Price Woes: Bean Prices below MSP even ahead of sowing

According to Davish Jain, chairman of the Indore-based Soyabean Processors Association of India, the industry is in no position to pay higher prices today.

Written by Harish Damodaran | New Delhi | Published:June 15, 2017 2:28 am
indian farmers, indian monsoon, Guindian commodities, gujarat, gujarat farmer, gujarat groundnut farmer, gujarat soyabean, soyabean price, india news, latest news By comparison, the gross revenues at October 2015 meal and oil realisations would have been Rs 3,900, corresponding to a mandi price of Rs 3,550 per quintal for soyabean.

Few farmers have met the fate that the ones growing soyabean — a crop which was planted in almost 11.5 million hectares during the last kharif season — have. In October-November, while harvesting was on, soyabean quoted at Rs 2,800-2,900 per quintal in Madhya Pradesh’s main Indore market. This was below the Rs 3,600-3,700 levels during the same period of the previous year.

But what is worse is how things have panned out subsequently.

Currently — when the new kharif sowing season has started and prices ought to be higher than during harvest time — soyabean is trading in Indore at Rs 2,750 per quintal. It is selling even lower, at Rs 2,500-2,600 in Maharashtra’s markets such as Akola, Amravati, Nanded and Nagpur. These are way below the Centre’s minimum support price (MSP, inclusive of bonus) of Rs 2,775 per quintal for 2016-17 and the Rs 2,850 rate recommended by the Commission for Agricultural Costs and Prices for the current season (which has apparently been accepted).

The above phenomenon of prices falling below MSP — that too, ahead of the sowing season — has never been observed in soyabean. Market prices have rarely ruled below the MSP, and certainly never at this time of the year when supplies would be drying out.

At current prices, farmers have obviously little incentive to plant soyabean. Nor are buyers — be it traders or processors — seemingly in any mood to pay more. The traders who had bought during the last harvest season — or even farmers who deferred sales expecting prices to move up in the off-season — would not have recovered even their capital, leave alone earning any return on their stocked produce. Is there any way of motivating farmers to sow or the trade to buy this time?

According to Davish Jain, chairman of the Indore-based Soyabean Processors Association of India, the industry is in no position to pay higher prices today. For every quintal (100 kg) of soyabean crushed, processors recover roughly 18 kg of crude oil. The balance 82 kg comprises protein-rich de-oiled cake and other solid extractions, also called “meal”. Ex-factory meal prices are at present around Rs 23,500 per tonne, while crude soyabean solvent oil is fetching Rs 59,500 per tonne. The gross realisation from processing a quintal of soyabean would, therefore, be below even Rs 3,000.

If one deducts from this roughly Rs 160 per quintal of processing cost — for coal, solvent (hexane), power, contract handling labour, wages/salaries, financial charges and other overheads — and another Rs 150 towards transport and mandi-level expenses (market fee, entry tax, arhthia or middleman commission, etc), the “parity price” for soyabean would hardly work out to Rs 2,700 per quintal. And that’s the ruling price at the mandis, too.

Since soya-meal is mostly exported, realisations from it cannot rise beyond a point. Given global prices — plus the rupee appreciating and the currencies of competitors such as Brazil and Argentina depreciating — it would be too much to expect ex-factory meal realisations to be anywhere close to the Rs 36,000-37,000 per tonne levels just over a year ago. That leaves the only option of boosting realisations from oil.

“This can be done by hiking the basic import duty on crude de-gummed soyabean oil from the existing 12.5 per cent to 37.5 per cent and that on refined oil from 20 per cent to 45 per cent. We can do it because 45 per cent is the bound tariff rate that India has committed under the World Trade Organization negotiations. Raising the duty to that permitted level will help both the domestic industry and our farmers in these troubled times,” said Jain.

Out of the 114.78 lakh hectares (lh) area planted to soyabean in the 2016-17 kharif season, 54.01 lh was accounted for by MP, followed by Maharashtra (39.79 lh) and Rajasthan (10.90 lh). The states have seen farmer unrest recently, with some of it —especially in MP’s Malwa belt — being linked to losses from soyabean cultivation.

The soyabean sector was, interestingly, a net foreign exchange earner till a few years ago, with exports of meal exceeding imports of oil. That situation has, however, reversed itself after 2013-14.

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  1. V
    Vinitsharma
    Jun 15, 2017 at 8:23 am
    MSP is nothing but political decision. Politician looks at his vote bank rather than market conditions. Present govt is so obsessed with power that realities are overlooked. Earlier govt also used MSP as a political tool. But present govt is far ahead in power politics. Farmers are vote bank for them. No major elections in near future. Let the things boil and will be addressed when elections are approaching.
    Reply