Bearish soyabean investors loose as market price rise

MUMBAI: Local punters who built bearish bets on the soyabean futures contract on farm bourse NCDEX were left licking their wounds on Tuesday with soyabean arrivals not having panned out as expected after last week’s Diwali holiday and the market price having risen by 4% tracking that on Chicago bourse.

The shorts were built since last month on expectations that bumper harvests in the US, Argentina and Brazil would depress prices. While a bumper crop is expected, prices of hogs in the overseas market have also hit highs, raising expectations of an increase in demand for soyameal — the main derivative of soyabean crushing used as feedstock. Soyabean crushing produces 80% meal and 20% oil.

US traders’ assessment of increase in demand for meal pushed up the price of soyabean meal in Chicago 7.6%, the most in seven years, on Monday. This, in turn, supported bean prices and caused the price of soyabean futures on NCDEX, which takes price cues from Chicago, to jump almost 4% on Tuesday by trade closing. Those with short positions, said Viral Shah, senior vice-president, Geojit Comtrade, would have suffered a big loss. The margin to trade soyabean is 5%, said brokers. Based on the closing price of soyabean November contract of Rs 3,217 per 100 kilos (quintal) on Tuesday, the contract value was Rs 3,21,700. Anyone with a short position at Monday’s close of Rs 3,094 (Rs 3,09,400 at contract level) would have to put up Rs 15,470 (5%) to trade one contract.

By Tuesday’s end of trade, he would have lost Rs 12,300. However, Shah said the rally could be just a blip in the otherwise bearish scenario for soyabean. The international market is expected to be flush with soyabean, which could bear down on overseas and local prices.

Thus, this jump could be a very temporary phenomenon. The price of the November contract, launched on May 2, hit a high of Rs 3,860 per quintal on May 5. It fell to a low of Rs 2,914 on October 13 after estimates of bumper harvests in the US. But, a physical market processor said trading houses had lowered estimates of the Indian crop to 9.8-9.9 million tonnes from the government’s fourth advance estimate of around 11 million tonnes. This, he said, could support prices for a while.