<p>Nearly 2.5 million tonnes (mt) of soybean output is set to be released for crushing in the next two months, to mills currently operating at just 35-40 per cent of installed capacity.
Oil extraction units are currently avoiding building stocks of soybean, due to negative parity —every kg of oil produced on crushing the seed would mean, at present prices, a loss of up to Rs 1 in the domestic market.
The apex trade body in the edible oils sector, the Central Organization for Oil Industry & Trade (COOIT), says 23.5 per cent of last year’s soybean output is currently with farmers, stockists and oil extraction units. COOIT estimated soybean output at 10.6 million tonnes during the last season. Soybean is a kharif crop, sown with the first monsoon showers, for harvesting in September.
The sudden release of such a large quantity in the next two months is, however, unlikely to bring the price down, say analysts. For one, India is a huge edible oil importer; 55 per cent of the country’s demand is met through import from Indonesia, Malaysia and Argentina. Hence, release of the said quantity for crushing during June–July period is unlikely to create a supply glut for domestic consumers.
Two, the sowing area is expected to be a bit lower this season in the US and Brazil, the world’s two major producers. According to the US department of agriculture, the planted area in the US for 2012 is estimated at 73.9 million acres, one per cent lower than last year. And, crop forecasters estimate Brazil's soybean crop falling to 66.7 mt this year from the 68 mt forecast in February, due to drought.
“Although the soybean heldover quantity is fairly large, it would be released in the market in a gradual manner over two months,” said Rajesh Agrawal, spokesperson of the Indore-based The Soybean Processors Association of India.
He says farmers and stockists would release the heldover quantity only when the price of soybean declines or that of soy oil rises. In either situation, the parity would turn positive, to fetch some profit margin for oil extraction units. Data compiled by the Solvent Extractors’ Association of India (SEA) showed the seed price up 38 per cent to Rs 31,000 a tonne on May 18 from an average of Rs 22,495 a tonne in 2011. In Indore, the mandi auction price was in a range of Rs 3,300–3,400 a quintal. For plant delivery, it moved in a range of Rs 3,440-3,475 a quintal. Soymeal price (Kandla) was quoted at Rs 29,500 a tonne yesterday as compared to Rs 30,000–30,200 a tonne in the previous weak.
“Why would one buy soybean at this price to incur a loss?” asked Mehta. While exporters are pushing for oilmeal shipments to take advantage of the record depreciation in the rupee , importers are avoiding fresh purchase orders in anticipation of a recovery in the currency, which may help a price decline.