1. TransGraph Research Consulting Technology
Commodity Price Risk Management solutions
Agriculture Metals Energy Currency Economy
Mapping the Market Thought of Oil and Oilseeds markets By
Nagaraj Meda,
MD, TransGraph Consulting Pvt Ltd

2. Review of GlobOil 2015:BMD CPO 3M Futures
Actual: Prices have rallied and placed a high of MYR 2793 during Mar’16 and turned lower towards MYR 2187.
TG Forecast: Prices are expected to trade higher towards MYR in the coming 5-6 months before turning lower towards MYR 2200.

3. Review of POC 2016 Outlook:BMD CPO 3M Futures
TG Forecast: BMD CPO Futures prices are likely to test MYR and turn lower towards MYR 2150 in the coming 3-5 months.
Actual: Prices have posted a high of MYR 2793 and turned weak towards MYR 2200 ahead of turning higher recently.

4. What we analyze is of immense value to the industry
TransGraph over a period of last 13 years have experimented and stabilized our mapping the market thought approach which is a combination of fundamental, technical and statistical analysis.
With the blessings of Lord Saraswati, our customer Gods and with the inspiration from distinguished and accomplished fellow analysts, we shall continue to focus, invest and improvise out MTMT approach and prepare the industry and our customers better to manage the price risk.

5. BMD CPO 3M Futures(USD/MT): Diametric Formation
In case of an exception the g-leg is already concluded and prices could extend higher towards MYR 3100.
This marks a conclusion of Cycle wave 2 as market enters into a fresh impulse
In case of an ideal diametric formation prices could turn lower towards MYR 2187 to place the g-leg during Oct-Nov’16 ahead of a gradual rebound.
BMD CPO Futures prices since year 2013 is processing a diametric formation. Within the said formation all the legs tends to be equal in time (not price) while in case of exception one of the leg extends more than times or truncates by less than
The G leg and subsequent price action would suggest a fresh bull market or a Sideways market in the long term.

6. Key question: has long term impulse 3rd grand wave started?
If impulse 3rd grand wave has started we will not see market below 2200 for another 3-4 years, if it is wave C up, after placing the high at in Feb/March, by Aug’17 markets will come down next year and then impulse may start.
Let us have a look at Fundamentals to arrive at the decision.,

7. Relative money supply growth prompting stronger Euro
Relative interest rates and money supply movement suggesting weaker Dollar in medium term
Real Interest rates prompting stronger Euro and possible rate hike in USA
Parameter
USA EU
Interest rate (A)
+0.4
0.1
Inflation (B)
+1.1
Real interest rate (C=A-B)
-0.7
Relative real interest rate (EU-USA)
(0-(-0.7)= +0.7
Relative money supply growth prompting stronger Euro
Money supply growth rate
7.0%
5.0%
Relative money supply growth (EU-USA)
5-7 = -2%

8. Reversal of Strong dollar weaker commodities on cards?
Region
TG estimate
2014
2015
2016p
2015 GDP (USD Bn)
2016 GDP increment (USD bn)
World
3.40
3.10
3.20
79897
2476
Advanced economies
1.80
1.90
2.00
36790
735
Emerging markets
4.60
4.00
4.20
43108
1811 US
2.40
2.20
16676
367
Euro Area
0.90
1.50
1.70
13555
230
Japan
-0.10
0.50
5677 28
China
7.30
6.90
6.50
8804
572
India
7.50
7.80
2359
184
Note: All data in % Change Y/Y, India GDP in FY terms (Apr-Mar) and based on base year in Gross value added (GVA) terms; Indian GDP 2016 is
Last 3 years, EU has bridged / bridging the gap with US economy in terms of GDP value.

9. Growth and Real interest rates support Euro but stimulus limits upside
EURUSD is likely to weaken towards support of 1.08 in in the coming 1-2 months and then resume uptrend towards 1.18 in the coming 4-6 months.

10. Dollar Index to trade mixed between 94 – 97.50
Dollar Index is likely to hold support of 94 on any immediate weakness and gain gradually towards in the coming 1-2 months and then resume weakness below 93 over the coming 4-6 months.

11. Supply – Demand Scenario indicates tighter balance entering into 2017
Bullish factors
Strong Chinese demand growth. 6.5% growth from 10.8 MBpd to 11.5 MBpd
Productivity issues and low drilling to keep the US crude oil output lower
Plateau in supply growth (Iran and Iraq producing at record pace ) and steady demand growth
Marginal dip in OPEC supplies due to the lower production in Venezuela, Nigeria and Libya.
Product glut likely to shrink by the end of the year.
Bearish Factors
Distillate demand expected to be tepid during upcoming winter due to possible La-Nina impact.
Recovery in Non-OPEC production due to the firm trend in prices.

12. WTI Crude Oil Price Outlook
Price Structure : Prices have placed cyclical bottom at USD 26 in Feb’2016.
Price Outlook: WTI Crude Oil, prices are likely to correct towards USD 37 levels and resume the positive trend towards USD 65 in the coming 6 months.
Turnaround Level: Early breakout above USD 52 will negate the immediate down side potential and accelerate the bullish trend.

13. Indian Balance of Payments (USD Billion)
Indian Balance of Payments indicating strong fundamentals for Rupee in medium term
Indian Balance of Payments (USD Billion)
Item p
Current Account
Merchandise trade balance
Invisibles
111.61
107.49
115.21
116.24
107.93
105.00
Total Current Account
-78.15
-88.16
-32.40
-27.94
-22.15
-6.00
Capital Account
FII
12.80
34.68
8.72
40.93
-4.13
18.10
FDI
34.31
22.42
24.30
32.63
36.02
40.00
Others*
28.52
42.59
22.40
16.40
9.24
-12.00
Total Capital Account
75.64
99.68
55.42
89.96
41.13
46.10
Balance of Payments
-4.95
14.21
22.14
61.41
17.90
41.10
*Note: Others include net commercial borrowings, short term loans, banking capital and other capitals

14. USD/INR : Preferred Elliott Wave Count
USDINR is likely to extend corrective gains towards INR and resume broad weakness below INR 66 in coming 4-6 months.

15. Soy Complex

16. US Soybean BS….South American soy crop holds key for 16/17
Attribute
USDA 2015/2016
TG Est 2015/16
USDA 16/17
TG Est 16/17
Area Harvested
33.11
33.60
Beginning Stocks
5.19
5.16
5.32
4.94
Production
106.93
114.33
113.40
Imports
0.68
0.64
0.82
Total Supply
112.80
112.74
120.47
119.16
Exports
52.80
52.82
54.02
54.50
Crush
51.71
52.00
53.07
53.50
Feed Waste Dom. Cons.
2.98
3.43
3.62
Total Dom. Cons.
54.69
54.98
56.50
57.12
Ending Stocks
9.95
7.54
Attribute
Soy Acreage
( Million acres)
Yield ( Bushels/Acre)
Production
(Mln Bushels)
( Mln ton)
USDA acreage
83.04
50.6
114.35
TG Acreage
82.02
50.8
113.40
Adjustments in US acreage likely to keep production lower than USDA .
16/17 stocks likely to stay at 7.5 Mln ton Vs 4.94 Mln ton last year

17. Supply squeeze in South america to drive soy complex in OND’16
Parameters
Brazil
Argentina
Ending stocks at the end of August'16
25.83
34.68
Average Monthly Requirements (August-Jan/feb)
Crush
3.11
3.15
Exports
2.42
0.94
Domestic consumption
0.30
0.52
Cumulated demand till 16/17 crop harvest
15.56
18.91
12.12
5.65
1.50
3.12
cumulated demand till pre-harvesting phase
29.18
27.68
Ending stocks at pre-harvest period
-3.35
7.00
Ending stocks last year during same time frame
4.84
16.95
Need for import
Yes
May Not 
Unit:-Million tons

18. Will grains have an edge over beans in Argentina
Will grains have an edge over beans in Argentina ??...who will fill the shoes ???
Brazil
Argentina
Variable
Corn
Soybean
Total crop funding cost (A) ($)
369.72
455.06
447.96
472.59
Taxes and Other Expenses (B) ($)
169.11
117.50
192.80
133.91
Financing interest ( C ) ($)
32.39
30.52
36.90
34.77
Total variable cost (A+B+C) =D ($)
571.21
603.08
677.66
641.27
Total fixed Cost ( E ) ($)
77.62
95.42
88.48
62.91
Total incurred cost (D+E) ($)
648.83
698.50
766.14
704.18
Farmers realized price ($)
152.98
298.72
151.00
282.00
Yield MT/Ha
4.28
2.92 8
2.91
Farmer income per Ha ($)
654.75
872.26
1208
820.62
Net realization in USD / Ha
5.92
173.86
441.86
116.44

19. Argentina Soy oil stocks hint at oncoming tightness despite lower exports …
Month
2015
2016
Sep
350
315
Oct
335
297
Nov
370
345
Dec
167
227
Units :KMT

20. CME Soybean Futures: Elliott Wave Count
CME Soybean futures prices are about to conclude intermediate wave 2 and entering into infant stage of intermediate wave 3 within primary wave 3. Prices on any further weakness are likely to find strong support of USc and gain towards USc 1200 in coming 3-5 months.

21. CME Soymeal Futures: Elliott Wave Count
CME Soy-meal futures prices are likely to hold above USD 300/285 zone and initiate a bull phase towards USD in coming 4-6 months.

22. CME Soy Oil Futures: Elliott Wave Count
CME Soy oil 1M futures placed intermediate wave-[1] at Usc and intermediary wave-[2] at 31.50, currently prices are in a intermediate wave-3. Going ahead prices are likely to hold above and trade higher towards 38.50/39.00 cents in the coming 5-6 months

23. Palm Oil Complex

24. Incremental acreages at main origins for 2016/17
Matured acreages growth from 15/16 to 16/17:
Malaysia: Th.Ha
Indonesia: 260 Th.Ha

25. Malaysian & Indonesia Palm oil Yield Projection for 2016/17Year
EI-Nino Pattern
EI-Nino Years
Years
Yield(T/ha)
% Change(Y-o-Y)
3.95
Very Strong
1982
3.58
-9.51%
3.29
-8.06%
3.56
8.30%
3.97
Moderate
1986
3.35
-15.68%
1987
3.53
5.47%
3.68
4.17%
3.83
1997
3.39
-11.53%
3.70
9.26%
3.67
-0.73%
4.06
2002
4.13
4.77%
-1.72%
4.40
8.36%
4.41
2009
4.36
-1.12%
4.33
-0.55%
4.25
-1.92%
4.24
2015
3.80
-10.32%
Estimated Yields
Scenario-1
3.99
5.00%
Scenario-2
4.11
8.00%
Indonesia
EI-Nino Pattern
EI-Nino Years
Years
Yield(T/ha)
% Change(Y-o-Y)
3.68
Very Strong
1982
3.85
4.66%
3.89
0.78%
3.40
-12.60%
3.42
Moderate
1986
3.08
-9.99%
1987
2.56
-16.87%
2.88
12.52%
3.34
3.02
1997
2.42
-19.95%
0.08%
2.86
18.17%
2.78
2002
3.00
7.97%
3.04
1.24%
3.09
1.73%
3.39
2009
3.44
1.33%
3.47
0.90%
3.63
4.57%
3.86
2015
-10.17%
 Estimated Yields
Scenario-1
3.65
5.00%
Scenario-2
6.00%

26. Production estimates for 2016/17 ( Oct-Sep) All units in Million ton
Country
Acreage (ha)
Yield
(t/ha)
Scenario-1
Production
Yield(t/ha)
Scenario-2
15/16 Production
14/15
Malaysia
5.01
3.99
20.00
4.11
20.57
17.92
19.88
Indonesia
8.85
3.65
32.26
3.68
32.60
31.12
32.50
Others
8.80
9.20
8.25
8.40
Total
61.06
62.37
57.24
60.78
All units in Million ton
Global palm production is expected to rise by 5.70% during 2016/17 as per scenario-1 & 7.60% as per Scenario-2

27. Malaysia-Indonesia Production &Stocks Projection(Sep-Dec’16)
After sharp surge in Sep’16 & Oct’16, stocks at main origins might stay on downward path in Nov’16 & Dec’16

28. Malaysia-Indonesia Stocks VS BMD Prices
Combined stocks at origins likely to rise in Sep & Oct’16 and stabilize by Nov-Dec ‘16

29. Major Four global veg oil scenario
soy
sun
Palm
Rape
Overall
Attribute
2015/16
2016/17
Beginning Stocks (MT)
3.71
3.30
2.09
1.20
9.56
7.44
5.63
5.50
20.99
17.44
Production (MT)
51.60
53.52
14.93
17.10
57.24
61.06
27.66
26.66
151.43
158.34
MY Imports (MT)
11.50
11.18
7.16
7.69
42.08
43.70
3.96
4.18
64.70
66.75
Total Supply (MT)
66.81
68.00
24.18
25.99
108.88
112.20
37.25
36.34
237.12
242.53
MY Exports (MT)
11.70
11.77
7.99
9.20
45.10
46.47
4.12
4.20
68.91
71.64
Industrial Dom. Cons. (MT)
8.99
9.25
0.65
0.70
13.40
14.30
8.21
7.94
31.25
32.19
Food & Feed Use Dom. Cons.(MT)
42.82
43.85
14.33
14.70
42.94
44.28
19.42
19.68
119.51
122.51
Total Consumption. (MT)
51.81
53.10
14.98
15.40
56.34
58.58
27.63
27.62
150.76
154.70
Ending Stocks (MT)
3.13
1.21
1.39
7.15
4.52
17.45
16.19
S/C Ratio
6.37%
5.89%
8.08%
9.03%
13.21%
12.20%
19.91%
16.36%
11.57%
10.46%

30. BMD CPO 3M Futures(MYR/MT): Elliott Wave Count-Short term
Prices in the short term can have potential to correct lower towards MYR 2500 (preferred) or towards MYR 2350 (alternate view) ahead of turning higher.

31. BMD CPO 3M Futures(MYR/MT): Preferred Elliott Wave Count
BMD CPO 3M Futures prices, after completion of intermediate wave-[B] of Cycle Wave 2 at MYR 2210 and currently prices are in a intermediate wave-[C]. Going ahead prices are likely to hold above MYR 2500 and trade higher towards MYR 3000/3150 in the 5-6 months.

32. Ukraine Sunflower Oil FOB 1M Forward USD/MT price outlook
Ukraine Sunflower Oil prices are likely to hold above USD 740 and turn higher towards USD 900 in the 5-6 months.

33. Indian Oil complex

34. Rise in kharif oilseed production by 14%
Kharif Oilseeds Production Estimates P
% Change
Soybean
68.3
96.7
42%
Groundnut (Unshelled)
25.3
35.1
39%
Sunflower
0.8
1.6
100%
Sesame
5.0
3.0
-40%
Niger
0.6 0%
Cottonseed
105.7
97.1
-8%
Total
205.7
234.1
14%
Lakh Tons
Improved acreages and yield resulted in rise in production except cottonseed and sesame

35. Soy Crop situation across the main origins…
Rajasthan MP MP MH MP MP MP
Soybean Crop is in better condition when compared to last two years
Damages reported in soy in certain pockets of Rajasthan, Ahmednagar Division in Mah and East MP
On the whole, a double digit growth in yields is inevitable this year
Rajasthan

36. AYP Soybean …
State
Telangana + AP
Chhattisgarh
Karnataka
Madhya Pradesh
Maharashtra
Rajasthan
Others
India
Acreage ( Million ha)
0.25
0.14
0.28
5.61
3.58
1.11
0.17
11.14
0.30
0.13
0.32
5.40
3.97
1.09
11.38
Yield ( Kg/Ha)
590
500
540
637
530
810
560
613
980
750
710
830
920
720
790
850
Production ( Million ton)
0.15
0.07
3.57
1.90
0.90
0.10
6.83
0.29
0.23
4.48
3.65
0.78
9.67
Annual Soybean Balance sheet (MY: Oct-Sep)
Indian soybean Balance sheet P
Crop size
68.50
96.70
Marketable Surplus
53.90
81.50
Estimated old crop stocks with crushers/stockiest
9.41
8.61
Total Supply
63.31
90.11
Arrivals (Oct-Sep)
57.03
82.00
Crush (Oct-Sep)
54.70
80.00
To be arrived
6.28
8.11
Stocks with crushers and stockiest (Ending Sep)
2.33
2.00
Total uncrushed seed available
10.11
Source: Industry and TG research; All Units in lakh tons
A production estimate of 9.67 million tons expected with an average yield of 850 kg per hectare which is below the median yield of 927 kg per hectares and mean yield of 908 kg per hectare

37. Indian Soymeal exports …can we bounce back ??
Soy Meal Exports in Thd Tons *
Country Wise
South Korea
141
142
154 2
Thailand
369
287
143 7 11
Vietnam
553
379 87 13
Japan
867
565
183 25 1
Indonesia
167 84 86 27
Iran
518
999
701
194
France
103
277
307
110
Others
762
706
357
213 17
Total
3479
3438
2020
591 36
Region Wise
South East Asia
1185
820
356 22
Far East
1064
740
349 39
Middle East
779
1208
824
245 12
Europe
363
654
463
195 89 28 9
* Till July 2016
Indian Meal Balance Sheet (Oct-Sep)
Parameter e p
Beg Stock for Season
3.04
3.14
Crush
54.70
80.00
Meal Production
44.31
64.80
Supply
47.35
67.94
Export
0.43
16.50
Dom
43.00
47.30
PNB
0.78
0.20
Total Demand
44.21
64.00
End Stock
3.94
Units:- Lakh tons
Domestic Soy Meal consumption basket
Poultry Feed
35.63
38.85
Aqua Feed
1.3
1.9
Pet Food
0.5
0.6
Cattle + Hog Feed
0.12
0.15
Food Uses
5.45
5.8
Total Consumption 43
47.3
Lakh Tons
Exportable Surplus of soy meal is expected to be 16.5 lakh tons in 16/17
Major Buyer could be South East Asian Nations as the bean tightness at South America likely to bring parities to indian meal

38. South East Soy Meal Market still looks bright if the price parity becomes favorable..
Pork and poultry meat production is expected to rise y-o-y basis and thus the soybean and soy meal demand will remain intact

39. Rising domestic production and reduced dependency on imports in 16/17
Indian Edible Oil balance sheet ( Nov-Oct)
Proj
Est
% Change
Beginning Stock
11.7
21.1
17.9
-15.1%
Production
63.2
61.1
74.8
22.4%
Imports
144.2
149.0
154.0
3.4%
Total Supply
219.1
231.2
246.7
6.7%
Industrial Use
8.8
9.2
9.4
2.2%
Food Use Consumption
198.0
213.2
232.0
8.8%
Total demand
206.8
222.4
241.4
8.5%
Stocks at ports
12.0
8.4
8.3
-1.2%
Stocks in Market
9.5
6.4
-32.7%
Ending Stock
14.7
-17.9%
In Lakh tons (OY)
Domestic production in India likely to keep import dependency lower as the Rabi oilseed prospects seem to be promising due to good reservoir levels and moisture replenishment

40. NCDEX Soybean Futures: Price Direction
NCDEX Soybean Future prices are likely to hold support of INR 3100 on any further weakness and trade positive towards 4000 zone in coming 5-6 months.

41. Soymeal FOR Kandla: Price Direction
Soymeal FOR Kandla prices are expected to find support near INR and turn higher towards INR in coming 5-6 months.

42. NCDEX Ref Soy Oil Futures: Price Direction
NCDEX Ref. Soy oil prices are seen consolidating in the zone of INR 670 to 620 in the last few months. Going ahead prices are likely to stay above INR 650 and trade higher towards INR 690/700 in the coming 3-4 months.

43. MCX CPO Futures: Price Direction
MCX CPO Futures price are likely to hold above INR 530 and trade higher  towards INR 635/640 in the coming 5-6 months.

44. Price Outlook Summary Markets Last Closing (Sept 19, 2015)
(0-4/6 months)
BMD Palm Oil Futures, MYR/MT
2643
CME Soy Bean Futures, Cents/Bu
979.50
CME Soy Meal Futures, USD/short ton
302
CME Soy Oil Futures, Cents/lb
33.05
NCDEX Soy Bean Futures, INR/Qtl.
3250
NCDEX Soy Oil Futures, INR/10Kg
645.50
Soy meal FOR Kandla, INR/MT
30500
MCX CPO Futures, INR/10kg
566.90