Soyabean needs a booster shot

Soyabean rules the global oilseed market, not just because of the sheer size of its output but also for its cultivation in both the hemispheres that ensures year-round supplies. It has multiple uses as food, feed, and fuel. The oil from soyabean is generally used for human consumption, but in recent years mandates and incentives have triggered its diversion for making biodiesel.

Since 2011-12, world soyabean output has been rising steadily to touch new highs, while Indian production has fluctuated due to vagaries of weather. For 2014-15, planting has been completed in North America and elsewhere and there is enormous expectation of world production reaching a new high of 300 million tonnes (mt). Traditionally, the world’s largest producer, the US, is widely expected to harvest a humongous soyabean crop of 103 million tonnes, according to USDA. Some private forecasts place the crop size even higher, closer to 110 million tonnes. Brazil (90 mt) and Argentina (54 mt) are two other major producers attempting to catch up with the US. China and India produce about 12 million tonnes each.

Given the massive supply surge anticipated, bean, meal and oil prices are already showing signs of weakness. Private forecasters see soyabean farm-gate prices collapsing by a fifth to below $9 a bushel (equivalent to $300 a tonne at origin). More availability at lower prices will encourage more bean crushing which, in turn, will expand meal and oil supplies, which could drag the entire oilseeds and oils complex down. The anticipated fall in bean and oil prices is, of course, great news for consumers and traditional importers such as China and India.

While developments around the world need to be monitored, weak onset and delayed rains at home are a cause for concern. Soyabean plantings are substantially lagging. Precipitation in central India over the last two weeks has encouraged growers to plant; but the final acreage number is anybody’s guess at this point in time. The general feeling in industry circles is that production would suffer, but quantifying it at the moment would be speculative.

For 2014-15, the government has retained the minimum support price for soyabean at ₹2,500 a quintal; but current prices are far higher at ₹3,700 a quintal. For the last few years, MSP has been notional as actual market prices ruled far above the support rate, a key reason being that aggregate processing capacity of 30 mt far exceeds the raw material availability. Soyabean growers have no doubt benefited and their holding capacity is now much better than before.

Presumably in anticipation of a shortfall in domestic production, the Centre has allowed de-oiled soyabean extracts to be imported duty-free. However, large-scale imports are a question mark as globally soya meal from genetically modified soyabean comprises over 80 per cent and there are conditions attached to importing such meal.

Weather uncertainties

Rising domestic demand and tightening supplies have meant soya meal exports from the country have begun to decline too. From 3.8 mt in fiscal 2011-12, total shipments fell to 3.4 mt the following year and then to 2.8 mt in 2013-14. China seems to have captured a part of the market vacated by India. Overall, weather uncertainties dog Indian soyabean production. While under normal circumstances, local prices would remain firm, huge supplies in the world market are sure to pressure the domestic market. A key issue for investigation is why Indian yields have stagnated at about 1,000 kg per hectare despite growers receiving remunerative prices.

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