Soybean prices set to rise on low output

A section of traders sees a price reversal on a likely cut in CVD

The soybean production in India is likely to drop by nearly 25 per cent, owing to erratic rains, leading to a rise in the prices of the bean.

However, a section of the traders believe the government is mulling slashing 4 per cent countervailing duty (CVD) on soybean oil imports, which would lead to a rise in imports and offset the rising prices.

The spot soybean prices on August 21 were down at Rs 1,253 a quintal from Rs 1,266 a quintal on August 1. The prices of soybean September contracts too were bearish at Rs 1,283 a quintal from Rs 1,314 a quintal during the same period.

The prices have slumped following speculations over the government doing away with the CVD on soybean oil imports.

Waterlogging after the floods in Madhya Pradesh and Maharashtra, the two key soybean-growing states, has affected the crop with water-borne diseases and will lead to a fall in output, opine a section of the traders.

"The soybean prices will be bullish hovering around Rs 1,315 a quintal in the days to come. The soybean oil prices too will shoot up to Rs 462 per 10 kg from the existing Rs 432 per 10 kg," said Naveen Mathur, head, commodities operation, Religare.

However, Rajesh Agarwal, chairman, Soybean Producers Association of India(SOPA), is confident of a normal crop this year. "Crop damage takes place every year, sometimes owing to waterlogging and at other times because of droughts.

A clear picture would emerge by the end of September," he added. Mr Agarwal is doubtful of any major impact on prices and consumption on the government's likely move to rationalise duties.

Soybean oil currently attracts an import duty of 45 per cent in addition to a CVD of 4 per cent. The bulk of the crop is used for extraction of soybean oil, while a very small proportion of soybean is used for human consumption in food.

Madhya Pradesh leads in soybean production with an output of 3.335 mt, about 54 per cent of the total Indian output at 6.126 mt. Maharashtra with an output of 1.963 mt and Rajasthan with an output of 0.491 mt are the other major soybean producing states. The country's consumption during the last soybean year (October 2004 to September 2005) was 8 mt.

India imported about 2 mt of soybean oil last year. The imports between October 2005 and July 2006 were 1.2 mt and they are expected to cross the last year's figures by the end of September.

The USA is the major producer of soybean and ranks first in world, followed by Brazil, Argentina, China and India.