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Hopes of normal monsoon and falling meal exports weighing on soyabean

As monsoon progresses over the Indian continent, most of the agri-commodities are trading under pressure due to anticipation of good crop in the next season. The main kharif oilseed, Soyabean, which is trading under a tight range of Rs 3,600-3,700 per 100 kg since last four months is feeling the pressure too.

There are reports of higher acreage under Soyabean in next season coupled with sign of falling meal exports from the country. Soybean prices were higher last season due to pick up in meal exports from the country mainly from Iran. However, due to US sanctions, India may not be able to export meal this season.

On the National Commodities and Derivative Exchange (NCDEX), Soyabean prices have surged over 21.5 per cent in three months, from the low of Rs 3,150 in October to the high of Rs 3,826 in January.

However, the prices then start to descend after January highs due to sufficient Soyabean stocks with the mills, increase in edible oil imports on lower prices coupled with improved mustard crop output in the country.

Sowing season approaching

Soybean is the largest oilseed crop in Kharif season. As farmers had good returns last year, there is a good chance that the area of Soyabean this season will increase up to 120 lakh hectares compared with 112 lakh hectares last year if monsoon distribution happens to be normal in Madhya Pradesh and Maharashtra, which account for close to 80 per cent of total Soyabean production in the country.

Soybean production last year (2018/19) according to the third advance estimate by the Ministry of Agriculture is 137.43 lakh tonnes (LT), 25 per cent higher than the previous year production and highest is the last five years. For the coming season, the production might be similar or more looking at higher acreage prospects. However, the United States Department of Agriculture (USDA), in its monthly report forecast output at 109 LT in 2019-20, down 5 per cent compared to the previous year.

As per Indian Meteorological Department (IMD), there is only 51 per cent chance of normal and above normal in its second long-range forecast predicting a normal Southwest Monsoon for 2019. Thus, major Soyabean producing states may face dry spell during the season may affect the productivity of Soyabean.

Soymeal exports down

According to the export data release by Solvent Extractors Association (SEA), exports of soymeal have fallen in the first two months of FY 2019-20 by 59 per cent to 59,300 tonnes compared with 144,300 tonnes last year same time. The drop in meal exports is due to decrease in exports to Iran on US sanctions. Iran was the largest export destination for Indian soymeal with close to 38 per cent of overall export volume.

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In case of soy oil, the imports have been higher during the first four months of 2019 despite higher crushing in the domestic market. India imported 9.48 LT of crude soyoil up by about 28.4 per cent compared with last year’s imports.

Outlook
Going forward, Soyabean prices are expected to trade under pressure in the coming months towards Rs 3,400 per 100 kg if the progress of monsoon is normal. Moreover, diminishing soymeal export demand and expectation of higher acreage may continue to pressurize prices as sowing season commencing.

In recent years, government-increasing minimum support prices and procuring directly from farmers to encourage them to plant more Soyabean. Last year, minimum support price (MSP) of Soyabean hiked by more than 11 per cent to Rs 3,390 per quintal and for 2019-20 season the prices may increase by another Rs 100 or so.

The seasonal index based on five years of price movement also shows that the prices will be trending lower during the next three months – June, July and August.

However, the prices may gain if there are any weather disturbances like prolonged dry spell in the central India. Moreover, any hike in exports sops for soymeal and increase in MSP will support prices in coming months.

Source: Economic Times