The price of any commodity is determined by the demand that the commodity generates and the supply of the commodity in the market.
If the demand is high/stable and the supply is short, the prices rise. On the other hand, if the demand remains stable or low and the supply increase, then the prices fall and as it seems, the latter has been the reason behind the drop in soybean prices over the last week.
A look at the data reveals that prices of soybean have fallen sharply in the last week, dropping by more than 1 percent to settle at 5554.80 rupees per quintal.
Reasons Behind Fall In Soybean Prices
The sharp decline in the prices of soybean in the past week has been due to the increased availability of local soybean inventories. The negative trend has also gained momentum on hopes of record soybean crops this season. Buy Soubean in Bulk
Recent projections back these statements as well. According to the most recent forecast, India’s soybean carryover stock is predicted to be around 3.00-3.25 million metric tonnes (MMT) with expectations of record production of 12.33 million metric tonnes (MMT) of soybean in the current crop year.
This increased availability of soybean in mandis (domestic markets of India) will also negatively influence the price of the commodity as farmers, traders and stockists will look forward to offloading soybean into the market. Compiling the volume of soybean arrivals from October 2022 to March 2023, a 22.20 percent increase can be clearly seen when compared with the same period a year ago.
Mixed Cues For the Global Soybean Market
The global soybean market witnessed mixed signals last week. While on one hand, the U.S. Department of Agriculture (USDA) predicted the world’s largest soybean producer to have a record soybean output at 153 MMT, other agencies like Agroconsult and Datagrow lowered their production forecast for Brazil owing to weather concerns and lower yields.
Strong Demand For Indian Soymeal
Strong Indian soymeal demand may provide respite to the falling soybean prices. A look at the data reveals that India exported 225,000 MT of soymeal in January 2023 and 230,000 MT of soymeal in February 2023, a 103% and 582% year-on-year rise respectively.
Logistical challenges and weather delays which are driving up prices of South American soymeal are primarily responsible for the increased demand for Indian soymeal.
The Bottom Line
Market demand and market supply greatly influence the price mechanism. An increase in demand amid a supply shortage leads to a price rise while a decrease in demand amid an increase in supply leads to a price drop.
Observing the latter phenomenon, last week, prices of soybean declined sharply. This fall in prices was a result of the increased availability of local soybean inventories. The negative trend also gained momentum on projections of record soybean crops that India is going to witness this season.
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