October 17, 2003

India' Bumper Soy Harvest Did Not Affect Prevailing High Prices

Bumper soy production coupled with high prices is likely to result in India's soyabean farmers reaping a rich harvest this year.

Early reports of the crop harvest indicate that soyabean production is likely to touch 7 million tons (mt), higher than the official estimates of 6.6 million tons and much higher than the previous highest production of 5.6 million tons recorded in 1997.

Interestingly, the record output did not drag down soya prices. The estimated fall in US soya crop size kept the prices higher than normal. According to latest estimates of the United States Department of Agriculture, America's soyabean production will be 67.18 million tons as against the original estimate of 80 million tons. A severe drought during August and severe cold in September has affected the crop this year.

Consequently, the soya meal price in the international market which started at a low $180 per ton (pt) is now ruling at $240 pt. In the domestic market, soya oil price that started at a low of Rs 38,000 pt has now gone up to Rs 42,500 pt. Bean prices, which traders expected to be around Rs 11,000 pt, is now in the range of Rs 13,000 pt.

However, according to Mr S. Sivakumar, Chief Executive of the ITC International Business Division (ITC-IBD), the soyabean prices are expected to fall to a level of Rs 11,000 pt by Diwali, which is still 14% higher than the minimum support price of Rs 9,650 pt announced by the Government.

Mr Sivakumar added that the prices are expected to fall because it has been projected that Brazil is going to harvest 60 million tons of soyabean this year as against 52 million tons last year. Even Argentina is estimated to produce 35-37 million tons of soyabean this year as against 30 million tons last year. As a result, the shortfall in the US soya crop output will be made up by the increase in the crop output in the Latin American countries.

What is favourable to the Indian farmer at present is that the Latin American soya output will come into the market only by March next year. So there is a clear four-months time for India to take advantage of the prevailing situation. But the Indian crop size, according to Mr Rajnikant Rai, Vice-President (Operations) of ITC-IBD, is equivalent to a crushing period of 10 months. If the industry tries to complete the processing earlier than this period, it will come under "cash pressure". Besides, there will be a problem of logistics that will affect the movement of soyabean in the country.

In view of this, Mr Sivakumar said, "There is no reason to believe that soya prices will remain at the current level".