"Soybean prices are too low," said a trader. "It cannot be sustained at these levels. There will be an unrest in the country...The government has to take some measures to keep farmers happy." Traders said farmers in the state of Madhya Pradesh, India's soybean bowl, had already begun demonstrating with demands that the government stick to its pre-election promise of guaranteeing a procurement price of Rs 8,450 per tonne.

India is set to export about two million tonnes of soymeal crushed from its winter crop of about five million tonnes to Asian countries, including Japan, Indonesia and South Korea, in the year beginning in October, they said. In the absence of Chinese demand for soymeal, prices for Indian soymeal are expected to drift lower from current levels of $178/$179 pertonne, C&F south-east Asia, for December shipment. India is also suffering from a slow start in the Indian export season due to rains and a change in farm financing, which has led its customers, including Japan and Indonesia, to South America to cover needs by the end of 1999, they added.

"Prices (for Indian meal) are going down. Demand is very, very sluggish," said another trader. "Japan bought a little, but I think they're through to December. Indonesia bought a little, yet they're also through up to December."

Reflecting a global oversupply of soybeans and a massive imports of vegetable oils into India, Indian soybean prices have dropped to well below Rs 8,000 per tonne, compared with around Rs 9,300-9,500 a year earlier. Prices were seen between Rs 7,800 and Rs 7,900 on Friday, after a small rebound on Thursday between Rs 7,500 and Rs 8,000.

On Thursday, the Soybean Processors Association of India (Sopa) said the state government was about to start buying the beans at the guaranteed price, withfinancial support of Rs 60 million from the national government. Traders in Singapore were sceptical if the plan would work.

The government had no infrastructure to buy soybeans, let alone warehouses, they said, while the budget would also be too small and only buy around 7,000 tonnes.