September 17, 2013

India's soy export may reach six-year high next season

Soymeal shipments from India may reach a six-year high next season as the best monsoon rainfall in two decades is set to boost production to an all time high.

Starting October 1, exports in the year may exceed 4.1 million tonnes estimated for 2012-13, which will be the highest sales since the 4.9 million tonnes in 2007-08, said Rajesh Agrawal, a spokesman for the Indore-based Soy Processors Association of India. Soy output, crushed into meal for animal feed and oil for cooking and biofuel, may climb to a record 13.5 million tonnes in 2013-14, the USDA's Foreign Agricultural Service said in a report on September 7.

Higher supplies of soy may curb prices in Chicago, US, up 29% from a 17-month low in August, with concerns that dry weather will affect yields in the US Midwest, the largest growing region in the country.

As demand for animal feed rose from buyers in Iran, Japan and Southeast Asia, India's soy futures are set for a fifth year of gain. "Indian soymeal continues to be in great demand from traditional buyers in Europe and Southeast Asia," Agrawal said. The nation has been contracted to export about 850,000 tonnes from the new crop, with stockpiles of about 500,000 at the start of the season, he said.

Soymeal for December delivery was at US$446 per 2,000 pounds on the Chicago Board of Trade. Prices reached US$345.30 on August 6, the lowest since February 28, 2012. Soy for delivery in November traded at US$13.9125/bushel, heading for a sixth week of gain.

A devaluing Indian rupee, down 13% against the dollar this year, may also boost incentives for exporters to increase shipments. In the past six months, the currency is the worst performer among 24 major emerging economies on concern that foreign capital outflows will accelerate as the US Federal Reserve prepares to reduce monetary stimulus.

"With a devalued currency, India can emerge as a significant exporter of corn, wheat and soymeal in the months ahead," Dorab Mistry, director at Godrej International Ltd, said.

Buyers adjust their bids to factor in the exchange rate moves as a weaker currency makes supplies attractive, said Agrawal. Exporters have contracted shipments between US$440/tonne and US$500/tonne free-on-board this month compared with the average of US$571 in July, he said. India, which competes with top exporters Argentina and Brazil, has a freight advantage of US$15/tonne to US$20/tonne in South-East Asian markets, he said.