Soybean is the most popular and the largest produced oilseed in the world. It constitutes around 55% of the total world production of oilseeds and figures around 220-235 million tonne. The major producing countries of soybean are the US, Brazil, Argentina, China and India.

The US is the world leader in soybean production. World production of soybean for 2008-09 is projected at 224.10 million tonne, up by 1.47% as compared to 220.86 million tonne in 2007-08. The US accounts for 34% of world soybean production, while Brazil accounts 27%, Argentina 20%, China 7% and India contributes only 4%. World soybean ending stocks for 2008-09 are projected at 49.87 million tonne, down 6.28 % from 53.21 million tonne in 2007-08. The major importers of soybean in world are China and European Union.

Domestic scenario

India is the fifth largest soybean producing country in the world after the US, Brazil, Argentina, and China. India harvested about 89 lakh tonne of soybean this year against the world annual production of 2,240 lakh tonne. Soybean is the third largest oilseed crop in India next only to groundnut and rape/mustard seed.

It accounts for 25% of the total oilseeds produced in the country in a year. It contributes about 13.3 lakh tonne of oil (about 16%) out of 82 lakh tonne of vegetable oil currently produced in the country.

Soybean is sown in June-July, i.e. it is a kharif crop. The harvesting of soybean in India commences around September and October. It is highly dependent on rain and a change in the rainfall pattern affects the production of soybean.

The average size of soybean farm in our country is less than 2 hectares. The productivity is one third of the US or Brazilian farms. Indian soybean farmers are competing with the most efficient oil seed farmers in the world.

Major producing states

Madhya Pradesh is known as the soybean bowl of India, contributing 59% of the country’s soybean production, followed by Maharashtra with 29% contribution and Rajasthan with a 6% contribution. Andhra Pradesh, Karnataka, Chattisgarh and other parts of India also produce the bean in small quantities. The total production for the year 2008-09 is estimated at 89 lakh tonne, down around 6% from 94.60 lakh tonne in the 2007-2008.

Vegetable oil production & consumption

Domestic vegetable oil production is about 82 lakh tonne, which is not sufficient to meet domestic requirement. 40%-45% of the local demand of India has to be met by imports. Soybean and mustard seed oil are the major contributors in the total production, which accounts for about 42% of total production.

India’s population is currently estimated at 1.15 billion and it is growing at the rate of 1.8% per annum. India consumes around 12.5-13.0 million tonne of vegetable oil per annum. India’s per capita consumption of edible oil was 12.78 kg/annum in the 2008-09, up 1.38 kg as compared to 11.40 kg/annum previous year due to cheaper availability of edible oil and increasing per capita income, but it is still significantly lower as compared to developed countries.

A large gap in consumption among sections of the population exists in India. The top 10% of the population consumes over 20 kg per capita and the bottom 30% consumes less than 5 kg per capita (this is due to a lack of purchasing power). Palm oil and soy oil account for 37% and 18% of India’s total edible oil consumption respectively.

Current scenario

As per Solvent Extractors Association of India, imports of vegetable oil surged to 6.59 lakh metric tonne in April 2009, up 113% from 3.10 lakh metric tonne in April 2008. During the first 6 month (November 2008 to April 2009) of oil marketing year import of vegetable oil was 40.94 lakh metric tonne, up 82.5% from 22.44 lakh metric tonne during the same period last year. Palm oil and soybean oil account about 90% of total import of vegetable oil during the 6 month (November 2008-April 2009).

Vegetable oil import increased sharply higher due to fall in prices of edible oil worldwide and zero import duty encouraged the vegetable oil importers. Importers/traders imported oils in huge quantity in anticipation that the government may re-impose the import duty about 20% from zero per cent and could be building up stocks with a view to making a quick profit. India is dependent on imports for meeting nearly half of its edible oil demand.

The surge in edible oil consumption was due to increased purchasing power of the middle class, which happened mainly due to the removal of import duty. India has been the biggest driver of consumption growth in this year. After the removal of import duty, we can state that the Indian vegetable oil market integrated with the world market.

From November 2008 to October 2008, India imported 56.08 lakh metric tonne of edible oil, up 18.95% as compared to 47.15 lakh tonne during the same period last year. Palm oil and soybean oil account 85.64 % of total import of vegetable oil. India imported mainly palm oil which had a 72% market share of the total imported vegetable oil this year. The market share of palm is very high owing to lower prices of palm oil on account of higher stocks in Malaysia and Indonesia.

Price analysis and outlook

As per latest USDA’s monthly report, US ending stock of soybean for 2008-09 was lower at 110 million bushels as compared to 130 million bushels last month. This is the lowest stock number since 1977. Ending stock for new crop 2009-2010 were in line with trade expectations at 210 million bushels compared to 230 million bushels last month. World ending stock of soybean for 2008-09 came at 41.85 million tonne versus 42.55 million tonne last month.

CBOT soybean prices surged about 42% during the period of November 2008 to May 2009 (November’s low was $ 8.40/bushel, whereas May’s high was $ 11.90/bushel) on account of lower ending stocks of soybean.

NCDEX soybean prices surged 86% during the period of November 2008 to May 2009 (November’s low was Rs 1517/quintal, whereas May’s high was Rs 2824/quintal) on account of the sharp fall of Argentina’s soybean production estimates and lower global ending stock of soybean.

Indian soybean production estimates was revised lower to 89 lakh tonne, much below the initial estimates of 100.8 lakh tonne this year. It is down by 5.92% as compared to 94.60 lakh tonne last year. However, prices fell slightly during the past couple of weeks due to lower export demand of soy meal due to poor demand from the global livestock industry and the impact of the global recession.

As per the Solvent Extractors Association of India, export of domestic soy meal in the first two months of the financial year (April to May 2009), was at 4.17 lakh metric tonne, down 63.38%, as compared to 11.39 lakh metric tonne over the corresponding period last year. Prices of soybean are driven by soy meal because after the crushing of soybean, the ratio of soy meal and oil contents is 82:18 respectively.

In the coming month, prices are expected to move northward due to the lower stock of soybean and a firm overseas market. Soybean prices could touch Rs 2,830-2,950 levels on the high side and a support is seen at 2,500-2,450 levels.

The author is associate director (commodities and currency) Angel Commodities