Oilseeds Outlook

Pradeep Unni · #1 24th December 2005, 11:59 AM

Hi Guys
Remember this !!!!!
All of the grain and soy markets are being driven largely by commodity funds. A mixture of short covering and outright buying has lifted prices off the fall lows. Keep in mind, however, that most fund managers pay little attention to underlying fundamental. Their sole purpose in trading commodities is to generate profits[u]. It is possible several funds are simply trying to push prices higher to grab a quick profit just before the end of the year. If so, this rally is not sustainable due to the very large corn and soybean stocks that will not disappear anytime soon[/U]. The reality is that regardless of technical factors, unless there are major and widespread crop production problems between now and next year’s harvest, corn and soybean futures are badly overpriced. Given the odds of this being the case, we don’t want to let what could easily turn out to be the best selling opportunities in months or perhaps years slip away.

The cash corn and soybean markets took on a slightly weaker tone. Although there was no strong evidence of increase country movement (US), this mild basis setback in many areas raises questions about how much longer the cash market can remain strong relative to futures. Elevators and end users know huge amounts of corn and soybeans are sitting in the country and that sooner or later they’ll have access to those bushels.

Soil moisture is on the light side of ideal across much of Argentina and in some parts of southern Brazil. This uncertainty will provide underlying support for the soy complex the next several weeks. However, sources in Brazil say there is no reason to scale back the current production estimate of about 58 million metric tons. That would be the largest Brazilian crop ever by a wide margin and would lead to South America having an even larger share of the global soy market.

With regards

Pradeep Unni
9867422279

Pradeep Unni · #2 24th December 2005, 12:43 PM

see the chart attached

Pradeep Unni · #3 30th December 2005, 05:47 PM

South American weather continues to be seen as generally bearish by the trade. Through out the last week, the market has widely traded the bullishness of new index fund money coming into the grain markets during January’06. Farmers would be willing sellers (those that have been holding back selling the market) of soybeans and corn, unless there is a bullish weather story in South America. China’s absence from the US soybean market this week is disturbing and increased buying activity must be seen within the next few weeks, or US soybean export projections will collapse further. Decisive South American weather trends could soon determine soybean market price direction. Favorable South American weather, combined with huge US soybean carryout estimates could soon result in the market falling further with gravity. The U.S. attaché continues to estimate Brazil’s crop at 61 MMT, vs. the official USDA forecast of 58.5 MMT. If the Brazilian crop were to come in that large, the world would likely be faced with very burdensome soybean stocks.

The Indian soybean prices is ruling firm on the Soymeal demand. But our Soymeal prices have reached a level where our parity may erode Vis-à-vis Argentina. A few weeks back, India-origin soymeal was around $20/ton cheaper than South American soymeal. But the recent rise in Indian soymeal prices has pared its price advantage to around $5/ton. South American soymeal is available to Asian buyers at $235/ton, cost and freight, while Indian soymeal is available at $230/ton, C&F. How far will the Soymeal story continue????? GUYS there are NO BULLS in SOY COMPLEX MARKETS

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