Indian edible oil importers may have wider choice as global soyabean output is set to rise

With global agencies forecasting over 6 per cent growth in world soyabean production this year, the Indian edible oil industry will likely have more options for imports. Some industry leaders feel that soya oil could compete with sunflower and palm oils for market share.

Various agencies peg global soyabean crop at 392-398 million tonnes (mt) in 2024.

BMI (a Fitch Solutions company) said in its commodity price forecast that it anticipates a 6.3 per cent year-on-year growth in soyabean production at 398.2 mt for the 2023-24 (July-June) season. The US Department of Agriculture’s (USDA) January report estimates global soyabean production at around 398.97 mt, while the Grain Market Report by the International Grains Council (IGC) pegs it at 392 mt.

Recovery in South America

Most reports attributed the uptick in soyabean output to strong recovery by key South American producers.

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Commodities Outlook 2024 by ING Think, the economic and financial analysis wing of the Dutch multinational financial firm, noted that Argentina is expected to see a recovery in output after the drought-affected previous season. Domestic production is forecast to grow 23 mt y-o-y to 48 mt. Even IGC’s report tied its production forecast to a rebound in Argentina.

ING Think said production is forecast to hit record levels yet another season in Brazil at 163 mt, up by 5 mt, on the back of higher acreage as farmers find soyabean more attractive than corn. However, there are risks to this crop with dry conditions appearing recently in some key growing regions.

BMI said Brazil is poised to make the most substantial impact, with a second consecutive record-setting harvest at 161 mt. The USDA cut Brazil’s soyabean production forecast by 4 mt to 157 mt as hot and dry weather in recent months strained the crop in key growing regions.

5.4% consumption growth

At the ‘Globoil Asia 2024’ meet a few days ago, Dorab Mistry, Director of Godrej International Ltd, London, said soyabean crop would increase by around 39 mt in 2024. Argentina will re-establish its soyabean crush of over 30-35 mt, he said, adding that there will be a surfeit of soyabean oil.

Sudhakar Desai, President of the Indian Vegetable Oil Producers’ Association (IVPA), told businessline that Argentina’s crop will be about 48 mt, and Brazil’s crop will remain unchanged from last year at about 155 mt. More soyabean will be available this year, he said.

BMI said it anticipates that robust global consumption will provide a stable base for international prices, as it forecasts a significant 5.4 per cent y-o-y growth in global consumption, reaching 383.8 mt, in 2023-24.

China’s soyabean imports are on track to cross 100 mt for 2023, with customs data recording 91.9 mt as of December. It said the accumulation of substantial domestic stocks and subdued domestic pork prices will likely lead to a reduction in China’s import demand on an annual basis.

Soya pressure on everything

ING Think said strong imports would continue in the early part of this year, with Chinese buyers recently booking large volumes of US soyabean for delivery into Q1 of 2024. More recent buying appears to reflect stock building rather than actual consumption, it said.

BMI said it foresees a boost in domestic consumption in Brazil due to the upcoming mandated increase in biodiesel blending. Scheduled to increase by 1 per cent to 14 per cent in April 2024, this is projected to create demand for an additional 2.2-2.6 mt of raw soyabeans.

“Consequently, we are predicting a surge in domestic consumption within Brazil. Our projections show an anticipated 11 per cent climb in consumption during the 2023-24 season. Due to the heightened blending requirements, we expect Brazilian export volumes to be constrained, effectively setting a floor for global prices. This regulatory adjustment is likely to limit the availability of Brazilian soyabeans for international markets, thereby supporting global price levels,” it said.

Mistry said that as the South American region is likely to produce a massive 210 mt of soyabean, availability of soyabean oil will surge lby May-June, putting pressure on everything, including palm oil, sunflower oil, and rapeseed oil. He forecast that soyabean oil will compete aggressively with palmolein in the international market during May-July.

Price forecast

Projecting that soyabean oil and sunflower oil will gain in market share, Desai said they will compete with palm oil for market share in India.

BMI said it maintains its CBOT-listed second-month soyabean annual price forecast for 2024 at 1,350 cents a bushel. However, ING predicted it slightly lower at 1,280 cents.

BMI anticipates rising prices fuelled by logistical challenges at Brazilian ports. The expected surge in sugar and soyabean exports, coupled with near-record corn volumes, is likely to strain port infrastructure, pushing global prices higher.

It said soyabean market’s reliance on China as a significant importer means that any reduction in Chinese demand could lead to a price drop.

About India, Mistry said a slight increase in import duty on vegetable oils after April-May may be required. India has to be braced for some high prices, particularly in palm oil, which may be quoted at a premium to soyabean oil for a short period with stepped up supply of soyabean oil.