Global soybean and soymeal prices have spurted in the last two months due to dry weather in Brazil that is feared to affect production.
Soybean production in India this year will be lower than projections of about 105 lakh tonnes (lt) as the crop has suffered heavy damage in Madhya Pradesh, the hub of the soybean industry.
The crop has been affected in parts of Maharashtra too but details are awaited.
“The soybean crop has suffered extensive damage in major Madhya Pradesh growing regions of Indore, Dewas, Malwa and Ujjain. Rains in early September followed by a rise in the day temperature led to pest attacks on the crops,” said Davish Jain, Chairman, The Soybean Processors Association of India.
The rise in temperature led to the standing crop drying up at the pod filling stage and thus the crop production has been lost, he said.
According to SOPA, soybean production this year is estimated to be 104.55 lakh tonnes, but in view of the damage to Madhya Pradesh crop, it could be lower.
“The production could, however, be higher than last year. Damages have been reported to the crop in Madhya Pradesh and some parts of Maharashtra,” said a Solvent Extractors Association (SEA) official.
SOPA has pegged soybean production in Madhya Pradesh at 41.77 mt against 40.1 lakh tonnes last year and in Maharashtra at 45.44 mt compared with 39.41 mt last year.
Soybeans have begun arriving and data from Agricultural Produce Marketing Committee (APMC) markets show that during October 1-22, arrivals were 6.17 lakh tonnes (lt) against 6.82 lt last year.
Of this, arrivals in Madhya Pradesh were 3.1 lt versus 4.41 lt last year. In Maharashtra, 1.34 lt of soybeans have arrived against 1.18 lt last year and in Rajasthan, the arrivals have been put at 1.13 lt against 75,000 tonnes last year.
Besides this, small quantities of soybean are directly going to the soybean processing units as the Union Government has given the freedom to farmers to bypass the APMC and sell to any buyer of their choice. This has been facilitated by the passage of The Farming Produce Trade and Commerce (Promotion and Facilitation) Act, 2020 during the monsoon session of Parliament.
Affected soybean growers say that a virus attacked the crop within 24 hours of the rains in Madhya Pradesh.
“At least 75-80 percent of our crop has been affected. One fallout of the lower crop is that soybean prices at the auction are currently quoting at Rs 4,400 a quintal” said Anand Singh Anjana from Ujjain region in Madhya Pradesh.
Currently, soybean is quoting around Rs 3,800 against Rs 3,300 a quintal during the same time last year. At Sanwer and Indore APMCs, most of the trades have taken place at Rs 3,860-3,880 a quintal.
This is against the minimum support price (MSP) of Rs 3,880 a quintal fixed by the Union Government.
However, poor quality soybean is fetching as low as Rs 2,300 a quintal in Indore, while the best quality command nearly Rs 4,200.
On NCDEX, November soybean futures ended at Rs 4,310 a quintal and December at Rs 4,337 on October 23. These are for fair average quality soybeans.
SOPA’s Jain said farmers were getting as much as Rs 4,300-4,400 a quintal for delivering fair average quality (FAQ) soybeans directly to processing units.
“The MSP factor is a factor considered by the processing units. But farmers must appreciate the quality variations. Units are offering higher than market price since it saves expenditure and multiple handlings,” he said.
“In particular, beans that have black marks or are discoloured fetch lower prices even at the processing units,” Anjana said.
“Rates that farmers get for soybean depend on the quality of the beans. If the quality is bad, then lower prices are offered,” said Vijayendra Singh, who functions at the Indore APMC.
Though farmers have a good drainage system on their farms, heavy rains rendered them helpless.
“Indore and its surroundings received 50-inch rains within 48 hours. That was the main problem that affected the crop,” Vijayendra said.
SOPA’s Jain said the Dewas region received 13 inches of rain in a day, affecting farmers badly.
“The weather phenomenon was a repeat of last year’s problems, getting erupted in no time. No one imagined that the problem could scale up so severely,” he said.
Anjana said that rains and virus attack forced some farmers to burn their crop and clean their farms. Some farmers are buying quality soybean at Rs 4,400 for sowing next year.
Sowing of soybean, a Kharif oilseed crop, takes place in June every year after the South-West monsoon sets in.
“If farmers delay buying beans for seed purpose, they might have to pay a higher price closer to the sowing period,” he said.
During May and June, the period ahead of sowing, soybean prices peak to as high as Rs 7,000 due to demand and lack of stocks.
For processing units, it is a bitter-sweet situation. “The production costs will go up for soybean processing units as the Indian crop quality has been affected, the beans suffer discolouration and oil yields from beans are much lower,” said SOPA’s Jain.
This will mean that costs for producing soymeal, derived after soybean is crushed for oil, will be higher. Indian soymeal is offered in the global market around $465 (Rs 34,300) a tonne free alongside the ship at Gujarat ports.
This is higher than last year when they were offered at $439 (Rs 32,500). On Chicago Board of Trade, soymeal December contracts closed at $384.5 (Rs 28,400) a tonne.
Indian soymeal enjoys an advantage on three fronts. One, it is produced from the non-genetically modified crop. Two, the destination is nearer compared to Brazil or the US. Third, Indian exporters can offer consignments in smaller parcels such as 5,000 tonnes to global buyers.
The soybean processing industry sees relief in global prices increasing. “Prices are better than last year as the global market is supportive,” Jain said.
Global soybean and soymeal prices have spurted in the last two months due to dry weather in Brazil that is feared to affect production. The South American nations are the world’s largest producer of soybean this year. Its soybean output is about 130 mt.
Farmers in Argentina, the third-largest global producers, are not showing any interest to sell. This is adding to the woes of the buyers.
Thomas Mielke, Editor and Chief Executive Officer of trade journal Oil World, has projected a firm trend for soybean until the first half of next year as production of competing crops such as sunflower and rapeseed is also expected to be lower.
(Subramani Ra Mancombu is a journalist based in Chennai, who writes on topics in commodities and agriculture)Disclaimer: The views and investment tips expressed by investment expert on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.