Soya: High carryover stock may save the day for crushing industry

Cost fears The crushing industry is concerned about losing export competitiveness due to costlier domestic production

Good August rains, along with record carryover stock of soyabean from last year’s crop, may help ease pricing pressures for the crushing industry and boost exports.

Trade has estimated a carryover stock of 1.5-2 million tonnes, based on the crop size of 11.5 million tonnes in 2016-17. Higher carryover stock may help the crushing industry with availability of seeds, thereby containing a possible bullish price trend emanating from lower acreage.

A sluggish beginning of sowing in the ongoing kharif season caused loss of acreage. Weather uncertainty also hit the crop. This prompted experts to estimate lower soyabean production for 2017-18; however, initial estimates will take some time as rains continue to lash growing regions in several States.

Davish Jain, President, Soyabean Processors Association of India (SOPA), highlighted the key concerns troubling growers, traders and exporters.

Weather pattern

“The August rains came at a crucial time of plant growth. But concerns still remain. The acreage has already gone down and the weather pattern is not as good as it was last year. So production will take a hit. But the silver lining is that we will have a carryover stock of 1.5-2 million tonnes, which will not squeeze the availability of seeds for crushing,” he said.

The area coverage under soyabean, as on August 25, was down 7.3 per cent at 104.9 lakh hectares, compared to 113 lakh hectares at the same period last year. According to SOPA, arrivals of soyabean were at 74 lakh tonnes (lt) in October-July, up from 54.5 lt a year ago, while stocks with farmers are at 30.9 lt, up from 796,000 tonnes a year ago.

However, there is widespread concern among the industry players about losing export competitiveness due to costlier domestic production. According to sources, Indian soyameal is currently $30-50 per tonne costlier in the international market. Addressing the farmers’ concerns, the government increased MSP on soyabean for the 2017-18 crop year to ₹3,050/quintal from ₹2,775/quintal last year.

Further, while a reduction in sowing area will dent production, soyabean prices may not escalate thanks to a huge carryover stock. “Farmers always anticipate better prices. Several farmers are now holding last year’s stock. More than 2 million tonnes is being carried forward. This will offset the drop in production,” said Rajesh Agarwal, former president of SOPA.

According to Agarwal, excess availability will help crushing with better price parity. “The crushing industry is in a dire state. Many units are either not operational or running at lower capacity. Crushing couldn’t take place because of higher domestic prices and lower global market,” he added.

Angel Commodities, a brokerage house, noted that the most active soyabean futures contract for October delivery on NCDEX may have its largest weekly loss in more than 16 months due to weak physical demand on rising input costs.

[Source”CNBC”]