Price fall fear prompts oilmeal forward sales

Anticipating a further fall in oilmeal prices, crushing units have started selling to foreign buyers via forward contracts, for delivery after December. By then, they believe, there would be a sharp jump in seed availability following the kharif crop harvest.

Data compiled by the apex trade body, The Solvent Extractors' Association (SEA) of India, showed the average price of soybean meal was down 20 per cent to $569 a tonne in September from $710 a tonne in May. The average price of rapeseed fell nine per cent to $237 a tonne in September from $261 a tonne in May.

This is a positive indication for oilmeal exporters, as they have been booking at today's prices for delivery of meal in future. Through this, crushing units would be able to compensate part of their loss from edible oil sales. Iran, the Gulf countries, East Asia and European countries are the major buyers of Indian oilmeal, for use as bird feed and animal feed.

"Oilmeal exporters have intensified selling in forward contracts for delivery after December, as they feel prices would decline further due to bumper soybean crops in the United States and other major producing regions," said Anil Agrawal, Director, Sanwaria Agro Oils.

Oilmeal export fell 43 per cent to 0.95 million tonnes (mt) in April-September, compared to 1.66 mt in the corresponding period last year. The prime reason was a plunge in export of soybean meal, by 87 per cent to 111,027 tonnes as against 873,481 tonnes in the same period last year. Rapeseed meal export had jumped to 572,000 tonnes from 418,000 tonnes.

B V Mehta, executive director of SEA, said the soybean crop was less than expected and this resulted in its high cost in local markets. "This led to total disparity for soybean meal in the international markets."

The Food and Agricultural Organization of the United Nations has forecast a bumper oilseed harvest globally, on favourable climatic conditions. The past two seasons' also had record harvests and global production is tentatively forecast to expand by another five per cent in 2014-15, possibly topping 535 million tonnes.

The increase would be almost entirely on account of soybean. With a current forecast of 311 mt, global production would outstrip the previous season's result by 10 per cent.

"Preliminary forecasts for 2014-15 suggest a further improvement in the global supply and demand balance. For meals-cakes, a sizable surplus in supplies could push global inventories to historical highs. This, along with likely improvements in stock-to-use ratios, suggests considerable scope for international meal prices to soften further. In addition, further downward pressure could arise from abundant global supplies of feedgrain," FAO said in its latest report.