Why India has lost its hold in the global oilmeals market

The drastic fall in exports of oilmeals from India is an eye-opener for exporters and regulators.According to DGCIS estimates, total oilmeals export during April-September 2013 was ₹6,084.28 crore, while shipments have halved by around 50% to ₹3,057.69 crore in the same . Exports of oilmeals during September 2014 were down by 74 per cent compared with the same month a year ago. Such a sudden fall may affect the market and thus, it needs to be prevented.

In the calendar year 2013, India was the fifth largest exporter of soyameal with the value of shipments being $2.86 billion, accounting for over nine per cent of the total global exports. An unexpected growth was seen in soyameal exports last year, as EU and US imposed a sanction on trade with Iran which paved the way for Indian exporters to capture this market. Had Indian exporters maintained the supply to other traditional market such as Japan, Thailand and Vietnam, the opportunistic behaviour to meet the demand from new segment would have been justified. Riding on the opportunity created by sanctions imposed by the EU and US, exporters are on the verge of losing even their traditional market.

Since Indian exporters were cashing in on the sanction imposed by EU and US, the easing of sanctions has hit exports of soyameal. Countries such as Brazil and Argentina are capturing their lost market by giving tough competition to Indian exporters in Iran. During the second quarter this year, soyameal exports to Iran plunged to $21.8 million, 86.6 per cent lower than exports during the first quarter. At the time of peak exports of soyameal to Iran, exporters fetched a premium in the market. Now, they may not get the same due to intense competition from Latin American countries.

In 2011, some 59 per cent of Japan’s total imports of soyameal were from India. In the first quarter last year, India boosted its exports to Iran and in the second quarter, as a result, exports to Japan dropped to $ 6.7 million from $98.7 million in the first quarter. The situation turned from bad to worse when exports fell further during the first and second quarters this year. During the second quarter of 2014, soyameal exports to Japan from India were valued at $32,000 only. Most of the market share in Japan is now captured by China, Paraguay and the US, as negligence towards the traditional market paved the way for competing countries to make inroads.

A similar pattern of exports from India were observed in Thailand. During the second quarter last year, shipments dipped in this market and were valued at $104,000 from $116.7 million in the first quarter. Indian exporters are yet to regain their position in this market as during the first two quarters this year, exports were valued at $12.5 million and $1.2 million respectively.

Accessing new market at the cost of existing market may not be an effective strategy in the long run. Looking at the situation, Indian exporters’ move to encash the opportunity was a good move. However, an effective strategy would have resulted in creating sustained demand from both old markets and the new one. To gain the trust of traditional buyers, exporters should have prioritised their needs even while having ample opportunity in other markets. To meet the demand for new market as well as meeting demand in the existing market, exporters should have also made an attempt to procure additional quantity through imports. Also, exporters now should adopt strategies to bring back the “lost sheep” to boost exports in the traditional markets.

The writer is associated with National Institute of Agriculture Marketing, Jaipur. Views are personal.