May 16, 2007

 

Lower output, stocks hit India's rapeseed meal exports

 

 

India's rapeseed meal exports in the financial year ending Mar 31, 2008, may see a significant decline because of a fall in procurement by the state-run National Agricultural Cooperative Marketing Federation, or Nafed.

 

Lower procurement at a time when carryover stocks from the previous year is already low would mean lower availability for exports, traders and analysts said Wednesday.

 

Indian began the current fiscal year with a carryover stock of only about 1.3-1.4 million tonnes, down from more than 3.5 million tonnes at the start of last year.

 

Procurement has also been slow following a drop in production this year after many farmers switched to wheat and pulses which have seen high prices since last year, they added.

 

According to trade estimates, India may produce about 5.8 million tonnes of rapeseed this year, down 900,000 tonnes on-year, as farmers preferred wheat and pulses which offered them better returns.

 

The country had exported a record 970,725 tonnes of rapeseed meal in 2006/07, up 82 percent on-year amid constant stock liquidation by Nafed.

 

This pushed total oilmeal exports to 5.1 million tonnes last year, up 700,000 tonnes on-year.

 

"Nafed's stock liquidation last year allowed millers to crush even during the lean season from September to December, but this luxury may not be there this year as Nafed is left with very little stocks and its annual procurement programme has not picked up as yet," said B.V. Mehta, executive director of the Solvent Extractors' Association of India.

 

According to government estimates, of the carryover stocks of 1.3-1.4 million tonnes of rapeseed in March, Nafed had about 700,000-800,000 tonnes, while private traders held roughly 500,000-600,000 tonnes.

 

Traders said Nafed has managed to procure only about 48,000 tonnes until May, down from 1.3 million tonnes a year ago, because prices have been higher than the government-set procurement price.

 

"Rapeseed meal is mainly used as feed for fish and with eating habits changing rapidly due to increased globalisation, there is bound to be more demand for fish," said Vijay Data, managing director of Vijay Solvex, India's largest producer of rapeseed meal.

 

He said India's total rapeseed meal consumption in 2007/08 should rise by at least 200,000 tonnes to 3.7 million tonnes because of rising population and changing eating habits.

 

"Exports might drop to about 500,000-600,000 tonnes in 2007/08 because of rising domestic consumption," he added.

 

Meanwhile, demand has been rising globally.

 

"There is an overall increase in global rapeseed meal demand mainly from Vietnam, Thailand and other South-east Asian countries as feed millers there are blending 5-6 percent of rapeseed meal in traditional livestock because of its low cost," said Ramesh Garg, chairman of KS Oils Ltd., a large exporter of rapeseed meal.

 

This might create more demand for rapeseed meal in the short term, but with low production and poor stocks, Indian crushers might not be in a position to meet that demand.

 

Tuesday, Indian rapeseed meal was quoting at INR5,000-5,500/tonne (US$122.35-134.58/tonne), freight-on-board, ex-Kandla port as against INR3,500-4,000/tonne around the same time last year.

 

"Extraction units are running at full capacity, but with rapeseed prices rising to INR20,000/tonne in 2007/08 as against INR16,500-17,000/tonne last year, many of them will have to reduce crushing," said D.P. Khandeliya, a leading mustard miller, based in northern India.

 

Khandeliya, who also heads the rapeseed promotion council under Solvent Extractors' Association of India, said rapeseed prices might test INR25,000/tonne in the next few months as supply has dropped dramatically.