December 31, 2003

Slowdown in Indian Soybean Sales

Soybean farmers in India are going easy on selling their produce as their realisation this year is 30 - 40% higher than past years, according to the Soyabean Processors Association of India (SOPA).

"The farmers have received enough money, enabling them to go easy on further sales, " the association Chairman, Mr Rajesh Agrawal, said in a statement. The statement has been issued on growing concerns about soybean crop size due to low arrivals in the markets.

According to industry sources, arrivals are low as soybean prices have been rising during the last one-and-a-half months. Though the prices tended to slip a little last week to around Rs 14,900-15,100 a ton, this week, they have increased to Rs 15,750-15,900, mainly on the outbreak of mad cow disease in the US. Hopes that there would be more demand for soy meal and corn as animal feed have led to the sharp rise in the prices since the weekend, when the outbreak was confirmed. Last year, during the same period, the farmers were getting Rs 13,000-13,500.

SOPA has raised its estimate of the soybean crop from 64.55 lakh tons (lt) to 69.32 lt, with production in Madhya Pradesh, the major producer, pegged at a little over 41 lt. Last year, the production had slipped to 43.03 lt due to drought and hot weather. On its part, the Government has estimated production of soybean, grown as kharif crop, at 71 lt. Besides soybean, production of other oilseed crops such as groundnut is also projected higher this year on good coverage of the south-west monsoon in the growing areas. Oilseed output this year is seen at a record 142.4 lt.

Soybean growers are witnessing a unique phenomenon of high prices along with the higher crop. This is mainly due to a lower US crop and rising demand for soy meal in South-East and Far-East Asian countries for compound feed. As a result, soy meal prices have spurted to Rs 11,650-11,750 a ton f.o.b for exports. This is about Rs 2,500 higher than the prices during the same time last year.

The Soyabean Processors Association, which has also come out with details of the arrivals, said arrivals of 33.467 lt during October-November were over 90%of the total arrivals last year. It was also about 50% of the estimated production.

It said the farmers were waiting for the rabi harvest to be over. "Once the rabi crop is harvested, we may see some increase in soybean arrivals," Mr Agrawal said.

The low arrivals were signs of the farmers becoming "commercially-minded and market-savvy, which indeed is a welcome sign", he said.

During the next few months, 3-4 lt of soybeans might arrive in the market. "Most of us did not expect such a steep rise in soybean prices despite a good crop. However, we can expect to reap the benefit of higher realisation of soybean received by the farmers in coming years. We presume - a price paid - is a long term investment," Mr Agrawal said.