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Informist, Monday, Mar. 10, 2025

 

 

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--Agrocorp's Paul: Domestic soybean prices down on demand for soymeal poor
--CONTEXT: Agrocorp research head Indrajit Paul's comments in interview
--Agrocorp's Paul: Ethanol byproduct DDGS replacing soymeal as feed
--Agrocorp's Paul: Despite govt buys, soybean below MSP of INR 4,892/100 kg
--Agrocorp's Paul: See Indonesia palm oil 2024-25 output up 3% at 47 mln tn
--Agrocorp's Paul: See soybean flat or down INR 200-INR 300/100 kg near-term
--Agrocorp's Paul: See 2024-25 mustard output 11.5 mln tn vs 11 mln 2023-24
--Agrocorp's Paul: Govt may start procurement of new mustard crop Mar 15
--Agrocorp's Paul: See govt's oil palm mission become a success after 2027
--Agrocorp's Paul: See 2024-25 wheat output 104-107 mln tn vs 106 mln 2023-24
--Agrocorp's Paul: See govt procure 25 mln tn wheat 2025-26 vs 31 mln tn aim
--Agrocorp's Paul: Govt may buy more wheat from Madhya Pradesh, Rajasthan 2025-26
--Agrocorp's Paul: Govt may not allow maize imports under tariff rate quota
--Agrocorp's Paul: Govt may not allow maize imports as output high this year
--Agrocorp's Paul: Maize prices falling as DDGS preferred for animal feed

 

 

By Anjali Lavania, J. Navya Sruthi, and Taniva Singha Roy

 

MUMBAI – Distillers Dried Grains with Solubles, widely known as DDGS, has jolted the Indian oilseeds market, as the animal feed industry is preferring the much cheaper ethanol byproduct over soymeal, says Indrajit Paul, head of research at Agrocorp International. Prices of oilseeds, especially that of soybean, are falling due to poor demand for soymeal both in domestic and global markets.

 

Soybean prices remain below the minimum support price of INR 4,892 per 100 kg, despite the government's procurement, Paul said in an interaction with Informist. The hike in import duty of edible oil in September has had very limited impact on domestic prices of oilseeds, he said.

 

On wheat, Paul sees output in crop year 2024-25 (Jul-Jun) at 104-107 million tonnes, against last year's target of 106 million tonnes, since there is no damage to the rabi wheat crop so far. Moreover, despite high prices in the open market, he expects the government to procure around 25 million tonnes of wheat in 2025-26 (Apr-Mar), against its target of 31 million tonnes.

 

In the case of maize, Paul said the government may not allow imports from now on under Tariff Rate Quota as its production in the kharif season was higher than last year. He also expects a rise in maize output in the rabi season.

 

Further, the government's recent move to allow production of ethanol using rice procured by Food Corp. of India at INR 22.50 per kg against INR 28 earlier, has eased demand for maize, resulting in lower prices.

 

Following are edited excerpts from the interview:

 

Q. Indonesia has been working on its B40 programme since months, due to which global exports of palm oil are expected to fall. What is your outlook on that?

A. Indonesia's palm oil production in 2024-25 (Oct-Sept) is seen 3% higher than last year at around 47 million tonnes, and expected to export 24.5 million tonnes of palm oil during this season. So globally, exports may fall only marginally by 1%, and not 7.3% as reported by some media, which is an exaggerated number.

 

The B40 programme refers to Indonesia's initiative to implement 40% palm oil-based biodiesel blend, aiming to reduce carbon emissions, boost energy independence, and support the domestic palm oil industry.

 

Q. India's palm oil imports have come down substantially in recent months. What are the reasons?

A. Malaysia's crude palm oil prices rose in Dec-Jan, which made it a bit costlier compared to soft oils like soyoil or sunflower oil. This is one reason why palm oil imports have declined. Palm oil is one of the cheapest in the edible oil basket, which leads to more consumption. In India, customers are more price-sensitive. That is why palm oil imports have decreased. Speaking about imports in 2024-25, they will be around 7.5 million tonnes compared to 9 million tonnes last year.

 

Q. Estimates show India's palm oil imports increased month-on-month in February. What is the reason?

A. Palm oil imports might have increased month-on-month because they might have not got clearance on the shipment front. But for the total oil year 2024-25, it will definitely be lower because in the first half of the year only it is expected to decrease further.

 

Q. Soybean prices have below minimum support price even after the government's record procurement. Why do you think prices of soybean are going down? What levels are you are expecting in the near-term?

A. Since one-and-a-half-years, soybean has not been performing well. The first reason is that domestic consumption of soymeal has decreased significantly as DDGS production has increased substantially in the last few years. Prices of DDGS are much cheaper than soymeal. For example, maize DDGS prices are around INR 15 per kg while soymeal prices are INR 28-INR 29 per kg. So, there is some sort of change happening in the feed concentrate, like for the poultry. If we crush soybean, we get 80% meal and 20% oil. If we see the meal market value, in terms of exports, we export around 2 million tonnes of meal every year. So, the major market is the domestic consumption and that is being taken away by the DDGS. That is one of the reasons why we are not seeing the prices moving for soymeal. DDGS production is impacting most of the meal prices including soymeal and mustard meal.

 

Another factor is the exports market for soymeal. Last year we exported around 2 million tonnes but this year the exports are also low because internationally soymeal prices have declined because of huge production and that is why India is not getting competitive on that front and so the prices have again deteriorated.

 

The government has procured about 14.7 million tonnes of soybean so far till Mar. 3, but prices haven't moved up. They are also selling soybean from kharif marketing season 2023-24, because they can't hold so much. So, this is also one of the factors putting unnecessary pressure on the prices. So, from here, prices will either stay flat at these levels or they may come down by another INR 200-INR 300 per 100 kg in near-term.

 

Q. Mustard prices are also under pressure due to rising arrivals. What is the production level you expect this year? When will the government start procuring the oilseed?

A. Production numbers will be around 11 million tonnes, which is lower than last year by half a million tonnes. This is due to drop in acreage by 3.5% this year. During the last weekend, there was rain and hailstorm in some mustard growing regions like Haryana and Rajasthan. So that might have impacted the new arrivals, but that would be very minuscule. Haryana government said that they will procure from Mar. 15. But from Rajasthan government, they haven't mentioned any particular date but yeah they'll soon start procuring.

 

Q. Will the National Mission on Edible Oils - Oil Palm approved by the government be helpful in the coming year?

A. This mission is quite good and supportive to build a sustainable source for consumption. We are already importing 67% of edible oil every year. However, benefits from this mission will not be seen soon, it will take time. I expect by 2027 this mission may show positive results. This is because palm trees have a gestation period of around four to five years. So, with that timeline, from 2027, we may see some domestic production of palm oil and we may gradually see some decline on the import side. But this year or till 2027, I see imports remain huge.

 

Q. About two years ago, various associations were demanding import duty on vegetable oils saying that it will help protect farmers in India. The government raised import duties in September. Do you think that has impacted or that has given the desired results for oilseed prices?

A. The impact on oilseed prices is not visible yet because after that also we are seeing soybean prices on the downtrend or if you see the other oilseeds, like groundnut prices, they are also on the downtrend this year. Only mustard prices are on the upside from previous year. So, it is not so fruitful. The government should adapt some other strategies also, apart from increasing import duties. Other factors should also be considered and not just import duty because this burden will go directly to the consumers.

 

Q. Do you think the government will meet its wheat procurement target of 31 million tonnes set for 2025-26 (Apr-Mar) given the high open market prices?

A. In Delhi, wheat prices have skyrocketed to INR 3,300 per 100 kg levels. But currently, if we see the same prices have corrected to INR 3,000 levels. And new crop arrivals have started in Madhya Pradesh and we are already seeing the price pressure to about INR 2,700-INR 2,800 levels. So that is one of the good signs for procurement. Because a few days' back, prices in open market sales scheme were also high, which led to a little bit of panic for everyone in the industry whether the government will be able to procure wheat in the upcoming year.

 

According to our estimates, the government would be able to procure around 25 million tonnes. That will also again depend on how much the price will crash in states like Rajasthan or Madhya Pradesh or Uttar Pradesh.

 

Rajasthan and Madhya Pradesh governments are providing a bonus over the minimum support price. So, the government will be able to procure a decent quantity from these states. As far as Uttar Pradesh is concerned, we need to see if the state government comes up with any bonus. In Uttar Pradesh, crop is sown a bit late and it usually arrives by April or mid-April. With prevailing temperature concerns, it is a bit doubtful what the output would be in Uttar Pradesh.

 

Q. What is your wheat production estimate for 2024-25 (Jul-Jun)?

A. We estimate wheat output at 104 million tonnes to 107 million tonnes for 2024-25, against our last year estimate of 106 million tonnes. As on date, the crop conditions are good and there is no adverse effect of the temperature. However, India Meteorological Department has predicted above normal temperatures from March to May. So, we are only concerned about the yields. The realistic picture can come about only in the first or second week of April.

 

Q. Do you think there is a need for India to import wheat after completion of the government's procurement?

A. If the government can procure 25 million tonnes, then they can comfortably manage food security schemes and open market sales as the requirement for such schemes is 23-24 million tonnes. Assuming the wheat stocks as on Mar. 31 will be around 11 million tonnes, higher than the buffer limit of 7.5 million tonnes. Adding this to the procurement of 25 million tonnes of wheat, the government would have 36 million tonnes. Even if they release 23-24 million tonnes (in 2025-26), it is a comfortable balance sheet. I don't see the government reducing 40% import duty immediately.

 

However, if we see any adverse impact of the weather driving the production numbers to somewhere near 100 or below 100 million tonnes level, maybe the government can come up with such policy decisions on the import side.

 

Q. Do you think the all-time high price is a new normal for wheat?

A. The government is seeing that there is no hue and cry over atta prices rising to INR 50 a kg. Two years ago, atta was INR 35-INR 40 a kg. So I think that should be the new normal going forward. This year, if you see, prices were INR 28-INR 30 a kg in Delhi market. And by the end of the season, if the government's open market sales scheme plays out well, this may bring prices within INR 3,200 and INR 3,300 per 100 kg.

 

Q. What is your outlook on maize output and do you see any risk to the summer and rabi crop?

A. We saw bumper production of about 24.5 million tonnes in the kharif season. In the rabi season, as per the government sowing data, the acreage is about 8.8% higher compared to last year, which is roughly around 2.37 million hectares. Yield in the rabi season is a bit higher compared to kharif season. Overall production is likely to be 38 million tonnes, which is higher than last year. Last year, production was lower during the kharif season because of irregular monsoon, but production during the rabi season was comparatively better.

 

But this year we expect normal maize crop throughout the three seasons. Ground reports from Bihar and West Bengal, the major producers, show that as of now the crop is doing very well and there is no impact on the yields. However, in the month of April, if the temperature crosses beyond 34 degrees Celsius, it will bring early maturity in the crops. In that case, crop size may get smaller or the grains may get a bit shriveled. However, given the higher area it would not lead to any concerning figure on the maize market this year.

 

Q. Do you think government would continue maize imports under the tariff rate quota this year?

A. It seems, the government may not import because if we see the current prices of domestic maize or since mid-January, they have been on the downward trend because of one factor, a huge crop in the kharif season. That is why the arrivals of the kharif crop lasted till January. In terms of demand, there has been a fall in demand as people have shifted to DDGS, a byproduct of ethanol production from maize, for poultry feed, which has kept prices on a downtrend and hence, we don't need to import because import prices are higher.

 

In the month of November or December, people imported maize from Myanmar; after that not much was imported. There is no deal even from Ukraine. We haven't seen that much of import this year, so I don't believe we need any imports of maize.

 

Q. How much of maize do you see going for ethanol? Will the allocation of maize for ethanol impact the market?

A. The government has allocated around 12.7 million tonnes of maize that should be crushed for ethanol. It is unlikely to impact the market as sentiment has changed after the government released FCI rice for ethanol at INR 22.50 per kg, as rice ethanol is better than the maize ethanol and that too they are getting at a subsidised rate of INR 20 to INR 30 per kg, so that is also one of the reasons which has kept the market silent till date. Otherwise, the prices would have moved. End

 

Edited by Ashish Shirke

 

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