Soya and its derivative products are valued more in terms of human consumption and higher margins to the cultivating farmers in India. India stands fifth in the production of soyabean, next to US, Brazil, Argentina, and China. During the crop year 1999-00 (Oct-Sep), the soyabean production in India is around 52 lakh tons.

Of the total production, states like Madhya Pradesh (MP), Rajasthan, Gujarat constitutes the major portion, with MP contributing 80% of the total output with the cultivated area of around 4.5 million hectares.

India being a major producer of soya and its products, domestically it would face great difficulty in enhancing more soyabean production in the years to come. The primary reasons for this pause in expansion of the acerage of the crop are low market price of the soyabean & its derivatives and poor productivity.

Out of 52 lakh tonnes total bean production, 45 lakh tonnes of beans are processed to produce 9 lakh tonnes of soya oil (conversion ratio: 5 tonnes of soyabean gives 1 tonne of soyaoil). After the extraction of the oil, 36 lakh tons of soyameal is produced from the residue (Conversion factor: 5 tonnes of bean gives 4 tonnes of soyameal).

India is producing the meal, which have good growth potential in the domestic consumption and have high demanding export market. The soyameal has its users in the Poultry and Livestock industry, dairy and cattle feed, and in aquafeed segments. Of the total meal produce of 36 lakh tonnes, 12 lakh tonnes usage is confined to the poultry, 1.2 lakhs for dairy and cattle feed and the remaining production for the aquafeed segment.

The price of the soya and its derivatives depends on the domestic crop output, global demand & supply scenario, and international prices. The farmers in India are provided with low returns, which make them to shift to other alternate crops like castor and cotton. The minimal return is due to the high cost of production and low realization from the output.

The soyabean productivity in India is less than one ton per hectare (ranges between 900 - 1000 kg). If we compare the yield factor between global average and India, the productivity for the world stands at 2.2 tonnes per hectare, much higher than the Indian soyabean yield of less than 1 ton per hectare.

The second aspect is the cheaper imported soyabean due to the surplus scenario prevailing in the international markets. The third and the most significant factor are the availability of the substitutes. The declining palm oil prices had drastically affected the demand for the soya oil in the vanaspathi-manufacturing segment.

Even hike in import duty on oil and oilseeds did not materialize to support the growers in the country. The next comes the crushing units in India, which are closing down due to the low margins in continuing it. The crushing units are heavily burdened by the overheads due to the low capacity utilisation.

At present, the crushing units are operating at 40% capacity, and low oil prices are pressurising the crusher's profit margin. The high raw material cost, unrealistic minimum support prices, and the increasing import duties are adding more trouble to the Indian crushing industry and oil seed imports.On the export front, Indian soyameal shares a prominent position in the Asian, South East Asian and Middle East countries. The demand for soyameal in the poultry and cattle feed segment is growing consistently in the recent years.

India's soyameal exports to Thailand contribute 12% to its total meal imports. The soyameal exports are around 1,59,44 metric tonnes as on April 2000 to the south Asia and Far East countries. Indonesia and Korean market is the major destination for the Indian soyameal.

However, the Indian exports are becoming uncompetitive due to the higher prices as compared to other prices. The minimum support price for soyabean in India is around Rs 8,450 per ton (ie around $188 per tonne @ INR 45.00) whereas the Argentina's soyabean is priced at $180 per ton, as it is considered to have a better quality than the Indian bean in the international market.

The lack of the market orientation in the domestic market is causing problems to price determination. The surplus scenario in the global market would further lead to the decline in the international prices, which would affect the Indian soyameal exports growth.

Indian soyameal exports have lost their market share in countries like Korea, China, and Indonesia. The higher cost of production is blocking the exporters from pricing its exports competitively. The posing question industry is facing is that, Are Indian soya-growing farmers, importers and exporters are losing their position in the domestic front and in the export market?

The recent initiative taken up by the American Soyabean Association to create awareness about the usage or application of soya in the Indian market raises several questions. The primary objective is to create demand in the domestic market so as to increase the domestic consumption. If consumption in Indian market goes up, then export growth will be affected if it is not supported by the increase in domestic production. This scenario will lead to the erosion of Indian export market share, and pave way for the US soyabean to dominate the export market, as it has the power to price its exports competitively.

The Indian farmers are disappointed by the lower prices of soya in the market, and would be looking for a shift into other profitable crop cultivation. The government's approach for protecting the farmers by providing higher minimum support price cannot withstand for a longer period. And the domestic crushing industry would not be interested in buying at a higher price when the international prices are competitively priced. The higher support prices in the domestic market may lead to increased imports due to the commercial demand at cheaper international prices and burdening the import bill of the exchequer, as effect of increase in import duty does not have any relevance to boost the domestic prices.

Also the availability of cheaper substitutes would worsen the situation for soyabean growers. To avoid the panic situation that would affect the Indian oil and oilseeds industry, the initiative has to be taken in various fronts. The foremost step is improving the productivity of the soyabean to the international standards so that farmer is provided with the higher monetary returns.

The low cost of production will lead to competitive pricing of the exports in the international market by Indian soyameal exporters. The better quality of the soyabean, which is highly enriched with protein content, will provide the Indian exporters the competitive edge over the international players.Technological innovation would be a better solution rather to provide a short-term recurring remedy to the stagnant domestic market.

Source: CommodityIndia.com