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Market sees India's MY 2022-23 soybean crop higher than govt estimates

Highlights

Trade sources peg MY 2022-23 soybean harvest up 3% on year

Govt estimates soybean harvest at 12.89 mil mt, a tad lower on year

Output seen rising on adequate showers, may boost yields

Bigger harvest may weigh on India's soybean oil imports

India's soybean harvest in the marketing year 2022-23 (October-September) is expected to be higher than the government's projection, according to market participants, on the back of steady acreage and adequate rainfall.

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According to a survey conducted among 11 trade participants and analysts, soybean output in MY 2022-23 is seen rising nearly 3% on the year to 13.1 million mt, up from an estimated 12.8 million mt in MY 2021-22 by trade participants.

The output is likely to increase on steady acreage under the crop on the year and adequate showers over key growing regions, traders said.

The government on Sept. 21, however, pegged soybean output in MY 2022-23 at 12.89 million mt, a tad lower than its estimates of 12.99 million mt for MY 2021-22.

According to agriculture ministry, the area under soybean was at 12.1 million hectares, largely steady over the year.

"The government may have estimated the output to be smaller due to a sharp decline in area in Madhya Pradesh. But adequate showers are seen to boost yield potential and eventually increase output across states," said an analyst based in Mumbai.

Soybean areas in Maharashtra, Rajasthan, and Karnataka have increased over the year. However, acreage in Madhya Pradesh, the largest soybean producer, has been lower on the year, the data showed.

In Maharashtra, farmers have sown soybean across 4.9 million ha, up from 4.6 million ha in the previous year, the ministry data showed.

In Rajasthan, soybean has been planted across 1.2 million ha, up from 1.1 million ha last year, while in Karnataka, area rose from 382,700 ha in MY 2021-22 to 437,500 ha in MY 2022-23.

For Madhya Pradesh, however, the area has decreased to 5 million ha from 5.5 million ha in the previous year.

"In Madhya Pradesh, the area shrank under soybeans as rainfall during the initial sowing period was poor and farmers moved to other crops," a Delhi-based trader with a multi-national firm said.

According to the Indian Meteorological Service, India has received 7% above average showers over June 1-Sept. 20.

In Maharashtra, rainfall has been 26% above average, while in Rajasthan it has been 34% above average.

Market participants are hopeful that despite a fall in area in Madhya Pradesh, an increase in yield is likely due to adequate showers, with the state receiving 22% above normal rainfall during June 1 to Sept. 20.

"Madhya Pradesh has seen a shift in the area from soybean, but recent heavy showers should be able to partially offset the impact on output as it may increase average yields," a Delhi-based trader with another international firm said.

However, some in the trade circles are concerned that heavy showers may weigh on the quality of the crop.

"Excessive showers at the time of harvest may lead to an increase in moisture content and lead to a drop in quality," a trader based in Indore, Madhya Pradesh, said.

India's soybean oil imports in focus

A likely larger soybean harvest in India, one of the largest soybean oil importers in the world, may have a potential impact on the country's soybean oil imports, according to traders.

"With above average crop expected in numerous leading producer states such as Maharashtra and Madhya Pradesh, and soybean meal getting further competitive in the international market pushing raw bean crushing, the oil production is also estimated to increase further, thereby decreasing imports ahead," said a Mumbai-based vegetable oil analyst.

India's soybean oil imports in MY 2021-22 (November-October) is projected around 3.8 million-4 million mt, lower than the previous estimates of 4.2 million-4.5 million mt over the same period, despite tax breaks on soybean oil purchase of 2 million mt annually, trade sources said.

"Domestic soybean oil is at better parity than imported one's while being priced at Rupee 1,200/10 kg-1,220/10 kg ($14.95/10 kg-$15.20/10 kg) against Rupee 1,240/10 kg-1,260/10 kg for imported degum soybean oil. This is boosting domestic crushing and oil production, leading to import cuts," said a vegetable oil and meal analyst based out of Delhi.

The above-average crop as per market expectation is estimated to boost soybean meal sales from the country while cutting down on oil derivative imports.

As per latest data from Solvent Extractors' Association, soybean meal exports increased almost 60% on the year to 17,547 mt in August despite Indian soybean meal being outpriced in international markets during the first half of 2022.

In anticipation of better crop leading to a fall in local soybean prices, Indian soybean meal FOB price fell and became competitive at $560/mt in August from a high of $888/mt in March, while soybean meal ex-Rotterdam was currently quoted at $554/mt, market participants said.

"With expected good soybean crop, coupled with substantial carry forward, crushing will increase from October or onward. Starting with the new season, the export of soybean meal from India may increase," the analysts added.