 "<b>AGRI OUTLOOK</b> Weak prospects ahead for cotton, soybean")
Soybean production this season is a case of a happy story gone sour. Soybean sowing this season took off like a shot, on early monsoons and favourable soil moisture. Planting for this year is 12.2 million hectares, according to ministry of agriculture, up 14 per cent from 2012. A bumper crop was expected and around early August, there were expectations that soybean could test this year’s government of India announcement on a minimum support price (MSP) of Rs 2,560 a quintal, a trend unseen for many years.
Then came the twist!
Towards late August and early September, Madhya Pradesh, the soybean bowl of India, started receiving above normal rainfall, during a critical yield development stage. Excessive rains then spread into Maharashtra into September, affecting yields in the second largest producing state. The delayed monsoon this season resulted in rain coverage across all major soybean growing regions in central India during the harvesting phase.
The net result has been that, despite the 14 per cent increase in sowing this year, production per hectare has declined 16 per cent from 2012, to 837 kg a hectare, according to the Central Organisation for Oil Industry and Trade. Consequently, production this year is estimated at 10.2 million tonnes, down four per cent from the past year. Soybean is at its peak arrival pace from October to December, but this year from October 1 till October 22, arrivals totalled just 850,000 tonnes, down 47 per cent from the year-ago levels. This resulted in prices rallying five per cent in a matter of three days to Rs 3,700 a quintal, ex-factory Indore, on October 24.
Sharp price gains during peak harvest, after a 14 per cent increase in acreage, is the paradoxical situation this season. The erratic monsoons has not only reduced the yield, but also the quality.
Damage caused this season due to high moisture could result in bad quality soymeal and low oil yield on processing. Soybean’s price is derived from the value of its byproducts, soymeal and soyoil. If bad quality soymeal won’t find buyers and soyoil content is low, soybean won’t find buyers as well and the recent spike in price might not be justified. At best, this will be a year of wide price range for good and bad quality soybeans.
Another key kharif crop, cotton, is expected to see a bumper crop this year and has its own set of problems in terms of government of India policy on exports. The Cotton Association of India (CAI) estimates that even though late rains have delayed arrivals, the available moisture is likely to help increase yields.
CAI estimates the crop to increase seven per cent year-on-year and reach 38.1 million bales of 170 kg each, in the 2013-14 harvest period, up six per cent from 2012. With production this year estimated at 37-40 million bales and consumption at 27-28 million bales, it could leave 10-12 million of surplus cotton, of which almost 10 million could be easily exported. But, the mulling over a 10 per cent duty on exports and the withdrawal of export benefits under the focus market scheme for cotton and yarn from September 25 could scuttle the cotton export potential and is bearish for cotton prices.
Then came the twist!
Towards late August and early September, Madhya Pradesh, the soybean bowl of India, started receiving above normal rainfall, during a critical yield development stage. Excessive rains then spread into Maharashtra into September, affecting yields in the second largest producing state. The delayed monsoon this season resulted in rain coverage across all major soybean growing regions in central India during the harvesting phase.
The net result has been that, despite the 14 per cent increase in sowing this year, production per hectare has declined 16 per cent from 2012, to 837 kg a hectare, according to the Central Organisation for Oil Industry and Trade. Consequently, production this year is estimated at 10.2 million tonnes, down four per cent from the past year. Soybean is at its peak arrival pace from October to December, but this year from October 1 till October 22, arrivals totalled just 850,000 tonnes, down 47 per cent from the year-ago levels. This resulted in prices rallying five per cent in a matter of three days to Rs 3,700 a quintal, ex-factory Indore, on October 24.
Sharp price gains during peak harvest, after a 14 per cent increase in acreage, is the paradoxical situation this season. The erratic monsoons has not only reduced the yield, but also the quality.
Damage caused this season due to high moisture could result in bad quality soymeal and low oil yield on processing. Soybean’s price is derived from the value of its byproducts, soymeal and soyoil. If bad quality soymeal won’t find buyers and soyoil content is low, soybean won’t find buyers as well and the recent spike in price might not be justified. At best, this will be a year of wide price range for good and bad quality soybeans.
Another key kharif crop, cotton, is expected to see a bumper crop this year and has its own set of problems in terms of government of India policy on exports. The Cotton Association of India (CAI) estimates that even though late rains have delayed arrivals, the available moisture is likely to help increase yields.
CAI estimates the crop to increase seven per cent year-on-year and reach 38.1 million bales of 170 kg each, in the 2013-14 harvest period, up six per cent from 2012. With production this year estimated at 37-40 million bales and consumption at 27-28 million bales, it could leave 10-12 million of surplus cotton, of which almost 10 million could be easily exported. But, the mulling over a 10 per cent duty on exports and the withdrawal of export benefits under the focus market scheme for cotton and yarn from September 25 could scuttle the cotton export potential and is bearish for cotton prices.
The author is head, commodity research, Phillip Commodities India