December 29, 2005

 

Indian soymeal prices soar as bird flu fears wane
 

 

Soymeal prices in India, a major Asian soymeal exporter, have surged over the past several weeks, in line with easing concerns over bird flu.

 

But renewed Chinese demand, India's more attractive prices relative to competitors and improved relations with neighbouring Pakistan have also contributed to the rise.

 

India produces about 4.5 million tonnes of soymeal annually and exports about 2.3 million to 2.5 million tonnes.

 

Soymeal is almost exclusively used as poultry feed, and major global exporters of soymeal include the US, Argentina and Brazil.

 

Since soymeal exports are so critically dependent on poultry consumption, outbreaks of bird flu in Vietnam, Indonesia and China and the resulting scare in east and north Asian nations in October and November had driven down soymeal sales and led to a price crash. Prices of Indian soymeal fell to as low as US$182/tonne, free on board, by Nov 30.

 

But since early December, cases of bird flu have dropped in almost all countries, including China, leading to increased sales of poultry and soymeal consumption. Indian soymeal prices have in turn risen 11 percent and were about US$202/tonne, FOB, Wednesday.

 

Another sign of the tide turning in soymeal demand was China's purchase this week of 36,000 tonnes of Indian soymeal for January and February delivery at between US$225/tonne and US$230/tonne, cost, insurance and freight.

 

A week earlier, Asian traders said Vietnam bought 10,500 tonnes of Indian-origin soymeal for Jan 20-30 shipment, though the deal could not be confirmed independently with Vietnamese traders.

 

"Traditional buyers of Indian soymeal including Japan, Vietnam, Indonesia and Thailand have started buying more Indian soymeal, as the fear psychosis associated with bird flu has quietened down," said Rajesh Agrawala, president of the Soybean Processors' Association of India.

 

A feedmeal purchasing manager with a major South Korean company said Asian buyers prefer Indian soymeal to South American varieties, mainly because of the price differential.

 

A few weeks back, Indian-origin soymeal was about US$20/tonne cheaper than South American soymeal. But the recent rise in Indian soymeal prices has pared its price advantage to about US$5/tonne. South American soymeal is available to Asian buyers at US$235/tonne, cost and freight, while Indian soymeal is available at US$230/tonne, C&F.

 

However, spot ocean freight rates from India to major Asian buyers such as South Korea are also marginally cheaper than freight rates from South America.

 

India eyes strong December soymeal sales
 

India may post strong soymeal exports of 450,000-500,000 tonnes in December, including 50,000 tonnes to neighbouring Pakistan and Bangladesh, said Agrawala.

 

An improvement in political relations between India and Pakistan over the last couple of years has led to the resumption of rail and road traffic between both countries.

 

This has led to larger exports of commodities such as sugar and soymeal to Pakistan by road and goods trains, since the freight rates work out much cheaper than ocean freight.

 

According to soybean industry officials, India has been selling an average 20,000 tonnes of soymeal a month to Pakistan, and higher availability of rail wagons could double these exports.

 

Davish Jain, managing director of soybean processing company Prestige Group of Industries, said Indian traders have already booked export orders for about 1.7 million to 1.8 million tonnes of soymeal this marketing year, which began in October.

 

"This marketing year, Indian soymeal exports may touch 2.5 million tonnes," he said.