Congratulations to Team India for their victory against Pakistan in the ICC T-20 World Cup, and to the people of India for reelecting Shri Narendra Modi as Prime Minister.
MDEX opened lower, and by lunchtime, August settled at RM 3952, down 23 points. At the time of writing, August has further declined to RM 3926, down 49 points. With it being Monday, we expect the slow trade to continue, overlooking the weakness in bean oil and increased stock figures. MPOB data shows opening stocks at 1.74 million MT, with production up by 13.48% and end stocks up by 0.5%. Despite the good discount of palm oil over other soft oils, traders expected higher export numbers, leading to the sell-off. The pace of export is good, and we can expect stock reduction by the end of the month, which will adjust the market higher. The RSI in MDEX is just over 50%, keeping the view mostly neutral, and we can expect some more selling pressure as the day progresses. CPO to India for July was offered around USD 940, with some trades around the same level, and ROL was indicated at USD 915, with buyers mostly around USD 900. Locally in India, we are not hearing of any major trades as traders are still processing the current correction in MDEX and busy executing pending contracts. We reiterate that this market has the potential to rally towards RM 4250, and we do not suggest panicking and creating shorts. Instead, dips should be bought. Prices between RM 3750-3650 are good levels to make long positions, and once we return to RM 4250 or higher, one can exit longs or even make shorts.
Soybean oil settled lower on Friday, with August at 43.75, down 71 points. Today, it is mostly unchanged as there is no new bearish news. This week, we will have the USDA report on Wednesday, and we can expect some good action following the report. China was the main buyer for beans from the USA last week, which helped the complex; however, we are back below the 44.50 mark. Prices above 44.50 are not finding reasonable support, but technically, the market is poised to race towards the 47.50 mark. Bean oil traded a few times last week for August at USD 995 CNF India, which is offered at the same levels today. At this price, bean oil becomes very attractive, and traders will be tempted to make long positions compared to sunflower oil. Sunflower oil, on the other hand, is indicated around USD 1075, which is over USD 80. China is closed today for the Dragon Boat Festival, which will also keep sentiments subdued. India is not excited today with the start, so we can expect flat prices to remain range-bound or drift a little lower. We reiterate that the basis should adjust to keep flat prices supported. CNF India resistance is expected only around USD 1100 for nearby months, currently indicated at USD 1020 for July. Prices between USD 950-1000 are very attractive until August-September, and traders are advised to refrain from making longs for October-December as factors like weather and the Indian crop will play a vital role in setting new base prices. Locally, Kandla degum was indicated around INR 87,000 for nearby months, with a USD 25 disparity, so we can expect Indians to become buyers for degum for July-August shipments.
Black Sea Ukraine has reached nearly our target price of USD 1100 for India, with shippers indicating around USD 1075. Europe rapeseed oil is about USD 1110-1120, depending on location. Against this, offers for sunflower oil are around USD 1060, which may rise further before facing resistance. Indians should not hurry in pricing the cargo unless there is a major macro event. Exiting old longs and trying to replace them for October-December should be the strategy going forward. Current prices can be owned at any time, and one should not add to the risk. We reiterate that although there are macro issues, with new crops arriving in October and the rapeseed crop next month, we should see increased selling pressure in existing sunflower oil, which could keep the rally in check. Prices below USD 1000 are attractive enough to make longs; anything higher should only be bought if they can be sold at a profit.
