July 23, 2010

Indian oil millers step up soy purchases

Indian oil millers have stepped up their purchases of soy on a jump in domestic soyoil prices, a rise in soymeal export price due to a weak rupee, poor rains and firmness in global market, an industry official said.

"Rains have changed sentiments. Prices are going up due to poor rainfall," B.V. Mehta, executive director of the Solvent Extractors' Association, said.

The central India, the main soy growing region in the country, has so far received 19% lower-than-normal rainfall, the weather department data showed, triggering worries of lower yields.

Soy is crushed to produce soymeal and soyoil. Lower prices of meal and oil earlier had deterred millers as their margins turned negative. Soyoil price in Indore spot market in Madhya Pradesh has risen by 8.2% to Rs474 per 10 kg in past one month, while soymeal has gained 5.9% to Rs17,100 per tonne.

Lower soy prices also prompted farmers to postpone selling, leading to a drop in overall crushing and soymeal exports. The exports had plummeted 10% to 98,400 tonnes in June from 109,923 tonnes a year ago.

Analysts said earlier Indian soymeal was costlier for importers, but now globally soymeal prices have risen.

"There is an improvement in soymeal export price, but now domestic soy prices are also going up," Subhash Goyal, an oil miller and member of the Soy Processors' Association, said.

At 4:40 p.m., the August soy on India's National Commodity and Derivatives Exchange (NCDEX) was up 1.75% at Rs2,095.5 per 100 kg, after hitting a contract high of Rs2,100.5 earlier in the day.

Analysts said the area under soy in 2010-11 would remain steady or fall slightly as its return were lower than cotton and pulses last year. Soy is the main summer-sown oilseed crop in India, the world's biggest importer of edible oil.

In 2009-10, the country had produced 10.05 million tonnes of soy, slightly higher than 9.91 million tonnes produced a year ago, farm ministry data showed.

The south Asian country is likely to import 150,000-200,000 tonnes of soyoil in July-October period, analysts said, adding in current oil year ending in October imports may stand between 1.5 million tonnes to 1.7 million tonnes.