Soybean crushing capacity declines to 40%

Finding soybean crushing a non-profitable business, a majority of small and medium oil extraction units have shut shop while larger ones have reduced their capacity tremendously.

According to an estimate by the Indore-based Soybean Processors Association (SOPA), total crushing capacity has been reduced to less than 40 per cent as crushers are currently facing shortage of raw materials supply from farmers and stockholders.

Considering bean prices at Rs 2,350 per quintal, total realisation for crushers comes to around Rs 24,846 per tonne as against the direct accumulative procurement cost of oil, meal and oilcake at Rs 24,900 per tonne. A tonne of bean processing fetches 800 kgs of meals and cake in addition to 180 kgs of oil, while the bean crushing cost comes to around Rs 800-900 per tonne. Today, soy extraction (meal) in ex-Indore mandi is quoted at Rs 20,900 per tonne. With about 15,000 oil mills, 600 solvent extraction units, 230 vanaspati plants and over 500 refineries existing in the domestic oilseed processing sector last year, about 25 per cent have closed down because of the non-availability of raw material.

Another 10-15 per cent are on the brink of closure. The industry estimates that the remaining oil extraction units would be able to crush only 55 - 58 lakh tonnes this year as against 88 lakh tonnes crushed during last season.

The industry fears that soy oil prices may increase while bean prices may decline in the weeks to come. SOPA coordinator and spokesperson Rajesh Agarwal said that farmers are holding their bean output in anticipation of rising global demand. But, looking at global excessive supplies and cheap imports, the price upsurge is highly unlikely, he added. Last year, India recorded a total soybean production of 98.9 lakh tonnes which is likely to decline to 90 per cent this year on unfavourable monsoon and lower yield.

Unlike other oilseed crops, soybean prices are currently quoted at Rs 2,350 per quintal, well above the minimum support price (MSP) of Rs 1,390 per quintal. Still farmers and stockists are holding their stocks. But, since global supplies are smooth, chances for price rise are very thin, said B V Mehta, executive director of the Solvent Extractors’ Association (SEA). Indian players are importing cheaper crude edible oil for blending with main oils like palm, soybean and sunflower. This is restraining edible oil prices to increase in the domestic market, he added.

Soybean prices remained volatile in the last one month ending March 7. In the first fortnight, the commodity plunged heavily but recovered in the second to trade with a monthly decline of 4 per cent.

Globally, a Rabobank estimates soybean plantings at 17 million hectare (ha) in 2008-09, slightly higher than last season’s 16.6 million ha. In the US, farmers are expected to increase plantings in the spring which will ease any global supplies concerns, particularly if livestock feed-demand continues to deteriorate. Acreage area under soybean in Brazil is estimated 0.8 per cent higher than the last year’s area at 21.5 million ha.