Soybean sowing may remain muted this kharif season

Despite massive stock, bean prices at the benchmark Indore mandi are trading at Rs 3,978 a qtl as against Rs 3,403 a qtl in March

Soybean sowing might remain muted in the ensuing kharif season, due to a negative price arbitrage between sowing and harvesting months in the futures market and a massive carryover stock from the earlier season.

Soybean is sown with the onset of the monsoon rainfall in June, for harvesting in October. The price of any commodity for delivery in the far months is usually higher than the prevailing price for the near month and spot trade. However, the price for delivery in October on the National Commodity & Derivatives Exchange is quoted at Rs 3,455 a quintal, about 15 per cent lower than the prevailing Rs 3,930 a qtl for delivery in June. Indications are a subdued price through next year.

“The current prevailing price is speculative, as a huge quantity of uncrushed soybean is left with farmers, stockists and crushing mills. Crushing units have abstained from buying. Therefore, around 40 per cent of soybean is still available with industry stakeholders which might affect sowing this season. However, much would depend upon rainfall and their even distribution this monsoon season,” said Davish Jain, president, Prestige Agro-Tech Ltd, an Indore–based oil producer.

According to the Soybean Processors’ Association, stakeholders had 4.1 million tonnes of stock as of May 1, of 9.9 mt total output in the 2014 season. Since mills await a turnaround in crushing parity before commencing processing of the bean, and realisation from refined soya oil and meal is inadequate to make the business profitable, edible oil mills are staying away from fresh buying.

“Mills are awaiting a recovery in oil prices to make soybean crushing worthwhile. So, with five to 10 per cent variation, sowing might get affected this year,” said B V Mehta, executive director, the Solvent Extractors’ Association.

Despite the massive stock, bean prices at the benchmark Indore mandi are trading at Rs 3,978 a qtl as against Rs 3,403 a qtl in March. Jain senses speculators’ role in the price rally as refined soy oil showed hardly any rise in the same period, to trade range-bound at Rs 6,017 a qtl.

“Farmers did not get the benefit of high soybean prices to encourage them to bring additional area this season. Traders and aggregators are reaping all benefits of high soybean prices. If farmers have a choice, they will shift to other crops,” said Satyanarayan Agarwal, advisor, Central Organisation for Oil Industry & Trade.