Soyabean surge on CBOT sows hopes of higher oilseed crop in India

Soyabean prices surged to a near seven-year high of $14.44 a bushel (₹3,875 a quintal) on the Chicago Board of Trade on Monday on excess rains in Brazil and dry weather in Argentina.

The rise in soyabean prices due to the problems in the South American nations — which make up nearly 50 per cent of global production — raises hopes of higher acreage under oilseeds during the ensuing Kharif season that begins in June.

According to Trading Economics website, soyabean has increased 9.55 per cent since the beginning of this year with six per cent of the gains coming in the past month.

In India, soyabean prices in Indore and Ujjain districts of Madhya Pradesh are ruling between ₹4,600 and ₹5,000 a quintal against the minimum support price of ₹3,880 fixed by the Centre.

On NCDEX, soyabean for delivery in May traded higher at ₹5,168 a quintal, up ₹34 from Monday.

Soya sown during Rabi

“Attractive prices for soyabean since the beginning of the season (October 2020-September 2021) encouraged Maharashtra farmers to grow soyabean as a Rabi crop this year,” said Solvent Extractors Association (SEA) Executive Director BV Mehta. Soyabean is a Kharif crop grown during June-September and harvested in October.

“Farmers are likely to expand the cultivation area of not just soyabean but all oilseeds this year due to the high prices. This will benefit the Government as well as growers,” said The Soyabean Processors Association of India (SOPA) Chairman Davish Jain.

According to the Solvent Extractors Association of India, soyabean prices are 38 per cent higher compared with the same period a year ago, while sunflower prices are up 43 per cent, mustard/rapeseed prices 41 per cent and groundnut by 8.78 per cent during the same period.

As regards cooking oil, refined sunflower oil prices have nearly doubled during the past year, soyabean oil by 47 per cent, groundnut oil by 25 per cent, rice bran oil by 58 per cent and refined, bleached and deodorised (RBD) palmolein by 57 per cent.

The US Department of Agriculture said that buyers are turning to Brazil where the harvest is underway. The South American nation is likely to produce 133 million tonnes (mt) of soyabean, up seven mt from last year.

Higher than MSP

Soyabean prices have also gained on strong demand from China but harvest in Brazil has been affected due to heavy rains in growing areas. On the other hand, continuous dry weather in Argentina is expected to cause stress in the crop and thus affect production.

In addition to soyabean, other oilseeds and oils are spiking on account of lower production in the respective crops. “Sunflower production is five mt lower in Ukraine,” said SEA’s Mehta.

Production of palm oil, which makes up two-thirds of India’s edible oil imports, was affected in Malaysia and Indonesia due to labour shortage following the emergence of the novel Coronavirus (COVID-19) pandemic. Workers from Myanmar and Indonesia, employed in the plantations, failed to report for work in view of the pandemic last year.

SOPA’s Jain said that the higher prices in the global market will result in higher revenue for oilseed processors and, in turn, result in better returns to farmers.

Soyabean prices have been ruling higher than MSP since the beginning of this season as the crop was affected by unseasonal rains in Madhya Pradesh, the hub of the oilseed crop. The weather also impacted the quality of the beans, which developed black spots due to viral infection.

“The other impact of the higher global prices for oilseeds and edible oils is that the Centre may not have to resort to the procurement of oilseed under the MSP regime,” Jain said. Usually, the Centre procures oilseeds, mainly copra and groundnut, when their prices rule below MSP as part of its procurement policy. “In view of the higher prices for soyabean, the area under the crop is expected to increase in Madhya Pradesh, Maharashtra, Rajasthan and Gujarat,” said Mehta.

Even crops under other oilseeds such as groundnut and sunflower would see a higher coverage, he said.

Import bill

Jain said that during the first 10 months of the current fiscal, the country could have spent at least ₹83,000 crore in importing edible oils. “We could spend a record amount to import edible oils despite a lower volume. This is because prices have increased sharply,” he said.

India’s imports about 15 mt of edible oils with the palm group of oils making nearly nine mt. “Our import bill is higher despite country-wide lockdown to tackle coronavirus and this could result in a similar situation we faced in pulses,” the SOPA Chairman said.

In 2015, prices of pulses topped ₹200 at retail outlets. It resulted in the Centre coming up with a special focus to increase the production of pulses. “Our production in pulses increased from 14 mt to 21 mt. Imports have not stopped depressing prices sometimes, but the higher production discourages imports,” Jain said.

The current high prices for oilseeds and oils could result in production rising sharply. A factor that encourages oilseed cultivation is the revision in MSP being carried out every year.

Since 2014-15, the MSP for oilseeds has been increased by between 30 per cent (groundnut) and 54 per cent (sunflower) till the current crop year ending June.

In view of the sharp spike in prices of edible oils, SEA has urged the Union Minister for Agriculture and Farmers’ Welfare Narendra S Tomar to immediately take up the promotion of oilseed production on a mission mode.

Soyameal prospects

Jain said soyabean farmers, in particular, stand to gain not only from higher prices for oil but also due to higher soyameal exports. “Soyameal exports will likely increase to 16 lakh tonnes this season from 8.6 lakh tonnes last season,” he said.

SEA data showed that soyameal is quoted at ₹40,500 a tonne free-alongside-ship currently, up 26 year-on-year.

Sunil Mukhati, a farmer near Indore in Madhya Pradesh, said farmers in his region would go for higher planting of soyabean this year. “However, we have to buy seeds since they were affected by fungus resulting in the black spot last year. We may have to pay a higher price for the seeds,” he said.

SEA’s Mehta said Brazils’ move for 100 per cent green fuel B-100 using soyabean could also push up prices higher. “Prices could rule firm until the end of March before beginning to cool down in April. They could drop in June-July to reasonable levels since it is also the period when palm oil production peaks,” he added.

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