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TransGraph Research Consulting Technology Commodity Price Risk Management solutions. Mapping the market thought of the Oil and oilseeds Market by Nagaraj Meda, Chairman & Managing Director, TransGraph Consulting Pvt Ltd. 27 Sep 2014. Market Risk Management Solutions.

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Mapping the market thought of the oil and oilseeds market by nagaraj meda

TransGraph Research Consulting Technology

Commodity Price Risk Management solutions

Mapping the market thought of the Oil and oilseeds Market

by

Nagaraj Meda,

Chairman & Managing Director,

TransGraph Consulting Pvt Ltd

27 Sep 2014


Mapping the market thought of the oil and oilseeds market by nagaraj meda

Market Risk Management Solutions

“what to do” + “what not to do”

Client

Positions

Database

Risk Management Software

Exposure + P&L + Risk

Engagement

Manager

Pricing & Hedging Guidelines

Customized Strategies

Pricing + Hedging

Risk Reporting

Price Outlook Services

Commodity + Currency + Economy

Risk Management Policy

Hedge Model + SOPs + MIS

Profitability & Risk Management


Review of 2013 outlook

Review of 2013 Outlook


Ice brent crude oil 1 month active futures usd bbl review of 2013 glob oil outlook

ICE Brent Crude Oil 1-Month Active Futures, USD /BBL Review of 2013 Glob oil Outlook

From Sep’2013 to Feb’14 Price moved as expected and we maintained the bearish view towards USD 92 upon holding below USD 115 which is moving inline with expectation. (There is time delay but price moved within the range of expectation)


Bmd cpo 3 month active futures myr mt review of 2013 glob oil outlook

BMD CPO 3-Month Active Futures, MYR/MT Review of 2013 Glob oil Outlook


Brent outlook

Brent outlook


Mapping the market thought of the oil and oilseeds market by nagaraj meda

Future SnD – Seasonal demand surge followed by weakness in JFM 2015

  • SnD balance till now:

  • Demand growth in China and EU has been rather subdued, while US has seen sustained demand growth

  • Oversupplied market conditions due to the ramping up of supply from Libya and Iraq despite violence situation in the region

  • Rising crude oil production in the US was the major contributor for higher supply

  • Scenario ahead:

  • Seasonal higher demand to keep the markets tight in Q4 2014 before returning to surplus in early 2015

  • Better demand outlook from EU gaining from strength in manufacturing sector and improvement in economic conditions in medium term

  • Stimulus support from Chinese government to boost housing and manufacturing sectors to boost demand

  • Volatile conditions in Libya which could disrupt supplies and possible supply cuts from OPEC producers in order to accommodate lower demand concerns and stabilize the prices


Ice brent crude oil futures continuation usd bbl scenario 1

ICE Brent Crude Oil Futures Continuation, USD/BBL-Scenario-1

ICE Brent Crude Oil Futures price might correct towards 105 in October / November and might continue the down fall into 2015 in the form of primary wave ‘C’ with in Cycle wave ‘2’ where the high probable culmination point could be around USD 75-80 levels.


Ice brent crude oil futures continuation usd bbl scenario 2

ICE Brent Crude Oil Futures Continuation, USD/BBL-Scenario-2

ICE Brent Crude Oil Futures price might correct towards 115 in OND’14 and might continue the down fall into 2015 in the form of primary wave ‘C’ with in Cycle wave ‘2’ where the high probable culmination point could be around USD 75-80 levels.


Soy complex

Soy Complex


Us bio diesel tax credit

US Bio diesel Tax credit ….

  • There is a clear correlation between the tax incentive and increased biodiesel production, which has grown from about 100 million gallons in 2005, when the tax incentive was first implemented, to almost 1.8 billion gallons in 2013.


Mapping the market thought of the oil and oilseeds market by nagaraj meda

CME Soy Oil Futures Continuation, Cents/lbs.

According to Elliott wave analysis scenario II prices are likely to remain weak towards 30.00 cents as Primary Wave C Which is likely to conclude the Corrective Cycle Wave ‘2’ and then Impulse Move is expected towards 38 cents in the coming 4-6 months.


Global soybean balance sheet

Global Soybean Balance Sheet

  • Ending stock of 14/15 is likely to grow by around 22.36 million tons due to higher production across the US & Brazil.

  • One has to keep in mind the supplies for October and November’14 and possible logistic challenges to ship out beans from US until south American crop.


Mapping the market thought of the oil and oilseeds market by nagaraj meda

CME Soybean Futures Continuation, Cents/bu. (Elliott wave analysis)

The Minor wave (a) is on the verge of completion near 900-880 cents ahead of witnessing rebound towards 1150-1200 cents as Minor Wave (b) in the coming 5-6 months.


Us soymeal chinese soybean booking

US soymeal & Chinese Soybean Booking….

  • Higher booking of soymeal is mainly due to robust demand from price sensitive market like South East nations

  • Though China as itself has booked around 1.15 million tons lower than last year, but they have booked huge quantity under unknown destinations, thus keeping the overall import similar to that of last year.


Mapping the market thought of the oil and oilseeds market by nagaraj meda

CME Soymeal Futures Cont., USD/Short ton

(Elliott wave analysis)

Minor wave (a) is on the verge of completion near USD 300 ahead of witnessing rebound towards USD380-390 as Minor wave (b) in the coming 5-6 months .

If 290 support breaks, look forward towards 250-270 range


Palm complex

Palm complex


Cpo usage as feed stock in biodiesel focus is shifting from destinations to origins

CPO usage as feed stock in Biodiesel- Focus is shifting from destinations to Origins???

  • Palm oil for biodiesel quantities has significantly increased, almost doubled in 4 years which has resulted in narrowing of spreads between palm and soy oils.

  • Enhanced usage of Palm oil and Soy oil in Biodiesel at Origins viz., Indonesia and Argentina focus has been shifting to origins.

  • Moving forward, amid ample supply anticipations for 2014/15 also, the origins continue to drive the demand dynamics.


Abundant soft oil supplies pressurizing palm prices

Abundant soft oil supplies-pressurizing Palm prices

Continued ample supply of other soft oils for 2014/15 also might keep the CPO discounts with other oils in the rage of $80 to $ 120/ per ton. Thus capping the upside price potential for palm oil


Other veg oils and brent palm is still competitive

Other veg oils and Brent- Palm is still competitive

Inspite of weakness in rival oil prices, CPO continues to be competitive with Brent crude. Thus

resulting in higher margins for PME


Indonesia cpo versus singapore gas oil shifting focus to fob indonesia

Indonesia CPO versus Singapore Gas oil –Shifting focus to FOB Indonesia?

Increasing CPO (FOB) discounts with Singapore Gas oil and CPO discount with Brent leading to improved Biodiesel Parity at Indonesia and also leading to enhanced PME margins at Rotterdam.

While Singapore Gas oil price is interlinked to Brent, view on Brent and derived parties will continue to remain decisive


Brent crude vs bmd cpo

Brent Crude Vs BMD CPO

  • As of now, BMD at MYR 2118/Ton is competitive in energy segment.

  • Any change in Singapore gas oil prices is likely to shift the price floor from the biodiesel perspective.


Global cpo balance sheet

Global CPO balance sheet

  • 2013/14 endings stocks are likely to remain lower at 8.12 ml tons which would bring down the S/C Ratio to 14.59% from 15.82% previous year. This fall in stocks coupled with forthcoming lower production months will be supportive for the prices in the short term.

  • Moving forward, stocks are anticipated to increase to 8.97 ml tons given higher production is realized..


Myr performance snapshot and outlook

MYR Performance Snapshot and Outlook


Mapping the market thought of the oil and oilseeds market by nagaraj meda

BMD CPO 3-Month Active Futures, MYR/MT Scenario I

BMD CPO Futures price within Corrective Intermediate Wave ‘Y’ most likely has completed Minor (a) leg at MYR 1914 on Sep’5th 2014 and now 3 leg corrective rise is expected towards MYR 2500 in the coming 4-6 months before turning negative again in the coming 4-6 months.


Mapping the market thought of the oil and oilseeds market by nagaraj meda

BMD CPO 3-Month Active Futures, MYR/MT Scenario II

As per Alternative Elliott wave count on BMD CPO 3-Month Futures price , Corrective Intermediate Wave ‘Y’ has culminated at MYR 1914 and now price is likely to move higher towards 2700/2800 a head of turning lower in the nature Intermediate Wave ‘Z’ in the coming 4-6 months .


Mapping the market thought of the oil and oilseeds market by nagaraj meda

MCX CPO Futures Continuation, INR/10Kg

MCX CPO Futures price has most likely culminated downside corrective leg (A) and now it is expected to move higher in the nature of Corrective Intermediate Wave (B) towards INR 540 before tuning negative again. However, price trading below INR 420 would negate this view and then lower price towards INR 390 is possible.


Indian oil complex

Indian Oil complex


Premiums of indian meal denting export demand

Premiums of Indian meal denting export demand…

  • Higher premiums of Indian meal to CME quotes impacted exports historically

  • In 2013-14, the severity was higher due to china emerging as one of the major exporters of meal to South East Asian countries


Mapping the market thought of the oil and oilseeds market by nagaraj meda

China eating away the share in Indian meal exports

(Oct-Aug Period)

  • Lion share in south east Asian soy meal imports is taken away by China last year

  • China emerging as a key competitor in the Asian continent


Current scenario of indian meal vs cme a price simulation

Current scenario of Indian meal Vs CME & a price simulation


2014 15 soybean crop estimates

2014/15 Soybean Crop estimates….

  • Change from 13/14 to 14/15 Area- (-9.74%) Yield-(+20.35%) Production- (+8.9%)

  • Change from 12/13 to 14/15 Area- (+3.86%) Yield-(-12.00 %) Production- (-8.50%)


Lower domestic crush to keep imports higher

Lower domestic crush to keep imports higher..!!

  • Edible oil imports likely to remain higher for the consecutive season mainly due to lower than anticipated soybean production & Crush.


Mapping the market thought of the oil and oilseeds market by nagaraj meda

NCDEX Soy Oil Futures Cont, INR/10 Kg

NCDEX Soy oil futures price is likely to trade lower towards INR 570 completing the Intermediate Corrective Wave (A) and then likely to trade higher towards INR 690 as Intermediate Wave (B) in the coming 5-6 months before turning lower again.


Mapping the market thought of the oil and oilseeds market by nagaraj meda

NCDEX Soybean futures , INR/Qtl

NCDEX Soybean Future prices (CMP – 3059) post making a high of INR 4858 in end of Apr’14 are witnessing down side correction relent less in the last four months and tested low of INR 3110 recently. Prices are likely to extend further weakness towards INR 2700 and make Seasonal Bottom in October 2014 ahead of turning higher towards 3750-3800 in the coming 5-6 months.


Mapping the market thought of the oil and oilseeds market by nagaraj meda

Soy Meal FOR Kandla, INR/MT

Soymeal FOR Kandla (CMP-29750) post making a life time high of INR 45750 in the month of May’14, started correcting relentless in the last four months . Momentum oscillator RSI (14) is entered in oversold zone, which also support the price move on the down side. Going ahead, prices are expected to find support near INR 27000-26500 and turn higher towards INR 35000 , in the coming 5-6 months.


Mapping the market thought of the oil and oilseeds market by nagaraj meda

Price Outlook and summary (4-6 Months)

Global and Indian oil and oilseed complex is likely to witness initial weakness and

turn positive.


Mapping the market thought of the oil and oilseeds market by nagaraj meda

Market Risk Management Solutions

“what to do” + “what not to do”

Client

Positions

Database

Risk Management Software

Exposure + P&L + Risk

Engagement

Manager

Pricing & Hedging Guidelines

Customized Strategies

Pricing + Hedging

Risk Reporting

Price Outlook Services

Commodity + Currency + Economy

Risk Management Policy

Hedge Model + SOPs + MIS

Profitability & Risk Management


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