Monsoon progress crucial to oilseeds sowing

Sluggish prices, carryover stocks may depress kharif, trade feels.

Ample carryover stocks, coupled with low domestic crushing due to cheap imports, may pull the oilseeds sowing area down by 10-15 per cent this kharif season, trade sources say.

A delay in monsoon rain has added to this. The overall sowing area was down by 50 per cent to 134,900 hectares (ha) as on June 18, as compared to 271,000 ha at the same time last year.

“During the past nine months, the price of oilseeds has been considerably below the expectations of farmers. The recent announcement of the minimum support price (MSP) was also a disappointment. Besides these two important factors, we must also look at the attractiveness of pulses. Most pulses require less water than oilseeds and are much more resistant to pests. So, farmers will switch to pulses and in some cases to cotton. Already, some switch has taken place to sugarcane,” said Dorab E Mistry, director of Godrej International.

Overall, this shift away from oilseeds will have only a small effect on world oilseeds supply and demand. But, this shift will have an effect on the price sentiment in the domestic market. Indian vegetable oil prices were too low and importers were sleeping, Mistry added.

“Recovery in sowing area is imminent but not fully. We are still apprehensive about rainfall. Since the monsoon rainfall also sets the trend for the rabi season, due to leftover soil moisture, the overall impact will be negative, if, the forecast of deficiency proves true, said Satyanarayan Agarwal, chairman of the Central Organisation for Oil Industry & Trade (COOIT), an apex body set up by the Ministry of Commerce.

During the earlier kharif season, a total area of 17.5 million ha was covered under nine major oilseeds, five per cent lower than the 18.4 million ha during the corresponding season of 2008-09. About two-thirds of oilseeds are produced in the kharif season, with the major crop being soybean and groundnut, while the balance one-third is produced in the rabi season, with mustard seed being the main crop.

Huge carryover stocks of various oilseeds would certainly encourage farmers to shift to other remunerative crops, including pulses and cotton, said Rajesh Agarwal, spokesperson of the Soybean Processors Association (Sopa). He forecast a five-seven per cent fall in soybean acreage during the current kharif season. Sopa estimated 9.5 million tonnes soybean output during the last kharif season. This year, the area may slip to 9 million ha, but output will depend upon the spread of the monsoon, said Agarwal.

According to trade sources, about eight million tonnes oilseeds is still uncrushed with farmers and stockists, sufficient to pull down the market sentiment and push farmers towards alternatives. Farmers and stockists are holding about three million tonnes of soybean and 2.5-3 mt of mustard seed. Plus, another two mt of other oilseeds.

Farmers held these stocks in anticipation of recovery in prices through the season. But, the zero customs duty on vegetable oil made imports cheaper.

The US Department of Agriculture (Usda) had, however, forecast India’s total oilseeds output at 34.9 mt in the 2010-11 oil year (October-September), up 3.2 mt over the 2009-10 production estimate of 31.7 mt, assuming a normal monsoon and favourable growing conditions. It also estimated total edible oil production in 2010-11 would rise by 13 per cent over the last year, at seven mt and oilmeal output to rise 13 per cent to 15.2 mt for 2010-11.

B V Mehta, executive director of the Solvent Extractors’ Association (SEA), a Mumbai-based trade body, says it is premature to forecast anything at present. Since the monsoon has just arrived in Maharashtra and sowing of major oilseeds takes place only by the end of June and continues until the first week of August, the overall trend will emerge only by the second or third week of July. Since monsoon forecast is normal, the sowing trend is likely to pick up in the coming days, with the progress of rainfall. It is too early to conclude when the season is just a week old, said Atul Chaturvedi, CEO of Adani Wilmar Ltd, a leader in the branded edible oil segment.

Siraj Choudhary, chief executive officer (refined oil) at Cargill India Ltd, feels carryover stocks of oilseeds will not change farmers’ sowing sentiment. The crop area will decline only if rainfall remains scanty or oddly distributed, he said.