India Wins on Feed Sales as Drought Destroys U.S. Crops

Soybean Meal Shipments From India to Climb on Crop, U.S. Drought
The shadow of a bidder falls on a pile of soy beans on sale at an auction in Dewas, India. India competes with the U.S., Argentina and Brazil to supply animal feed to China, Vietnam, Japan and South Korea. Photographer: Adeel Halim/Bloomberg

Soybean-meal exports from India, Asia’s largest shipper of the animal feed, may advance 5 percent next year as the oilseed harvest is poised to climb to a record for a second year, according to Adani Wilmar Ltd.

Shipments may exceed 4 million metric tons in the year starting Oct. 1, compared with 3.8 million tons this year, said Atul Chaturvedi, chief executive officer at the Ahmedabad-based exporter. The soybean crop in 2012-2013 will be more than the 11.5 million tons estimated by the Soybean Processors Association of India, he said, without giving his own estimate.

Soybean-meal prices have surged about 55 percent this year and reached a record on concern that the worst U.S. drought in at least 50 years will shrink soybean and corn supplies from the world’s largest exporter. U.S. processors including Bunge Ltd. and Archer Daniels Midland Co. reduced oilseed crushing 9.2 percent last month from July after the rally in prices eroded demand for livestock feed made from soybeans, boosting demand for shipments from India.

“All indications are that when you have a crop on your head, prices normally soften,” said Chaturvedi, whose company is a joint venture with Wilmar International Ltd., the largest importer of soybeans into China. “Prices have to come down to make India more competitive in the global market.”

Soybean meal futures have fallen about 10 percent since reaching an all-time high of $541.80 per 2,000 pounds on the Chicago Board of Trade on Sept. 4. The December-delivery contract was at $486.70 at 3 p.m. in Mumbai today. Soybeans rose to a record $17.89 a bushel also on Sept. 4 as U.S. farmers will harvest the smallest crop in nine years after June and July were the hottest since 1936.

Buyers’ Appetite

“Because of the spurt in prices most buyers are hand-to-mouth, which means they all have an appetite to buy when prices stabilize,” said Davish Jain, group managing director at Prestige Foods Ltd. “If India produces more soybeans, it’s a golden opportunity for the country as the North American crop is affected by drought.”

India competes with the U.S., Argentina and Brazil to supply animal feed to China, Vietnam, Japan and South Korea. The country usually exports more than 70 percent of its soybean-meal output. Traders have contracted to sell as much as 300,000 tons at prices ranging from $620 a ton to $640 a ton free-on-board to buyers in South East Asia and Africa for shipment in November and December, Rajesh Agrawal, spokesman for the Soybean Processors Association, said on Sept. 18.

Monsoon Revival

Monsoon oilseed production in India this year may be little changed from a year earlier as an increase in soybean output will be offset by a lower peanut crop, Adani’s Chaturvedi said. The country harvested 28.6 million tons of oilseeds 2011-2012, according to the Central Organization of Oil Industry and Trade.

Farmers planted soybeans in 10.7 million hectares (26.4 million acres) as of Sept. 7, compared with 10.3 million hectares a year earlier, according to the farm ministry. The area under all the oilseeds fell to 17 million hectares from 17.5 million a year earlier, it said.

A revival in monsoon this month has brightened prospects for a bigger rapeseed crop this year, Chaturvedi said. Rapeseed, the main oilseed sown in the winter season, totaled 6.03 million tons in 2011-2012, according to central organization’s data.

The monsoon, which accounts for more than 70 percent of annual rainfall, has been 5 percent below a 50-year average as of yesterday, according to the India Meteorological Department. The deficit was 19 percent at the end of July.

Superb Price

“Farmers will plant more because the prices have been superb and we have got very good rains,” Chaturvedi said.

Rapeseed futures on the National Commodity & Derivatives Exchange Ltd. in Mumbai have rallied 40 percent in the past year, reaching a record 4,564 rupees ($84) per 100 kilograms on Aug. 4. The October-delivery contract was at 4,145 rupees today.

Vegetable-oil imports by India may increase to as much as a record 9.7 million tons this year from 8.7 million tons this year, Chaturvedi said. Imports climbed 19 percent to 8.16 million tons between November and August, according to the Solvent Extractors’ Association of India.

India meets more than half its edible oil requirement through imports. It buys palm from Indonesia and Malaysia, and soybean oil from Brazil and Argentina.

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