Fall in soymeal exports temporary, says Sopa

Talk of drastic reduction in India's soymeal exports to China on bird flu scare is 'over-hyped' and the situation will normalise soon, soy traders and industry officials said.

Rough estimates said that soymeal export orders of around 80,000 tonne to China have been cancelled in October-November due to the scare.

"These figures are largely exaggerated. Only four shipments of 13,000 tonne each have seen confirmed cancellations and the number has not been growing," Rajesh Agarwal, chairman, Soybean Processors Association of India, said.

India exported around 31,284 tonne of soymeal to China in September, the largest monthly quantity sold during the 2004-05 oil year.

"Soymeal exports to China could have touched a record high of over 100,000 tonne in October, had not the bird flu scare happened," Agarwal said. The October export figure will be known next week, he said.

Soymeal is primarily used as a compound livestock feed because of its high nutrient value. Killing of chickens in Southeast Asian countries due to bird flu scare has led to sharp drop in meal demand.

Soymeal is India's largest exported oilmeal and until September around 2 million tonne of the commodity were sold in Southeast Asian countries and the European Union. India also exports rapeseed, rice bran, and cottonseed meals. There could also be other reasons for China's action.

Traders said China's cancellation of India's soymeal orders could also be due to price disparity with other countries.

"Soymeal sold from India is costlier by $15 a tonne in comparison with Brazil and Argentina. Given the price-sensitive nature of Chinese buyers, this slight disparity could have lead to cancellation of orders," a city-based trader pointed out.

Despite the cancellations, Agarwal was of the view that re-negotiation in many cases is possible.

"Only those orders, which has been rejected at the destination point should be taken as final cancellations. It is quite possible that some of these orders will undergo a price re-negotiation," he said.

Also, the problem could be a short-lived one and demand for India soymeal from Southeast Asian countries might re-emerge soon.

"Chickens take around 45 days to mature and given the Chinese penchant for non-genetically modified Indian soymeal, we expect demand to rise soon," Prem Agarwal, managing director, Krishna Oil Extractors Ltd., said.

Traders also believe that cancellation figures are grossly miscalculated. Some exporters, who were in preliminary stage of negotiations with buyers, claimed their orders were cancelled even before negotiations were through.

"When there are no confirmed orders, how can they be treated as cancellations," asked another trader.

Soymeal rates have been falling sharply in the domestic markets on reports of heavy reduction in India's meal exports. Prices have dropped to around Rs 8,300 now from around Rs 8,700 per tonne in October (ex-factory). International soymeal rates too have dropped to around $195 a tonne from its peak of around $215 per tonne two months ago.

However, some traders were of the view that rates have now bottomed and any further reduction may not happen. Soy industry players are hopeful that meal exports to China and even to other traditional buyers will normalise in the coming few days.

"Given India's geographical proximity to China and other Southeast Asian countries, any sudden spurt in demand will have to met from here. This gives us hope that meal exports will normalise soon, Agarwal said.