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Is Next Bull Market Ahead in Veg Oil 2015 Perspective

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Title: Is Next Bull Market Ahead in Veg Oil 2015 Perspective


1
www.transgraph.com
A presentation by TransGraph Consulting
Is Next Bull Market Ahead in Veg Oil 2015
Perspective
2
Flow of Presentation
  • Long Term Perspective
  • Why Big Move?
  • When and How it will happen
  • Medium Term Perspective

3
WHY ???
4
Vagaries and Extremities of Weather
  • Rising instances of extreme dry/wet weather
    patterns since last decade.
  • CY oscillations shows a milder El-Nino extending
    till Q1 2010.

5
Land use patterns major oilseed regions
  • More than land constraint, it is labor shortage
    that will be more worrisome.
  • Especially in countries like India and China,
    where the duo standing to be major demand
    centers.
  • Urbanization is pulling out agri-labor out of
    villages making these nations more import
    dependent.

6
World Veg Oilseed and oil production trends
Turning palm centric
  • Highly varying oilseed output
  • Yields at the mercy of erratic weather
  • Leading to unsustainable production growth
  • Plantation expansions in Malaysia and Indonesia
    has led to Palm to emerge as the forerunner.

7
Veg oil trade shares tilting towards Palm
  • With soy and rapeseed oils finding their way into
    bio-diesel usage at US and EU respectively, palm
    oil is gaining prominence for edible consumption.
  • Rising share of palm oil in total veg. oil trade
    is evident.

8
Forward Looking Supply Scenario 2015.
Canada Prod 2.35 (1.83) Ex.Sur 1.93 (1.4)
EU Prod 9.52 (8.14) Ex.Sur -0.918 (-0.06)
US Prod 14.45 (11.49) Ex.Sur 5.41 (3.6)
Malaysia Prod 21.7 (17.7) Exp.Sur 19.92 (16.2)
Indonesia Prod 26.23 (19.7) Exp.Sur 20.88
(14.65)
Argentina Prod 9.97 (7.5) Ex.Sur 7.97 (5.79)
Brazil Prod 10.19 (8.13) Ex.Sur 5.26 (4.04)
Overall, Soy oil production _at_ American countries
by 2015 could hover around 34.61 m.t(27.12),
while exp.sur stay Close to 18.92 m.t (15.18)
Overall, Palm oil production and exports by 2015
could reach to 47.92 m.t(37.4) and 40.80
m.t.(30.85) respectively
Overall, Rapeseed oil production _at_ Canada EU
is set to increase. However, trade shall stay
trio-centric
figures in parentheses are for CY, Ex.Sur
Exportable surplus
9
So what the world is fed with..5 years from now
  • Soy oil
  • Net addition to production at 7.5 m.t. with USSA
    at 4060 vis a vis 3565 since 2005
  • Interestingly, exportable Surplus generation to
    remain Argentina centric with 2/5th share
  • Relative importance to bio-diesel to take large
    pie of US/Brazil surplus
  • Palm oil
  • Better acreage increments in Indonesia vs.
    Malaysia since 2005 to drive higher surpluses
  • Net addition to production at 10.5 m.t.
  • Palm to compensate loss in soy surplus for food
    use
  • Rapeseed oil
  • Region-specific trade ties
  • Any surpluses to come from Canada
  • EU to remain net importer

10
  • Global veg. oil demand at a glance

11
Regional trends in veg oil consumption Asia
the forerunnerSoy preferred as Bio-Diesel
  • Asian continent as a whole accounts for close to
    half of global edible oil consumption.
  • Palm, soy and rapeseed (70) are preferred in
    Asia.
  • China and India consume close to 64 or 40 m.t of
    Asian veg. oil consumption

12
  • Regional Focus- Asia

13
Strong Per Capita Consumption
  • Rise in per capita veg oil consumption from 10
    Kgs to 14 Kgs in India and 18 Kgs in China
  • Though, major edible oil consumers, per capita
    consumption stands lower than world average

14
Consumer Anatomy - Asia
  • Bulging working group and non-agriculture Indian
    work force
  • Edible oil, Eggs and Meat show high per capita
    growth vis a vis staples
  • Incremental population in the spending age group
    in China and India
  • In 2020, the average Indian will be only 29 years
    old, compared with the average age of 37 years in
    China and the US, 45 in west Europe and 48 in
    Japan

15
Economic Exuberance to return! India and China
  • Current slow down well factored
  • Recovery signals in GDP numbers to follow by the
    end of this fiscal.
  • By 2011/12
  • Indian GDP to cross 8 and Chinese 2-digit
    growth to return
  • PCI to follow suit

16
So how much would India gulp 5 years from now
  • Under case-1 PCI growth expected is 6-7 leading
    to 21 Kgs per capita consumption and total demand
    of 26 m.t.
  • Under case-2 PCI growth expected is 10 leading
    to 26 Kgs per capita consumption and total demand
    of 33 m.t.

Equation Dt d0 Nt (1 y e)t
Dt - household demand for edible oil in year t d0
- per capita demand of the edible oil in base
year Nt - projected population for year t y -
growth in per capita income e - expenditure
elasticity of demand of the edible oil
17
Is India Equipped to be self reliant?? ..Import
dependence to rise
  • Limited Domestic production possibility with
    arable land as a constraint
  • Imports to increase
  • Larger degree of Domestic-Global price alignment
  • Revolutionary Agricultural Policy is the need of
    the hour

18
China too follows. leading import surges
  • Sub-optimal growth in total sown area over the
    decade
  • Oilseed acreages on a falling trend
  • Urbanization in the long run (towards 55-60)
    might cap significant additions to acreages
  • Total veg. oil consumption to rise from 25 m.t.
    to 36 m.t.
  • Consequent rise in import dependence, to begin
    with the CY soy production drop.

19
  • Marshalling The balance Sheet

20
SnD Projections 2015
This means RoW should be contented with 1.8
m.t. Then what happens to the bio diesel band
wagon ?
Asia alone demands 85 of the fresh exportable
surplus by 2015
  • Collating the production and exportable surplus
    prospects across major veg. oils vis a vis
    projected Asian demand, the rise in share of
    Asian demand (India and China) from 53 to near
    61 by 2015 shall create shortage elsewhere
    implying higher prices to ration demand.

21
So what about prices.
  • Soy oil Rising demand for bio-diesel,
    trouble-some SA supplies, Slow paced growth in
    exportable surplus
  • Palm oil Strong Asian Demand, growing demand
    from the west, Polarized SE Asian suppliers
  • Rapeseed oil region specific trade ties,
    bio-diesel thrust
  • So, Get ready for bullish surprices

22
How and When
23
BMD CPO Futures Pitchfork Analysis
24
BMD CPO Futures Astronomical Analysis (Mars-Pluto
Conjunction)
25
Preferred Elliott wave Count on BMD CPO Futures
Long term
26
Alternative Elliott wave Count on BMD CPO
Futures Long term
27
CBOT Soy Oil Futures (cents/lb) Indicator
Analysis (Stochastic Combination)
28
Preferred Elliott wave Count on CBOT Soy oil
Futures Long term
29
Alternative Elliott wave Count on CBOT Soy oil
Futures Long term
30
  • Medium term SnD unwinding
  • Global

31
Soybeans Global Supply Higher .
  • Better price realization vis a vis corn coupled
    with potentiality for higher exports next year
    resulted in surge in US bean harvested acres to
    31 MHa vs. 30.2 MHa LY.
  • 2009/10, global soybean production is likely to
    grow by 12 percent from 212.29 m.t to 237.9 m.t
    largely on the back of output recovery in
    Argentina, Brazil and handsome growth in US
    production.

32
Soybeans Crushing to recover
  • Apart from Asian countries, a recovery in crush
    volumes at American countries as a major theme
    total world soybeans crush during 2009/10 is
    likely to grow by 4.58 percent to 201. 3 million
    tons.
  • Higher availability to lead to better crushing
    volumes .

33
Soybeans China buoyancy to continue
  • China imported heavy volumes of soybeans this
    season as the government created buffer stocks of
    around 7 m.t, a drive undertaken to protect
    farmers in globally financial tough times.
  • Prevailing climatic conditions across Chinese soy
    belts could trim production in 2009/10 towards 14
    m.t, which could prompt China to continue bean
    imports in 2009/10 as well towards 38.6 m.t.
  • So far in MY 2009/10, close to 10.2 Million T of
    forward sales have been booked by China Vs 4.6
    Million T

34
Soybeans South America supplies likely to revive
Stock bulge
  • South American soybeans supply demand balance
    sheet shall improve from a net decline in stocks
    to rise towards end of 2009/10.
  • Thus improvement in SAs supply scenario could
    partially reduce the soy products supply stress
    across the world in the coming season.

35
Soybeans US supplies likely to revive
36
Soybeans Global balance sheet to improve
  • Global soybean ending stocks could increase
    towards the end of 2009-10 as a factor of
    recovery in SA supplies.

37
Soy Oil SD trends
  • After a precipitous decline in production and
    consumption of soy oil in 2008/09, conditions are
    set to improve in the coming year.
  • At bio-diesel front, soy oil off-take into the
    sector is likely to see some progress at US
    front, while the same continue to be discouraging
    at EU due to preference to rapeseed oil.

38
Soy Meal S D Dynamics
  • With recovery in soybean production at SA, global
    soy meal supply demand balance shall tilt towards
    a surplus scenario in 2009/10 from a net deficit
    during the current year.
  • Simultaneously, trade conditions too are likely
    to improve considerably there by withdrawing
    thrust to the prices.

39
However US remains numero-uno supplier at least
till next march
  • Undoubtedly, 2009/10 soy products supply-demand
    conditions are showing signs of improvement. But
    until SA comes to world with its next crop (only
    after Mar 2010), US continues to be the sole
    supplier of the products to the world. This
    underscores that supply polarization shall
    continue to be a factor of concern in the coming
    6-8 months time frame.

40
Sunflower oil Production Consumption trends
  • Barring Ukraine all other major producers of
    sunflower oil in the world might reap better
    harvest in 2009-10 taking total output to 11.52
    million tons, same as last year.
  • Delayed sowing and dry conditions in Ukraine
    shall result in drop in production by 9.36 to
    2.17 million tons. Nevertheless the same shall
    still stay above last 3-yr average of 2.0 mln.
    tons, thus keeping any supply concerns at low
    key.
  • Major part of higher Sun oil demand is likely to
    come from EU, Russia and India taking total
    consumption in 2009-10 towards near 11.11 m.t.

41
Global Rapeseed oil SD trends
  • Except Canada, all the three major rapeseed
    producers are expected to reap higher crop next
    season and as a result of this total world
    rapeseed oil production in 2009-10 is projected
    to stay around 20.58 million tons, higher by
    around 1.8 percent on y-o-y basis.
  • However, weather condition during coming months
    in China and India needs to be watched more
    cautiously.
  • Looking at consumption trends, China and EU are
    likely to register considerable growth in demand
    while global rapeseed oil demand as a whole is
    projected to increase by 4.9 to 21.32 million
    tons.

42
Global veg oil - holistic view
  • World Veg. oil SnD gap to narrow due to adverse
    weather conditions affecting supplies at Asian
    front, while a signs of economic recovery might
    bring back demand on to track.
  • Palm oil gap factor is a matter of concern.

43
  • Fundamentally this year could be
  • N shape

44
CBOT Soy bean Futures (cents/bu)
CBOT Soy Bean futures prices have culminated
1-Cycle wave up at Jul08 high of 1654 cents and
subsequently entered into a long-term downside
corrective phase as 2-Cycle wave down (A-B-C)
pattern. Of which, A-Primary wave down has been
terminated at Dec08 low of 776 cents and
currently proceeding as the middle leg of
B-Primary wave Up i.e. B Intermediate wave down.
This wave is expected to take the prices towards
the 850/800 cents in the coming 4-6 weeks time
frame. Upon completion of the same prices are
likely stay on a medium-term bull trend as
C-Intermediate wave up subsequently. Concisely
prices are likely to witness initial weakness
towards 850/800 cents and turn positive towards
1000 cents in the coming 2-3 months.
45
CBOT Soy Meal Futures (USD/short ton)
CBOT Soy Meal futures prices have culminated
1-Cycle wave up at Jul08 high of USD 448 and
subsequently turned weak as 2-Cycle wave down
which is unfolding into A-B-C corrective pattern.
Of which, A-Primary wave down has been
terminated at Dec08 low of USD 235 and
currently proceeding as B-Primary wave Up.
Currently prices are in the middle leg of said
wave i.e. B-Intermediate wave down which is
expected to take the prices towards USD 250/240
in the coming 3-5 weeks time frame. Upon
completion of same prices are likely to stay on a
medium-term bull trend as C-Intermediate Wave Up
in the subsequently. Concisely prices are likely
to witness initial weakness towards USD 250/240
and turn positive towards USD 320 in the coming
2-3 months.
46
CBOT Soy Oil Futures (cents/lb)
CBOT Soy oil prices are witnessing a gradual
pullback towards 34 cents after finding a
resistance near 39 cents for last one month and
are exhibiting a negative bias. According to the
Preferred Elliott wave count the Primary Wave B
is shaping into a double flat wherein the
Intermediate B is underway. This has the
potential for testing 33/32 cents and eventually
prices could bounce back towards 38 cents as
Intermediate wave C. Concisely prices are likely
to trade mixed within a broad range of 32-38
cents in the coming 2-3 months time frame.
47
BMD CPO 3-Month Active Futures Cont Preferred
Elliott Wave Count
BMD CPO Futures prices after a bounce back from
MYR 1965 found resistance at MYR 2521 and are
turning lower for last one month exhibiting a
weak tone. According to the preferred Elliott
wave counts prices are within the Intermediate
wave B of the Primary wave B within the Cycle
wave 2. Hence prices are likely to stay below MYR
2350/2400 on a subdued note towards MYR 1800 and
subsequently witness a gradual recovery in the
coming 2-3 months time frame.
48
Medium Term Price Outlook
Judged from the recent price action, edible oil
prices shown decent correction for the prior
rise. From now prices should consolidate with
initial weakness and form a base during the month
of Oct - early Nov and trend up.
49
  • Medium term SnD unwinding
  • India

50
All India oilseed acreage and Production trends
  • 14.04 y-o-y drop in 09/10 oilseed production

Others include sesame, Niger, safflower, linseed
51
Pre-season and current dynamics of Soy Bean
  • Close to 50 percent of the planted area was taken
    up with varieties like Early-80, 9560, Samrat and
    9305 which has duration of 75-80 days and yield
    potential of 720-750 Kg/ha.
  • About 40 percent sown medium duration variety
    NRC-7 (90 days) yielding 900 Kg/ha, leaving the
    rest 10 for HYV.
  • Severe crop anomalies are seen in Vidarbha and
    Rajasthan
  • Average soybean yield during 09/10 could hover
    around 861 kg/ha.

52
2009/10 Nominal imports and receding stocks
till Q22010
  • 5.37 y-o-y drop in 09/10 edible oil production
  • Kharif decline at 10.65
  • Improvements expected in Rabi
  • Palm oil share to rise at the cost of Sunflower
    Oil . Soy Oil share could remain same
  • 8 m.t. to be imported vs. 7.71 CY
  • Stocks could start receding to normal levels.

53
Indian veg oil consumption trend comparison
  • Rising veg. oil consumption / requirement to
    drive huge imports.
  • 16-17 m.t. to be consumed in 09/10
  • Close to 8 m.t. to be imported vs. 7.71 CY

54
NCDEX Soybean Futures, INR/Qtl
NCDEX Soybean futures have completed 2-Primary
wave down at Nov08 low of INR 1517 are
progressing as the 3-Primary Wave Up
subsequently. Within the said wave prices are
currently proceeding as 2-Intermediate Wave down
in the form of Flat (3-3-5) corrective pattern.
As a part of it prices are likely to trade on a
weak note towards INR 1800 in the coming 4-6
weeks time frame. Upon completion of the same,
prices are likely to stay on a positive note
towards INR 2600 in the subsequent 5-7 months
timeframe. Concisely prices are likely to place a
seasonal bottom near INR 1800 and rally towards
INR 2600 in the coming 6-8 months.
55
Soya Meal FOR Kandla, INR/MT
56
Indian Crude Soy Oil Spot Indore, INR/10 Kg,
Elliott wave count.
Crude Soy Oil prices at Indore have completed
A-Primary Wave down at Nov08 low of INR 357 and
are proceeding as the second leg of the overall
long term downside corrective phase i.e.
B-Primary wave up over the last few months. With
the said wave prices have completed
A-Intermediate wave up at May09 high of INR 472
are currently proceeding as the last leg of
B-Intermediate wave down which is expected to
take the prices towards INR 350/340 in the coming
4-6 weeks. Upon completion of same prices are
likely to stay on a positive note towards INR 500
as C-Intermediate Wave Up towards INR 470 in the
subsequent 5-7 months.
57
Price Outlook
58
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Transgraph Consulting Pvt Limited
Thank you for your attention
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