Should traders avoid soybean as prices go through the roof?

Soybean surged to a fresh peak on Friday, extending a record run in the past few sessions. At the current levels, the legume has taken its rally to 132 per cent from last year’s low of Rs 3,228 per 100 kilograms.

NCDEX soybean futures for delivery in July were being quoted at Rs 7,550 per quintal on Friday evening, up Rs 231 or 3.16 per cent from the previous close, after surging to a record high of Rs 7,606 during the session.

The refined soy oil contract for June delivery jumped by Rs 16.8 or 1.21 per cent to Rs 1,405 per 10 kilograms.

Analysts say building up of fresh positions by speculators is pushing the rates to unprecedented levels and some volatility can be expected in the near term.

Soybean has outperformed most agri-commodities in recent times. It is up 64 per cent so far this year, sharply outperforming the NCDEX Agridex index’s 27 per cent rise, and 87 per cent in the last one year. Other winners in the pack include cottonseed oil cake, turmeric and chana gram, up 37 per cent, 36 per cent and 30 per cent so far this year, respectively.

The rally in soybean is being fuelled primarily by robust demand for soymeal from exporters amid shortage of stocks in the spot market, said Vinod TP, Research Analyst at

.

“The yellow bean started its northward journey after corrective selloffs witnessed in the first quarter of last year, owing to nationwide lockdown on the back of concerns over fall in global soybean outlook along with lower stocks,” he said.

Fundamentally, lower edible oil stocks globally amid concerns over falling output due to drought in Brazil also underpinned the prices, said TP, who has a positive outlook on soybean. He, however, added that profit booking cannot be ruled out in the near term.

Others are more circumspect about entering soybean at the current levels.

“Trends witnessed in global markets are pointing to some correction in soybean ahead with US planting seen surpassing last year’s levels. Soybean futures have reached risky levels, making it difficult to take long positions,” said Ajay Kedia, Founder and Director of Mumbai-based Kedia Advisory.

At the current juncture, soybean is trading at a 94.59 per cent higher price compared to the MSP or minimum support price set by the government.

Some industry players have suspected a speculative increase in the price of the commodity due to rigging and have sought regulatory intervention.

Technical view

Kedia advises traders to avoid taking long positions for now. The near-month contract may slump to Rs 6,100 level in the near term, where it can find some technical support, he added.

Soybean is quoting above all major exponential moving averages and as long as it remains above the Rs 6,680 per 100 kilogram-mark, it appears poised to reach Rs 7,200-7,260 levels, said TP. “Any direct fall below Rs 6,650 with firm volume could see profit booking with selloffs towards Rs 6,490/6,400.”

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