September 19, 2012

 

India expects bumper soy crop this year

 

 

Buoyed by the revival of monsoon rains which will ensure plentiful soymeal supplies to Asia and ease concerns sparked by a devastating US drought, India is on track for a bumper soy crop this year.

 

While the soy crop in the US, the world's top exporter, has been decimated by the country's worst drought in 56 years, India is on track for above-average yields, with rains over the past three weeks providing much-needed soil moisture.

 

The prospects of higher supplies from India, Asia's top soymeal exporter, could pile pressure on the benchmark Chicago soy market, which is on track for its first decline in four months.

 

"India's soy crop looks superb as rains have been so good in all the areas," said Atul Chaturvedi, chief executive at Adani Wilmar Ltd, one of India's top farm goods exporters. "I see no reason why the crop should not be better than last year."

 

Most traders and analysts expect India to at least match last year's soy output of 10.6 million tonnes, leaving it with at least 4.0 million-4.5 million tonnes of meal for export to its traditional customers in Asia. Some forecasters project the Indian bean crop as high as 11.5 million tonnes.

 

There had been fears that poor rains in June and July, the first two months of India's monsoon season, would exacerbate the supply tightness due to lower production in South America this year and the drought in the US.

 

But the monsoon rains have been reviving since the last week of August with three straight weeks of above average rainfall until September 12, ensuring healthy downpours over the soy growing areas in central India. The annual rains are vital for the 55% of India's farmland that is without irrigation.

 

Still, India's soymeal exports will help only to a certain extent, with lower oilseed output in the US, Brazil and Argentina, the three countries that account for 90% of the world's soy exports.

 

The USDA in its monthly crop report last week forecast ending stocks next summer to be the lowest in nine years and the stocks-to-use ratio at the lowest in nearly five decades.

 

India itself grappled with tight feed grain supply in July and August that forced the government to abolish import duty on oilmeal after domestic soymeal prices soared 110% to an all-time high of US$850 between May and July amid a drought. But prices have since eased, following rains across the nation's oilseed belt in central Madhya Pradesh and western Maharashtra states.

 

In Southeast Asia, Indian soymeal is quoted at US$650 a tonne, including cost and freight, compared with US$675 a tonne for South American meal and US$695 a tonne for US cargoes.

 

US soy futures tumbled by the daily trading limit on Monday, posting their biggest percentage drop in nearly a year but that was more to do with anecdotal accounts of better-than-expected harvest yields in the US Midwest farm belt.

 

India has sold some 200,000-250,000 tonnes of new-crop soymeal for shipment between October and December, mainly to importers in Asia, such as Thailand, Japan, South Korea, Vietnam and Indonesia.

 

India will continue to sell soymeal to sanctions-hit Iran as a payment mechanism with the Middle East country was in place, traders said. "Iran and the EU will be on our export radar," said Rajesh Agrawal, an official of the Soy Processors Association of India.

 

Iran stepped up soymeal purchases from India this year as the nation faced Western sanctions that reduced its ability to source food from other origins.