October 20, 2021
India's soybean prices spike in January-September 2021; production to increase this year
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The first nine months of 2021 were very sensational for India's soy complex market.
Due to the lower production of soybeans, prices of soybeans and soybean meal skyrocketed and almost doubled. Prices of other oilseed meals also went up accordingly.
However, Indian poultry feed producers were losing heavily due to the increase in feed costs. As such, the government attempted to regulate online trading of soy complex.
Poultry and feed related associations like Compound Livestock Feed Manufacturers of India (CLFMA) of India, All India Poultry Breeders Association and Poultry Federation of India met with central government officials to convince them to allow the import of genetically modified (GM) soybean meal. This was permitted only until October 31 this year to avoid adverse effects on new soybean crop prices. Around 700,000 tonnes are expected to be imported from various sources.
Meanwhile, the Soybean Processors Association of India (SOPA) released its first estimate on October 10, 2021. Every year, the organisation employs an agency from the private sector to collect primary data about soybean plantings, yield, quality and production.
SOPA estimated that soybean production this year will be 14% higher – at 11.89mmt as compared to 10.45mmt last year. The total area under soybean farming went up from 11.84 million hectares last year to 12.37 million hectares this year.
The soybean yield is also up to 991kg per hectare as compared to 883kg in 2020. Madhya Pradesh, Maharashtra and Rajasthan are major soybean-producing states in India and contributes almost 90% of the total production (mainly in the central part of India).
Yield per state will vary from 762kg to 1102kg per hectare. The Ministry of Agriculture’s area estimate is 12.37 million hectares.
There are increased arrivals of new soybean crops, as harvesting has started in Madhya Pradesh and other major growing states, potentially putting pressure on prices. The increase in imports of soybean meal and a better supply outlook of domestic soybean for this season will also keep prices down.
The Indian government has decided to impose a stock limit on edible oil and oilseeds to keep a check on prices and speculations, as well as taming market sentiments. However, export prospects in the next three months are not so positive due to the higher prices of Indian soybean meal.
In another development, NCDEX soybean futures extended their losses due to the surging arrival of new soybean crops. The expectation of an advancement of harvesting activities due to drier weather conditions in central India also weighed on market sentiments.
NCDEX soybean futures for delivery in November 2021 came down by 3.28% in value to ₹53,900 (US$718.76) per tonne. Furthermore, about 800,000 bags recently arrived in major growing states as compared to 500,000 bags in the previous week. Soybean prices were at ₹46,000 (US$613.55) per tonne at the Indore market. Weekly arrivals in October are similar to last year's arrivals.
India's soymeal free on board (FOB) price was US$620 per tonne with a premium of around US$200 over soybean meal from Argentina.
The soybean meal landed cost was at ₹42,100 (US$561.49) per tonne compared to local prices of ₹49,700 (US$662.85) per tonne. The soybean domestic crush margin is favourable with higher meal and oil prices. The crush margin is likely to remain positive due to an expected decrease in soybean prices.
Following the announcement of imports of soybean meal, prices came down from ₹80,750 (US$1,076.88) per tonne in August to ₹49,000-50,000 (US$653.46-666.80) per tonne in October. Prices are extending weakness, making lower highs and lows from August 2021.
Going forward, soybean meal prices are likely to hold below the resistance level of ₹50,000 affecting any recovery and extend weakness towards ₹40,000 (US$533.44) in the coming trading weeks.
NCDEX soybean prices for November 2021 have traded on a weak note before settling at ₹53,850 (US$718.14) per tonne. Prices will continue to show a downward trend. Additionally, prices are likely to vary between ₹51,000 (US$680.14) to ₹56,000 (US$746.82) per tonne in the coming month.
Due to local festivals in the first week of November 2021, demand for poultry meat is lower by 20 to 30%.
Poultry integrators reduce their production accordingly, adjusting to a monthly production of 256 million broilers. Production is expected to rise to the level of 320 million broilers from the second week of November 2021.
As such, demand for soybean meal will also increase in the coming days.
- Dr. Dinesh T. Bhosale
The print version of this article appears in LIVESTOCK & FFED Business November issue.