American soybean crushers face tougher times – but not as tricky as those besetting their Indian peers, which are being undercut by cheaper imported oilseed products.
US processors typically suffer a seasonal decline in the spring, as South American competitors begin to chew through the region's crops and regain share of export markets.
But they face a "sharper than usual" fall this year, thanks to flat American markets for soyoil and soymeal, the US Department of Agriculture said.
The comments follow reports that Cargill has temporarily stopped crushing at an Indiana plant because of weak margins, while processing giant Bunge on Tuesday stunned markets by delivering soymeal against Chicago futures contracts, suggesting it could not find another home for the animal feed.
'Harsh business climate'
Nonetheless, trading conditions appear worse in India, where soybean processors are being undercut by strong imports, which the government has encouraged by lifting duties in the face of soaring inflation.
|
Selected Indian 2009-10 soy market data (year-on-year change)
Soybean output: 8.75m tonnes (-3.8%)
Soybean crush: 6.60m tonnes (-12%)
Year-end soybean stocks: 1.08m tonnes (+222%)
Soymeal exports: 2.53m tonnes (-19.9%)
Source: USDA |
Prices of food, on which Indian consumers spend 40% of their disposable income, soared 18% in the year to February, in part down to last year's weak monsoon, which weakened the production of many crops.
"A deluge of cheap vegetable oil imports is shaping a harsh business climate for India's domestic processors of soybeans," the USDA said.
Meanwhile, exports of soybean products have been diminished by strengthened competition from China and the US, at a time when the rupee is appreciating, and are on course to hit a five-year low.
Surging stocks
These market dynamics will feed through into a surge in soybean inventories, the USDA said, explaining a decision on Wednesday to more than double to an "unusually high" 1.08m tonnes its estimate for Indian stocks at the end of 2009-10, which it had expected to increase only marginally.
"Indian processors normally use all the soybeans that are produced in a year, but a low crush could swell the country's season-ending stocks," the department said.
Vegetable oil imports, meanwhile, were on course to rise 6.1% to 9.3m tonnes, comprising mainly palm oil, which would account for 7.3m tonnes.
China is expected to remain the world's biggest buyer of foreign vegetable oils, with imports estimated at 9.9m tonnes.
PRINTABLE VERSION
EMAIL TO A FRIEND
RSS FEEDS