India's soy prices must drop to stop crusher losses

Soy prices in India must drop by about 9% to help domestic crushers end losses caused by competition from cheap edible oil imports, according to an analyst.

The benchmark Indore soy price needs to drop to INR1,800 (US$40) per 100 kilograms (220 pounds), from INR1,978 (US$44) yesterday (Apr 28) to make crushers competitive, Nagaraj Meda, managing director at traders'advisory company TransGraph Consulting Pvt. said.

''Soy prices have to come down to a realistic level,'' Meda said.

Crushers are losing INR600-INR1,000 (US$13-US$22) per tonne of soy processed, said Ashok Sethia, president of the Solvent Extractors' Association of India. ''If we don't process, we lose on overheads and fixed expenses. No plant in India has made a profit in the last six months.''

Crushing of oilseeds has declined in India as farmers and traders withhold supplies on expectations that domestic prices will rise after a drought in 2009 cut output. Reduced processing has boosted oilseed stockpiles, while cheap duty-free imports of edible oils have cut prices, reducing profit margins for domestic oil producers and likely lowering overseas purchases of products like palm oil.

India was the world's biggest palm oil importer in 2009, and is Asia's biggest exporter of soymeal.

Exports of soymeal from India may drop this year to about 2.65 million tonnes in year ending September, from 3.59 million tonnes a year earlier, as duty-free imports makes crushing of domestic oilseeds unprofitable, Thomas Mielke, executive director at Oil World said.

India's total oilseed stockpile may total 15.2 million tonnes on June 1, about 40% higher than normal levels, Meda said.