Soyabean witnesses long squeeze at NCDEX, premium between May and June contracts widen

MUMBAI: The soyabean counter on agri bourse NCDEX witnessed a long squeeze on Monday, causing the premium between the May and June contracts to widen to an intraday high of 3.8% from the normal 1.5-2%, say brokers like Harish Galipelli of Inditrade.

The last traded price of the May contract was Rs 3,882 per quintal (100 kg) while that of the June contract was Rs 4,023. The May contract expires on Friday. The cause for the spike in spread was the final expiry date of stocks for May delivery.

Since the stocks cannot be retendered they have to be sold. The selling pressure was so great that buyers were left with the option of accepting deliveries or squaring off at a loss, with many choosing the latter.

Prop brokers short bean were able to pocket not just the decline in prices from their higher selling levels but also to sell the June soya bean contract at elevated premia, said Sandeep Bajoria, one of the largest physical market brokers of edible oils.

The long squeeze is the lesser known counterpart of the short squeeze. In the former a sharp decline in prices causes those with long, or buy positions, to square off, adding to the selling pressure.