Mumbai, Feb. 7 The adverse impact of allowing huge speculative interest to build in soyabean that has kept prices at elevated levels is now showing in the soyameal export numbers. Shipment volumes have fallen by almost half to 11.1 lakh tonnes in the last four months (October 2009 to January 2010). In the corresponding period last year, soyameal exports were 19.8 lt. The picture is more alarming when looked at on a financial year basis. Soyabean extraction export in the first ten months (April 2009 to January 2010) of the current fiscal recorded a mere 17.5 lt, a steep decline from 36.4 lt during the same period the previous year. The reasons are not far to seek, according to insiders. Huge speculation in the market has driven bean prices up and has kept them at levels that do not make for export price parity.
From the beginning of the new season in October 2009, bean prices remained at around Rs 23,000 a tonne. There has, of course, been a small correction recently based on global cues; still the rates are at levels not justified by market fundamentals. It may be interesting to know that for the 2009-10 season, the Government fixed the minimum support price for soyabean at Rs 13,900 a tonne.
So, current market prices (after recent correction) of around Rs 21,500- 22,000 a tonne are still 50 per cent above the MSP.
Disconnect in prices
Worse, there is disconnect between spot and futures prices. Usually, futures market should reflect prices as ‘spot plus cost of carry'. In case of soyabean the futures prices are way above the spot price of around Rs 19,500 a tonne.
Both markets are usually known to feed on each other. Firm futures prices caused by build up of speculative positions are preventing a healthy correction in the physical market, throwing export parities haywire, complain processors.
In private, industry representatives talk about how a handful of operators have built up huge speculative positions both in the physical market and in the futures section, hoping to make windfall gains over time. There is now demand for an investigation into the business activities of firms and persons holding large trading positions in the bourses. Why the regulator has failed to take cognisance of the anomalous price situation between spot and futures is unclear, rued an export house representative. He is clearly miffed by the fact that export parities are disturbed.
It is not just soyameal exporters who are upset with suspected speculation and consequent firm prices of bean and meal, but also animal and poultry feed users who find feed prices uneconomic. Feed costs have increased manifold.
“We understand having to pay high prices for feed in times of genuine shortage; but currently there is no shortage and yet the rates are unaffordable because of speculative activity,” an end-user commented.
The Government is already under pressure to ban or at least restrict the export of extractions. If the demand is conceded, speculators run a massive risk of incurring losses. Further downward correction in bean prices is imminent. Food inflation is turning out to be an intractable issue for New Delhi. There are no signs of any real relief from high food and feed prices anytime soon. So, there is reason to believe, the Government will be forced to act against speculation.
Source : Business Line