December 10, 2009

Indian soy hoarders fear bumper South American crop

Indian soymeal exports have virtually ground to a halt as traders store beans to make a killing on surging domestic prices, but a large South American crop could strand dealers on fat stockpiles.

The most disastrous monsoon in nearly 40 years cut India's soy harvest by 10% and lifted domestic prices by nearly a fifth in the last two months, making crushing unviable just as Asia's largest soymeal shipper enters what is normally its peak export season.

Traders say soymeal exports could fall by up to half in the fourth quarter as Asian buyers, who normally turn to India for supplies from November to March, seek out cargoes from other origins.

"The increase in prices can impact our exports in a big way," said Atul Chaturvedi, head of the agricultural arm of Adani Enterprises Ltd, the country's second largest exporter of soymeal, which is used to make feed for livestock and fish.

"It is going to result in India accumulating large bean stocks which will probably be crushed when the South American crop is coming into the market."

This scenario could leave India struggling with a problem of plenty as buyers clinch deals with South America, where hopes of a bumper harvest have already started to cut prices, with Chicago Board of Trade soymeal easing 10% since September.

Asia's top soymeal importers, such as South Korea, Japan, Vietnam and Indonesia - which usually buy Indian cargoes between October and January - have been snapping up shipments from the United States and Argentina instead.

Vietnam bought 20,000 tonnes of Argentine soymeal at around US$460 a tonne in a recent deal, including cost and freight (C&F), for January shipment, rejecting an Indian cargo offered at around US$475 a tonne.

Malaysia, South Korea and the Philippines have struck similar deals, buying Latin American soymeal.

India's government forecasts a soy harvest of 8.9 million tonnes in the year to October 2010, down 10% from 9.9 million a year ago, leaving 9.4 million tonnes to process after taking into account 500,000 tonnes of carryover stocks.

A Mumbai-based oilmeal trader expects crushing this year to drop to 2 million tonnes of soy from the 4.5-5.5 million tonnes usually processed between October and December.

Traders said India was likely to export no more than 1.0-1.2 million tonnes of soymeal in this period, or just half of the 2 million usually traded during the quarter, a situation not seen since 2002, when drought shrivelled the soy crop.

India's soymeal exports fell 54% on the year to 297,340 tonnes in November, industry group the Solvent Extractors' Association of India (SEAI) says.

Although India's soymeal exports make up just 6% of the world total of around 52.5 million tonnes, it caters to Asian buyers looking for competitive prompt shipments.

Traders said Indian crushing plants were running at around a quarter of installed capacity as rising soy prices and cheap vegetable oil imports have eroded margins.

Crop supply agency Conab said on Tuesday that Brazil's 2009-10 soy crop was projected at a record 64.56 million tonnes, which comes on top of record production in the US, the world's biggest producer and exporter of the oilseed.