Soybean prices have fallen sharply to trade below the government's Minimum Support Price (MSP) in major wholesale markets across the country, due to a surge in arrivals during the ongoing peak harvesting season.
Data compiled by government-owned web portal Agmarknet says soybean in Indore was quoted at Rs 2,711 a quintal for the week ended October 31, down 5.7 per cent from the earlier week and 43.5 per cent from the corresponding period last year. For near-month delivery, it is trading at Rs 2,822 a quintal on the National Commodity & Derivatives Exchange (NCDEX).
Normally, the government offers to purchase cereals and other agri commodities at MSP when the market price falls below this benchmark. Soybean's MSP is Rs 2,850 a quintal, in addition to a Rs 200 bonus for farmers to encourage sowing.
"Soybean futures are expected to trade sideways, as new season arrivals and subdued physical demand is exterting pressure on prices. There are reports that the government is expected to step in for procurement in Maharashtra and Rajasthan to help farmers," said Ritesh Kumar Sahu, research analyst at Angel Commodities Broking.
Meanwhile, encouraged by an increase in import duty, coupled with the low soybean price, oil mills are crushing more soybean this year. "The increase in import duty on edible oils has had a positive effect on capacity utilisation of our refining facilities across India. This is especially seen in palm oil refining, where refining volumes have risen 35-40 per cent in recent months. This is primarily due to a major shift from import of RBD (refined bleached deodorised) palmolein which does not require further processing to CPO (crude palm oil), which needs to undergo processing and refining at our facilities.
We expect RBD palmolein import to drop further, with a corresponding increase in import of CPO. We estimate RBD palmolein import to drop 40-50 per cent from the previous year, at the cost of CPO," said Dinesh Shahra, managing director, Ruchi Soya Industries.
By Agmarknet data, soybean arrivals across the country were 1.09 million tonnes in October, compared to 1.04 million tonnes in the comparable month last year. The Union Ministry of Agriculture forecast India's output at 12.21 million tonnes in its First Advance Estimate, issued on September 22, compared to 13.79 million tonnes the previous year. The industry, however, estimates India's total bean output at eight mt this year.
"India's (annual) consumption stands at five million tonnes. Additionally, 1.2 million tonnes are needed for re-sowing. So, domestic consumption stands at less than 6.5 million tonnes. Unless exports are encouraged, India would have 1.5 million tonnes of carryover stock for the next season," said D N Pathak, executive director, Soybean Processors Association.