Informist, Thursday, Nov. 14, 2024

By Anjali Lavania

MUMBAI – Soybean prices in states like Madhya Pradesh and Maharashtra continue to be below the minimum support price of INR 4,892 per 100 kg. This situation persists even after weeks of the government increasing import duties on edible oils, aimed at boosting domestic production. The drop in prices is due to factors like increase in supply, poor stock conditions, delayed and less procurement by the government, sluggish soymeal exports, and high import dependency. The current soybean prices are in the range of INR 3,800-INR 4,600 per 100 kg.

After over 2.5 years, the government raised the basic customs duty on crude soyoil, crude sunflower oil and crude palm oils to 20% from 0% with the effect from Sep. 14, taking the effective duty on crude oils to 27.5% from 5.5?rlier.

Soybean is a 144-day kharif crop that is sown in Jun-Jul and harvested during Oct-Nov. Soybean output estimate for 2024-25 (Jul-Jun) is pegged at 13.4 million tonnes, which is slightly higher than 13.1 million tonnes in 2023-24, according to the first advance estimate for 2024-25 (Jul-Jun) released by the government on Nov. 5.

"Over the last four years, there has been a notable increase in soybean production, which helped stabilise the availability in the domestic market," Rahul Chauhan, director of IGrain India Pvt. Ltd. said. Currently, prices have remained below the minimum support price, with strong arrivals of new soybeans in markets, he said.

"Despite the government's approval for large-scale procurement, actual purchases at minimum support price have been limited and slow, which has prevented price stabilisation," Shailendra Soni, a trader from Madhya Pradesh said. The government has procured around 39,398.71 tonnes of soybean at a minimum support price till now across India, which is less than the sanctioned quantity of 3.2 million tonnes, according to the data provided by Chauhan to Informist. "The procurement operations are ongoing, with the highest procurement having occurred in Telangana (24,253.50 tonnes)," Chauhan said. The procurement period runs from Sep. 25-Dec. 23 in Telangana, and from Oct. 21-Jan. 18, 2025 in Madhya Pradesh, he said.

"The volume of government procurement has been insufficient to stabilise prices," Indrajit Paul, head of research of Agrocorp International, said. In Madhya Pradesh, soybean procurement reached only 0.7% of the procurement target of 1.37 million tonnes, and in Maharashtra procurement reached only 0.3% of the target of 1.31 million tonnes and overall procurement reached 1.2% of the target of 3.2 million tonnes all over India, Paul said. "Procurement in Madhya Pradesh was 9,972 tonnes and in Maharashtra was 3,888 tonnes and all over India was 39,399 tonnes," Paul said.

Another reason for the fall in soybean prices is sluggish soymeal exports, as Indian soymeal is less competitive compared to Argentina's offerings, Paul said. "Domestic demand for soymeal has declined, with the poultry industry shifting a significant portion of demand to distiller's dried grains with solubles, which is more cost-effective, thereby putting additional pressure on soybean prices," Paul said.

Furthermore, Pakistan's approval for genetically modified soybean imports has opened the door for cheaper soybean from the US, Argentina, and Brazil, shifting Pakistan's demand away from non-genetically modified soybean, he added. "As a result, there is a surplus of non-genetically modified soybeans from African sources that now flows into the Indian market, adding downward pressure on domestic prices," Paul said. Additionally, India's non-GMO soymeal exports to Pakistan face challenges, as Pakistan’s acceptance of GM soymeal imports reduces its reliance on Indian non-GMO soymeal, further impacting Indian exports, he said.

The soybean crops in the US, Argentina, and Brazil significantly impact Indian soybean prices. As top global producers, these countries influence international soybean supply and pricing, creating competition for Indian soymeal exports. "This year, with favourable crop conditions in the US, Argentina, and Brazil, soybean supplies are ample, resulting in lower global prices. Additionally, markets like Pakistan are increasingly importing cheaper GM soybeans and soymeal from these countries, reducing demand for Indian non-GMO soymeal," Paul said.

"The peak arrival of soybeans occurs between late October and December, with current arrivals affected by higher moisture content due to rains in some districts of Madhya Pradesh," Soni said. Due to rain before harvest, soybean arrivals have high moisture content now, making them less favourable for procurement, he said. The government is procuring only those varieties of soybean which have less than 10% moisture, he said.

According to media reports, Latur, one of the largest soybean producer districts in Maharashtra, is facing severe issues because of the oilseed being sold below the minimum support price. The ongoing rate in the Latur mandi is in the range of INR 4,100-4,300 per 100 kg, the report said. "Prices in Vashi mandi, Maharashtra are currently trading in the range of INR 4,300-INR 4,400 per 100 kg," Pankaj Vora, a local trader said.

"Poor quality soybeans with high moisture content and an increase in imports of soyoil in October are putting pressure on oilseed prices," said Narendar Porwal, another trader from the state.

"High import volumes, along with domestic stock surpluses, have led to a higher supply than demand, putting downward pressure on prices," Soni said. Imports of crude soyoil in October were up 152.6% on year at 341,818 tonnes, the Solvent Extractors' Association of India said Wednesday. "Due to the ongoing decline in soybean prices, the buying activity from stockholders has slowed down, and seed dealers are also purchasing less," Soni said.

"Soybean prices in Indore, Madhya Pradesh are expected to remain bearish in the short to medium term, staying within the range of INR 4,300-INR 4,700 per 100 kg. In the long term, prices are also likely to stay bearish as long as they trade below INR 4,700 per 100 kg," Paul said. End

Edited by Deepshikha Bhardwaj

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