The Hindu Business Line : Soya arrivals halve as farmers hold back stocks

New Delhi, Oct 14 Even as the country is poised to harvest yet another bumper crop of soyabean this year, market arrivals in Madhya Pradesh (MP) – the No. 1 producing State – are down by almost a half.

Most mandis from Indore, Dhar, Ujjain and Dewas to Mandsour, Pipariya, Bhopal and Sehore have since the start of this month reported cumulative sale volume declines ranging from 25-75 per cent over the corresponding period of last year.

MONSOON VAGARIES

“The arrivals are markedly low, whereas this is the period when harvesting is at its peak,” noted Mr Rajesh Agarwal, spokesperson of the Indore-based Soyabean Processors Association of India (SOPA).

The lower arrivals are partly due to staggered sowing followed by late rains in September, leading to harvesting delays and excessive moisture in the grain. But a more fundamental factor relates to the prevailing market uncertainty emanating from the global financial meltdown.

BUMPER CROP

The current year has seen a record 96 lakh hectares (lh) being planted under soyabean across the country. With prices touching unprecedented levels of Rs 2,600 a quintal during June-September and ruling at Rs 2,000-plus since January, farmers were enthused to bring in nearly eight lh additional area under the crop.

The sentiment was further bolstered by soyabean meal exports hitting an all-time-high of 4.9 million tonnes (mt) worth over Rs 7,300 crore during 2007-08 (October-September).

But the recent worldwide credit freeze and exit of investors from commodity markets has completely transformed the situation. Soybean for November delivery at the Chicago Board of Trade (CBOT) is now trading at $9.50 a bushel having plunging to as low as $8.81 a bushel on Monday – and way below the record $16.37 of July 3.

EXPORT PRICES DIP

The above trend is also reflected in the realisations from soyameal exports as well solvent oil sales. Currently, meal shipments for November-December are quoting at $280-285 a tonne free-on-board Kandla/Bedi, after averaging $374.35 in September, $484.73 in August and $ 492.69 in July.

At an export price of $280-285 a tonne, the corresponding cost of delivery at the rail-head closest to the ports would be Rs 13,800-14,000 a tonne. If one were to deduct around Rs 900 a tonne towards rail freight and loading/unloading from the extraction plant, the ex-factory realisation on soymeal would come to Rs 12,900-13,100 a tonne (say, Rs 13 a kg).

Likewise, solvent soya oil is selling at Rs 42.5-43 a kg ex-factory, against Rs 52.21 in September, Rs 55.07 in August and Rs 61.22 in July. Taking 18 kg of oil and 82 kg of meal for every quintal (100 kg) of soybean processed, the gross realisation for the extractor would then work out at about Rs 1,840 (1,066 from meal and 774 from oil).

“From this, you must also subtract about Rs 115 towards the processing costs, which covers the solvent (hexane), power, coal, labour and other overheads. Therefore, even without including interest, depreciation or profits, the maximum that we can pay for soyabean at today’s realisations is Rs 1,725 a quintal,” claimed Mr Agarwal.

Yellow soyabean is now fetching Rs 1,550-1,600 a quintal in auctions at Indore, net of the four per cent value-added tax. “The prices are obviously not up to the expectations of farmers. So, they (especially the bigger ones with holding capacity) are not bringing the produce into the market,” he added.

However, in the background of a bumper crop and the need to generate cash before Diwali (which falls in the month-end), there are limits to the quantity that can be held back. Complicating the scenario would be assembly elections in MP due on November 25, which may increase the pressures on the Government “to do something”.

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