17400 16350 16200 15200 15200 India 6800 5850 7000 7690 7900 8000 Paraguay 3911 4050 3640 6500 6200 6200 Canada 2263 3042 3161 3466 3100 2850 Other 7385 8366 9537 9249 9773 9747 Total 186531 215721 220556 2365 221621 221269 United States, the largest producer of soybean is expected to produce around 18% less soybeans than that produced last season Overall World soybean production is expected to be down by 6% Chinese production is expected to remain down by 1 Million Tons Monday, September 17, 20
(Thousand Metric Tons) SOYBEAN IMPORTS 2003/04 2004/05 2005/06 2006/ Aug 20/08 Sep 20/08 China 16933 25802 28317 28750 33500 33500 EU-27 14675 14540 13952 15800 14881 15681 Japan 4688 4295 3957 4100 4150 4150 Mexico 3797 3640 3667 3925 3950 3950 Taiwan 2217 2256 2498 2375 2475 2475 Argentina 537 692 584 1700 1800 1800 Thailand 14 1517 1501 1700 1800 1800 Indonesia 1059 1112 1280 1400 1600 1600 Korea Republic of 1368 1240 1190 1225 1225 1225 Egypt 243 762 776 1100 1200 1200 Other 7133 7660 6420 6814 7504 7558 Total 54057 63516 64142 68889 74085 74939 China will import around 4.75 Million Tons of soybean more than the last season and will be the biggest importer of the commodity World imports are expected grow by 8.5% (Thousand Metric Tons) SOYBEAN EXPORTS 2003/04 2004/05 2005/06 2006/ Aug 20/08 Sep 20/08 Brazil 20417 20137 25911 24600 29688 30688 United States 24128 29860 25579 29937 27760 26535 Argentina 6741 9568 7249 8000 10200 10200 Paraguay 2776 2888 2465 4900 4600 4600 Canada 897 1093 1326 1570 1470 1300 Other 1228 1197 1443 1742 1665 1665 Total 56187 64743 63973 749 75383 74988 Brazil to dominate exports; overtaking United States as the largest exporter of soybean Monday, September 17, 20
SOYMEAL WHEN CRUSHED, SOYBEAN YIELDS AROUND 81% OF SOYMEAL AND 19% OF SOY OIL. (Thousand Metric Tons) United States 2003/04 2004/05 2005/06 2006/ Aug 20/08 Sep 20/08 32953 36936 37416 38575 38859 39358 China 20190 24026 27296 28250 30250 30250 Argentina 19685 21531 25015 26250 30225 30225 Brazil 22360 22658 21842 23050 22735 22735 EU-27 11084 11194 10643 11527 12000 12000 India 4422 4005 4772 5268 5414 5440 Mexico 3090 2958 3030 3146 3178 3178 Other 14724 15409 15604 16339 17130 17110 Total 128508 138717 145618 152405 159791 160296 United States remains the major producer of soy meal, major of which is used for domestic consumption Higher Chinese production is due to large imports soybean which is crushed for domestic consumption of meal and oil Monday, September 17, 20
(Thousand Metric Tons) SOYMEAL IMPORTS 2003/04 2004/05 2005/06 2006/ Aug 20/08 Sep 20/08 EU-27 22012 21910 22822 23300 24200 24600 Indonesia 1665 1849 21 2300 2550 2550 Thailand 1662 1730 2042 2350 2400 2400 Korea Republic of 13 1462 1773 1850 2000 2000 Mexico 792 1311 1728 1850 1950 1950 Vietnam 963 1152 1651 1500 1750 1750 Japan 1196 1503 1601 1700 1725 1725 Philippines 1163 1377 1272 1485 1560 1560 Canada 19 1145 1342 1385 1450 1450 Iran 851 216 508 900 950 950 Other 12331 12286 13824 13953 153 153 Total 45021 45941 50634 52573 55608 56008 (Thousand Metric Tons) SOYMEAL EXPORTS 2003/04 2004/05 2005/06 2006/ Aug 20/08 Sep 20/08 Argentina 19221 20650 24192 25705 29342 29492 Brazil 14792 14256 12895 12659 12000 12000 United States 4690 6659 7301 7757 7484 7484 India 3310 1794 3679 3540 3470 3470 Paraguay 1082 644 836 1050 1050 1050 Other 2468 2603 2512 2674 2685 2685 Total 45563 46606 51415 53385 56031 56181 Monday, September 17, 20
FREIGHT: DRY BULK RATES: Ocean freight markets have ridden a four-year boom on rapidly-expanding seaborne trade, robust global economic growth and China and India's emergence as economic powers. Argentina China Mississippi china Brazil China India china Monday, September 17, 20
Following table represents the freight rates of dry bulk containers from different origins to China Source- 2-Jun- 1-Jul- 1-Aug- 1-Sep- 10-Sep- Destination Argentina- China 67.39 66.1 78.1 83.6 87 Brazil- China 64.15 63 75.3 79.9 83.2 Mississippi- 61.03 61 72.5 76.9 80 China India- China 37.94 38.7 41.1 46.1 49.6 Indian freight to China and other Asian Countries remains relatively down making it competitive INDIA EXPORT OF SOYMEAL FOR APRIL TO August ' WITH COMPARATIVE PERIOD FOR PREVIOUS YEAR 2006- (05 MONTHS) Month 2006-20 2005-2006 April- 250,775 316,925 May- 110,050 140,5 June- 64,5 108,975 July- 66,700 119,450 August- 47,225 111,5 Total 538,825 796,500 2006-20(F.Y.) 3,661,875 2005-2006(F.Y.) 3,424,600 2004-2005(F.Y.) 1,861,325 2003-2004(F.Y.) 2,683,675 Indian exports for Soymeal has shown a phenomenal growth after a slowdown in 2004-2005 Although the exports in current year has declined on Y-o-Y basis, firm international prices kept prices up Monday, September 17, 20
Soybean Meal/Extraction Rates per MT 8-Sep- 06 4-Aug- 11-Aug- 18-Aug- 25-Aug- 1-Sep- 8-Sep- FAS/FOB (Bedi/Kandla) NOV-DEC-JAN. $ F.O.R. (Bedi/Kandla) Against "H" form (NOV- DEC-JAN) INR Ex-Factory (Indore) Ready Against "H" form INR 198 280 277 275 285 289 305 8,950 11,050 11,050 11,050 11,500 11,675 12,250 8,325 10,550 10,550 10,350 10,900 11,5 11,650 Soybean and soy oil prices: Spot prices Soybean seed Prices- Indore 8-Sep- 06 4-Aug- 11-Aug- 18-Aug- 25-Aug- 1-Sep- 8-Sep- 12,525 15,560 15,480 15,420 15,280 15,190 15,700 Soy oil- Indore 43,058 49,595 49,135 48,780 47,835 47,535 47,910 Following graph represents the rise in prices considering 8 th September 2006 as 100 points 160 150 140 130 120 110 FAS/FOB (Bedi/Kandla) NOV- DEC-JAN.($) F.O.R. (Bedi/Kandla) Against "H" form (NOV-DEC-JAN) Ex-Factory (Indore) Ready Against "H" form Soybean 100 8/4/20 8/11/20 8/18/20 8/25/20 9/1/20 9/8/20 Soy oil The highest yield is seen in prices for port delivered Soymeal, clearly indicating firm export demand Soy oil has the lowest yield indicating extractors feeling the heat from imported edible oils are ready to offload the by-product Monday, September 17, 20
Country F.O.B prices for Soymeal ($/MT) 11-Sep- 06 6-Aug- 13-Aug- 20-Aug- 27-Aug- 3-Sep- 11-Sep- India 197 273 278 277 284 296 306 Brazil 171 209 219 206 224 234 242 Argentina 170 216 228 216 218 233 242 Graphical representation of Soymeal Prices ($/MT) 320.00 300.00 280.00 260.00 240.00 220.00 200.00 180.00 160.00 6-Aug- India Brazil Argentina 13-Aug- 20-Aug- 27-Aug- 3-Sep- 10-Sep- Indian Soymeal enjoys premium due to nearly located markets and high protein value. WHY INDIAN SOYMEAL IN DEMAND? Indian Soymeal contains high protein i.e. 48% Located near to the consuming countries, Indian Soymeal can reach the destination point in shortest time India produces totally Non-GMO soybean which adds to its premium Due to the recent rise in freights possibility is that previously contracted export orders from South America may be fulfilled from India Monday, September 17, 20
INDIA SELLS SOYMEAL AT RECORD PRICES Indian exporters are signing fresh Soymeal export contracts at record prices of $330-$340 per tonne, including cost and freight, to destinations in Southeast Asia and China. This is the highest ever price for Soymeal contracts India had so far contracted to export close to 500,000 tonnes of Soymeal from the new crop, harvest of which begins in October. Indian domestic demand for Soymeal is 2 million tonnes, while the country exports around 3.5 million tonnes. US AND CHINA'S LOSS IS INDIA'S GAIN By a strange coincidence, freight costs are up, while simultaneously, production has slumped in both the US and China. This has boosted Indian Soymeal exports this year. Little wonder that Indian Soymeal exports are expected to be 10 to 15 per cent higher this year. India's soybean crop is also expected to be 15 per cent higher than the 7.6 million tonnes (MT) grown last year. China's projected crop is 15.2 MT compared with 16.2 MT, while the US will produce 71.27 MT compared with 86 MT last year. World soybean production is projected to touch 222 MT this year, down from 236 MT last year. The landed cost of soybean meal from India to South East Asian countries is $40 per tonne, compared to $100 from Argentina or the US, owing to high freight costs for bulk dry cargo. Chinese pig feed manufacturers prefer to buy from India, not only because of proximity, but also because Indian Soymeal contains 3 to 4 per cent more protein. If the current demand in Soymeal sustains then Indian crop which is expected to be record higher will be absorbed easily by world demand. Monday, September 17, 20
AREAS OF CONCERN Indian harvesting will begin full swing between Dasara (21 st October ) and Diwali (9 th November ). Peak daily arrivals of around 10-12 lakh bags (100 Kg each) can pull down market for short term Appreciation of Indian Rupee Bird flu has emerged in major parts of World but any major outbreak may stop the bull run CRUSH MARGIN (INR/MT) Crush Margin is the difference between the value of soybean meal plus oil and the purchase price of raw soybeans Soybean Meal: 11650 x 0.81 = 9436.5 Soybean Oil: (Reference Nov Futures) 44000*0.185 = 8140 Soybean Meal + Soybean Oil = 17576.5 Soybean Nov Contract on NCDEX =15550 (Prices as of 14 th September 20) Based on the above calculations; the current crush margin (including expenses) comes out to Rs. 2026.5 per MT. Depending on the plant size the cost of crushing vary between Rs.700-1000 per MT. Hence there is big scope for soybean prices to come up and soy oil prices to go down. Monday, September 17, 20
TRADING STRATEGY FOR SOLVENT EXTRACTORS India had so far contracted to export close to 500,000 tonnes of Soymeal from the new crop Extraction plants which have sold Soymeal for export should cover there risk by locking the crush margin For every 40 MT of Soymeal traded, the ideal trading strategy for extractor strategy should be Buy 50 MT of Soybean on NCDEX Sell 10 MT of Ref Soy Oil on NCDEX Soymeal Contracts on NCDEX are illiquid hence the above strategy would be applicable only for those who have sold Soymeal in forward delivery Monday, September 17, 20
TECHNICAL OUTLOOK FOR SOYBEAN NCDEX SOYBEAN NOV HAS GIVEN BREAKOUT ABOVE 1560 WITH INCREASE IN VOLUME AND OPEN INTEREST. BUY NCDEX SOYBEAN NOV ABOVE 1560 FOR TARGET OF 1620, 1665. CLOSING ABOVE 1670 CAN OPEN FOR 1800 LEVELS. Monday, September 17, 20
Contract Specification Name of Commodity Ticker symbol Trading System Basis Unit of trading Delivery unit Quotation/base value Tick size Change of 1 Rs. Margin Delivery center Soy Bean SYBEANIDR NCDEX Trading System Ex-Warehouse Indore exclusive of sales taxes 10 MT 10 MT Rs per quintal 50 Paisa 100 Rs. Move Around Rs. 10,000 per Trading Unit Indore Additional delivery centre Kota Nagpur Akola Itarsi Sagar (M.P.) + Rs. 15/Quintal - Rs. 16/Quintal - Rs. 16/Quintal No Premium/Discount No Premium/Discount Delivery Logic Closing of contract Position Limits Sellers Option On the expiry of the contract, all outstanding positions not resulting in giving/taking of physical delivery of the commodity shall be closed out at the Final Settlement Price announced by the Exchange Member level: 45,000 MT or 15 % of market open interest, whichever is higher Client level: 15,000 MT The above limits will not apply to bona fide hedgers. Near month limit (Applicable from 28 days prior to expiry date) Member level: 15,000 MT Client level: 8,000 MT Monday, September 17, 20
Ventura Commodities Pvt. Ltd. Registered Office: Dhannur E, 15, Sir P.M. Road, Mumbai 400 001; +91 22 2266 0969. This report is neither an offer nor a solicitation to purchase or sell commodities. The information and views expressed herein are believed to be reliable, but no responsibility (or liability) is accepted for errors of fact or opinion. Writers and contributors may be trading in or have positions in the commodities mentioned in their articles. Neither Ventura Commodities Limited nor any of the contributors accepts any liability arising out of the above information/articles. Reproduction in whole or in part without written permission is prohibited. This report is for private contribution. Monday, September 17, 20