On the face of it, the US Department of Agriculture's prospective planting and stock report released last Friday appears bullish for new crop soyabean, the plantings of which were estimated at 73.9 million acres for 2012, down one per cent from last year.

Coming as it does in the wake of lower South American soyabean crop, it is sure to signal further price strength. If anything, the market was hoping for a higher US soyabean acreage that could have helped avoid a tighter global market condition.

Yet, the projected acreage is by no means final. The actual planted acreage could well vary; and there is high probability that it will – on the higher side.

It is necessary to remember that during the survey period for the prospective plantings report, the soyabean market was still undergoing changes. In the US, soyabean prices have been higher relative to corn in recent weeks.

Now the attractiveness to plant soyabean has considerably improved. It is reasonable to assume that farmers would be tempted or incentivised to allocate a higher acreage for the bean now than it was say 3-4 weeks ago.

It is for this reason, many experts have argued that in the planting report expected in June there is very good chance of higher soyabean area than what the prospective report suggested.

As for the stock report, it indicated that soyabean stocks totaled 1,370 million bushels, up 10 per cent from stocks a year ago. This implies fairly neutral outlook for old crop soyabean futures; but the planting numbers point to bullish outlook for the new crop soya futures.

It would be advisable to exercise caution in reading and interpreting the numbers.

CBOT TRADING

Currently, on the bourses, especially Chicago Board of Trade, the speculative interest in soyabean is considerably high.

For several weeks now, investor interest in this commodity has been escalating. It is driven primarily by dry conditions in South America which has affected bean production.

To be sure, investors are holding long positions and the managed money inflows are bullishly biased in soyabean.

While the recent USDA prospective planting report has added further impetus to strong prices, as said earlier, it would be risky to place too much reliance on it.

If actual planting progress suggests an improvement in acreage, one can well expect a bout of long-liquidation and sharp correction in prices.

oilseeds

While other major oilseed origins in the northern hemisphere are readying to plant oilseeds, it would not be out of context here to state that peak production season for palm oil begins in April; and stocks, especially in Malaysia, could be trending higher in next few months.

So, the oilseeds and vegetable oil markets are likely to be torn between constructive fundamentals in the short-term and prospects of crop rebound and better availability in the second half of the year.

Many analysts are betting on rising crude prices that they believe will propel vegetable oil prices.

Indeed, with global economic recovery still fragile, escalating energy prices can prove to be counter-productive. So, the last word on oil prices has not been said yet.

>gchandra@thehindu.co.in

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