RM Seed Medium Term report

 

Price Movement in Rs/Quintal
 
  • Since 5th of April’17 rape-mustard futures have declined by almost 13.31% to make yearly low of Rs 3471/quintal on 22nd June’17.
  • The prices moved on the negative trajectory due to surplus production in 2016-17 Rabi season along with lack lustre demand from buyers.
  • Moreover, expectation of rise in ending stock for rape-mustard seeds kept the prices lower during the aforementioned duration.
  • Meanwhile from the year low prices have recovered by 7% till 11th of July’17. It rose on back of gradual pickup in seasonal demand for mustard oil.
  • Lower arrivals at physical market also supported the trend in July’17.
 
Indian Balance Sheet
 

*Source- KCTL BAW                          #-RM Oilcake exports in equivalent of seeds

  • In 2016-17 the production of domestic Rape-mustard seed is estimated to have risen by 20% Y/Y. The acreage under Rape-mustard crop during 2016-17 is at 70.56 lakh ha up by 9.3% Y/Y.
  • The domestic consumption of India is also likely to rise by 13% Y/Y to 6.34 million MTs as lower mustard oil and oil cake prices may support domestic demand and exports.
  • The exports here depict the Rape-mustard oil cake exports which is estimated to rise by 65% on lower prices in 2016-17 oil year (Nov-Oct).
  • The ending stock is likely to rise by almost 41%, on higher production amid moderate increase in domestic consumption in the country.
 
Global Balance Sheet
 

*Source- KCTL BAW

  • For the year 2017-18, global rape-mustard seeds production is projected to increase by 5% Y/Y on the back of production increase in Canada, EU and Ukraine, which is growing by 13.5%, 3.3% and 68% Y/Y, respectively.
  • Globally rape-mustard imports are projected to increase by 1% with European Union and China being the leading nations.
  • The global exports are marginally declining by 0.5% Y/Y due to decrease in Australia’s exports, which are falling by 19% Y/Y to 2.6 million MTs.
  • However, Canada being the largest exporter of rapeseed, is likely to increase the shipment by 2% Y/Y to 11.2 million MTs.
  • The increase in domestic consumption of China and India by 2% and 13% Y/Y respectively is going to push the global domestic consumption by 2%
 
Crush Margin :

  • The crush margins since April’17 have remained in the negative territory
  • The crush margins did improve during the month of May’17, on pickup in demand from pickle makers and stockiest
  • However, with falling prices of mustard seed derivatives like mustard oil cake and Kachi Ghani, crush margins again moved into the red zone
  • Mustard Oil cake prices touched 2-years lows of Rs 1580-1585/quintal during June’17.
  • Meanwhile, Kachi Ghani prices have also made fresh 2 year lows during last week of June’17 at Rs 697-698/10 Kgs
 
Oil Cake Exports (in MTs)

  • Rape-mustard oil cake exports in 2016-17 oil year (Nov-Oct) till June’17 is around 189,441 MTs, up by 72.8% on Y/Y for the same duration.
  • Lower mustard oil cake prices due to rise in its output amid overall increase in RM seed production favoured higher export sales. The FAS rates of mustard oil cake in 2016-17 has remained lower that of the previous oil year.
  • Since, commencement of fresh arrivals of RM Seed in Jan’17 , mustard oil cake have risen month on month till present
 
Canola Imports (in MTs)
 
  • Canola Oil imports during 2015-16 oil year in India is around 377,469 MTs up by almost 6% on Y/Y
  • Below normal monsoon rainfall in two consecutive years affected rape-mustard seed production in the country, which had increased its dependency on imports in 2015-16
  • However, with bumper production witnessed in 2016-17 season, the increase in imports has been slow with March’17 recording no canola oil imports.
  • In 2016-17 Oil year, till Jun’17 around canola oil imports were around 194,654 MTs which is higher by 2.3% Y/Y for the same duration
 
Seasonality
  • As per the seasonality, rape-mustard futures during the July- Sep’17 period are likely to trade on a upward trajectory.
  • This period coincides with commencement of festival demand from northern and eastern India. The consumption of mustard oil is more in eastern India followed by northern India.
  • During the monsoon season end, demand for edible oil rises including mustard oil in the country. It is also the lean arrivals period which provide further support to the prices.
 
Fundamental Outlook-Bullish

NCDEX’s Rape-mustard futures is projected to trade on a positive note in the medium term based on following factors :-

  • With increasing prices of Kachi Ghani and rise in oil cake exports, crushing demand from the oil millers may improve
  • During this period i.e., July-Sep, end user demand for mustard oil rises on back of monsoon season and commencement of festival around the country
  • The arrivals in the physical market around the major trading centres are gradually going to decline and this may tighten supplies providing support to the prices
  • Mustard Oil cake spot prices at present are hovering around their 2-year lows is likely to further support the oil cake exports which is already up by 72.8% in 2016-17 Y/Y till June’17.
  • Moreover, any increase in import duty on veg oil may further support demand for domestically crushed edible oil including Kachi Ghani.
 
Technical Outlook- Bullish

• RM Seed NCDEX August future trade at 3677 level and it took support near to trend line on weekly chart during June month. Fibonacci extension shows AB=CD at 3654 level on chart.

• The momentum oscillator stochastic trade at 37.92 level and MACD trade below zero line on weekly chart.

• Immediate support seen at Rs.3600 and major support at Rs.3300. Resistance is now observed at Rs.3980/4250.

Note: Recommendation is given in August contract. While initiating trade in other contracts, levels to be adjusted as per premium/discount to the August contract

 
Recommendation

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Posted by Content Publisher Saturday, August 19, 2017 1:57:00 AM Categories: Medium Term Report

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