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International Trade: Soybean

The document provides an overview of the global soybean oil trade, highlighting the production and consumption patterns, particularly focusing on China, the United States, Brazil, Argentina, and India. It identifies the challenges in India's soybean oil market, including sourcing, financial, and regulatory issues, while also analyzing the trends that indicate a shift in export dominance from the U.S. to South American countries. Additionally, it discusses India's increasing need for imports due to rising domestic consumption outpacing local production.

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• Dhruba Jyoti Chatterjee 11C • Hasan Nayyar 16C • Jasmit Singh Chawla 19C • Kapish Kaushal 20C • Shashwat Sinha 41C • Surjodeb Sarkar 44C
CONTENTS 1. Trends in the global trade of soyabean oil 2. Global Pattern in Production of Soyabean Oil 3. Global Pattern in Consumption of Soyabean Oil 4. Production Trend in India 5. Consumption Trend in India 6. Major Exporters of Soyabean • United States • Decline of United States and Rise of Brazil and Argentina 7. Major Importers of Soyabean Oil • China • India • EU 8. Policy and Procedure governing import of soyabean oil 9. Import planning of soyabean oil for Indian markets 10. Challenges • SCM/Warehousing Challenges • Financial Challenges • Marketing Challenges • PFA (Prevention of Food Adulteration Act)
TRENDS IN THE GLOBAL TRADE OF SOYABEAN OIL The soyabean oil trade is on the rise after a fall in 2008-09 due to a drop in price courtesy of the poor demand prevailing then. The total soyabean oil production increased rapidly and crossing over 42 million tons annually as of 2011. China continued to be the largest producer of the world with a total share in world production of around 24% followed by the United States, Argentina and Brazil. India stands 5th in the World production of soyabean. China is the largest consumer of Soybean Oil and consumes 27% of the global production followed by United States which consumes 18% followed by Brazil which consumes 12%. India is the fifth largest consumer of Soybean Oil and consumes 6% of the global production. Now focussing on India, The major soya bean producing areas are Madhya Pradesh, Himachal Pradesh, Uttarakhand and the Khasi and Naga Hills in the Eastern Indian states. The annual production of soya is on the rise, and has seen a 4 fold increase in the yields over the past two decades. However, the annual consumption of soya bean has outstripped the pace of production requiring India to import the commodity. United States currently stands as the leading exporter of soya bean with more than 45% share in the World’s exports followed by the two South American nations Brazil and Argentina. China doesn’t feature in the top three because of its high domestic consumption, which leads to very little being left for export of the commodity. However, a growing trend in the export of the commodity that is likely to be observed is the South American nations overtaking the North American ones. The flag bearers of this increase are likely to be Brazil and Argentina. China stands as the largest importer of soyabean oil. The rapid growth of China's economy has spurred food consumption and China's WTO accession has reduced import tariffs and quantitative restrictions to its oilseed market. EU and India are the other big importers of this commodity.
Global Pattern in Production and Consumption of Soybean Oil Production The largest producer of Soybean Oil in the world is China which produces more than ten million tons of Soybean Oil annually followed by United States of America and Argentina producing over 8.5 million tons and 7.5 million tons respectively. India is the fifth largest producer of Soybean Oil and produces over 1.7 million tons annually as of 2011. Soybean Oil World Production 14000 Thousand Metric Tons 12000 10000 8000 2007/08 6000 2008/09 4000 2009/10 2000 2010/11 0 Nov 2011/12 Dec 2011/12 Country Source: http://www.fas.usda.gov/psdonline/ Global Soybean production is on the rise after a drop in production in 2008-09 due to drop in prices due to poor demand with the total Soybean Oil production over 42 million tons annually as of 2011. Total Soybean Oil Production 44000 42000 Thousand Metric Tons 40000 38000 36000 34000 32000 2007/08 2008/09 2009/10 2010/11 Nov Dec 2011/12 2011/12 Year Source: http://www.fas.usda.gov/psdonline/
China produces 24% of the world Soybean Oil followed by United States at 19% and Argentina at 17%. India produces 4% of the Total Soybean Oil production in the world. World Soybean Oil Production 1% 10% 4% Country / Year 4% China 5% 24% United States Argentina Brazil 16% EU-27 India 19% Mexico 17% Other Source: http://www.fas.usda.gov/psdonline/ Consumption China is the largest Soybean Oil Consumer in the world consuming over 12 million tons annually which is more than it produces leading to net imports of over 1.4 million tons annually. The Second largest consumer is United States consuming over 8 million tons followed by Brazil at over 5 million tons. India is the fifth largest consumer of Soybean Oil consuming over 2.7 million tons which is more than it produces leading to net imports of about 850 thousand tons of Soybean Oil annually. Soybean Oil World Consumption 14000 Thousand Metric Tons 12000 10000 8000 2007/08 6000 2008/09 4000 2000 2009/10 0 2010/11 Egypt Argentina Morocco China United States Mexico Algeria Other Brazil EU-27 Japan Bangladesh India Korea South Iran Taiwan Nov 2011/12 Dec 2011/12 Country
Global Soybean consumption is on the rise after a drop in consumption in 2008-09 due to drop in production due to poor demand with the total Soybean Oil production over 42 million tons annually as of 2011. Total Soybean Oil Consumption 44000 Thousand Metric Tons 42000 40000 38000 36000 34000 32000 2007/08 2008/09 2009/10 2010/11 Nov 2011 2011/12 Year Source: http://www.fas.usda.gov/psdonline/ China is the largest consumer of Soybean Oil and consumes 27% of the global production followed by United States which consumes 18% followed by Brazil which consumes 12%. India is the fifth largest consumer of Soybean Oil and consumes 6% of the global production. World Soybean Oil Consumption 1% 1% 1% 1% Country / Year 1% 1% 10% 4% China 2% United States 2% 2% 27% Brazil 6% Argentina 6% India 6% EU-27 18% 12% Egypt Mexico Source: http://www.fas.usda.gov/psdonline/
Import Procedure & Strategy of Soya-bean oil (1507) and its fractions, whether or not refined, but not chemically modified Production & Consumption Trends of Soya-bean Oil in India from 1990 to 2010: India is the 5th largest producer of Soya bean oil in the world, following countries like China, Brazil, USA and Argentina. The major Soya bean producing areas in India are Madhya Pradesh, Himachal Pradesh, Uttarakhand and the Khasi and Naga Hills in the Eastern Indian states. Source: Indexmundi (United States Department of Agriculture) The annual production of Soya bean in India from 1990 onwards has been graphically plotted which shows an increasing trend, more than a 4-fold rise in the yields in the past 2 decades. Soya bean being a Kharif crop is usually sown in June in India. In some states, it is cultivated twice a year. The harvesting period for soya bean comes around September to October. It is highly dependent on monsoons, and any change in the rainfall pattern affects the production of soya bean significantly.
Year Production (1000 MT) 1990 425 1991 400 1992 500 1993 650 1994 495 1995 712 1996 657 1997 859 1998 972 1999 774 2000 805 2001 833 2002 607 2003 1004 2004 810 2005 1239 2006 1157 2007 1499 2008 1287 2009 1340 2010 1715 Source: Indexmundi (United States Department of Agriculture)
Year Domestic Consumption (1000 MT) 1990 445 1991 425 1992 562 1993 711 1994 555 1995 772 1996 706 1997 1095 1998 1805 1999 1564 2000 2080 2001 2231 2002 1910 2003 1942 2004 2737 2005 3000 2006 2500 2007 2330 2008 2300 2009 2810 2010 2650 As Domestic industrial consumption is very low, the domestic food consumption is a good measure of the total consumption in India. India ranks 5th in Soya Bean Oil consumption in the world as well. The annual consumption of Soya bean in India from 1990 onwards has also been graphically plotted which again shows an increasing trend, but a more than 5-fold rise in the demand in the past 2 decades, hence creating a need to import the crop to meet the rapidly increasing domestic demands.
MAJOR EXPORTERS OF SOYABEAN IN THE WORLD Soy has been grown for three millennia in Asia and, more recently, has been successfully cultivated around the world. Today, the world’s top producers of soy are the United States, Brazil, Argentina, China and India. United States Large-scale development of soybean production and processing in the U.S. began during the 1940s and 1950s spurred on by a rapid increase in both domestic and worldwide demand for protein meal and oil. Harvested acreage for soybeans in the U.S. more than tripled between 1940 and 1955, from 4.8 million acres to 18.6 million, while total production of soybeans increased nearly five-fold, from 78 million bushels to 374 million. As the number of acres devoted to soybeans continued to grow during the 1960s, the United States became a world soybean superpower and began exporting large quantities of soybeans, as well as meal and oil, to Europe and Asia. Despite substantial growth in oilseed and oilseed product output in the past 25 years and recent gains in export volume, the U.S. share of global exports has steadily diminished. In the mid- to late 1970s, the United States dominated world trade in unprocessed oilseeds, with a global market share of more than 70 percent. Recently, this figure has fallen below 50 percent. From a smaller percentage base, the United States has seen its share of oilseed meal and vegetable oil exports decline even more sharply, particularly before 1990.
DECLINE OF UNITED STATES AND THE RISE OF BRAZIL AND ARGENTINA While soybean exports from the United States have grown over the past 25 years, the share of U.S. exports in global oilseeds trade has declined. A key development has been the phenomenal growth of foreign soybean output and exports, particularly by Brazil and Argentina. Foreign soybean output now exceeds that of the United States, and Brazil and Argentina currently share more than half of the soybean export market, up from less than 15 percent before 1980. With increased soybean production and rapid growth in crushing capacity, Brazil and Argentina have each surpassed the United States in soy meal and soy oil exports. Another factor is the recent expansion of U.S. meat exports, which stimulates domestic meal use rather than exports of soybeans or soybean meal. Brazilian and Argentine soybean and meal exports are projected to continue capturing market share from the United States in the next decade. Brazil now trails only the United States in soybean production. Brazilian soybean growing regions used to be concentrated in the south, relatively near the major ports. In recent years, soybeans have expanded into the vast farmland of the centre-west states, as infrastructure improvements have cut internal transportation costs. Brazil's vast reserves of farmland could permit a continued significant expansion in soybean area, though expansion is currently limited due to insufficient transportation infrastructure. Argentina's soybean growing regions and crushers are located close to port facilities, where the country’s highly developed crushing industry and relatively small domestic market makes it the world's largest exporter of soybean meal and oil. A lower export tax on processed commodities than on unprocessed commodities also favours the export of soybean oil and meal from Argentina. Recent increases in production by Argentine and Brazilian grain and oilseed producers could foreshadow continued gains on the strength of abundant undeveloped agricultural resources, more stable economies, and expanding trade liberalization Given the amount of available arable land and water resources in Brazil, it is expected to eventually become the number one soybean-producing nation. Already, South America as a continent produces more soybeans than North America (combined U.S. and Canada production). In the past decade, large tracts of fertile land and low labour costs have fuelled explosive growth in South America’s soy industry. Poor road and rail infrastructure, as well as economic instability and environmental concerns, have been the primary checks to further expansion. In the U.S., soybeans are grown mostly in the Midwest. The top soy-producing states are Iowa, Illinois, Minnesota, Indiana and Nebraska. Many farmers in this region grow corn and soybeans in rotation. The Brazilian states with the greatest soybean production are Mato Grosso, Paraná and Rio Grande do Sul.
List of Exporters for Soyabean in 2010 20000000 18000000 16000000 14000000 12000000 10000000 8000000 6000000 Exported Value, USD thousand 4000000 2000000 0 Source: TradeMap As shown by the above graph, the leading exporter of soyabean in the world is United States followed by the two South American nations Brazil and Argentina. The percentage share in world exports is shown in the following graph 50 45 40 Share in World Exports (%) 35 30 25 20 15 10 5 0 United States Brazil Argentina Paraguay Canada Uruguay Netherlands Countries Source: TradeMap
Major Importers of Soybean Oil World oilseed trade consists of many closely substitutable commodities, such as soybeans, rapeseed, sunflower seed, and cottonseed. Countries also trade oils and meals obtained from crushing oilseeds. Foreign import demand depends on the difference between countries' domestic oilseed output and consumption. Divergent demand for protein meal and vegetable oil, as well as limits on domestic processing capacity, determines the ratio of oilseeds to oilseed products that countries import. The volume and source of foreign imports depends on seasonal availability and relative prices, credit and delivery terms, local preferences, and quality. Country policies, such as tariffs and domestic subsidies, also can affect prices and the availability of competing products. Some of the major importers of soybean oil in the world are: China: China is the world's fourth-largest producer of soybeans. The major Chinese soybean growing regions are in the northeast part of China. Yet, rapid growth of China's economy has spurred food consumption, turning the country into the world's leading soybean importer. Changes in China's agricultural and trade policies have greatly influenced world oilseed markets. China's WTO accession has reduced import tariffs and quantitative restrictions to its oilseed market. China:Imports(MT) 3000 2727 2494 2500 2000 1514 1319 1400 1400 1500 1000 500 0 2007/08 2008/09 2009/10 2010/11 Nov Dec 2011/12 2011/12 India: The major Indian soybean growing region is in the central state of Madhya Pradesh. Indian production of soybeans and other traditionally grown oilseeds—such as peanuts, rapeseed, and cottonseed—has increased in the last decade, although yields are among the worlds poorest. India often imposes prohibitive barriers on oilseed imports, so its domestic crushing industry relies on domestic oilseed supplies. Domestically produced oilseeds are highly valued sources of vegetable oil, but domestic consumption has risen faster than
domestic production so that India is now among the world's largest vegetable oil importers. India is a smaller (but growing) consumer of soybean meal, and exports its surplus to other Asian countries. India:Imports(MT) 1800 1598 1600 1400 1200 1060 945 1000 850 850 800 733 India:Imports(MT) 600 400 200 0 2007/08 2008/09 2009/10 2010/11 Nov Dec 2011/12 2011/12 European Union: The European Union is self-sufficient in vegetable oil production, but its protein deficit still makes it the world's largest importer of soybean meal and second-largest importer of soybeans. Since the 1960s, EU imports of soybeans swelled because of rapid growth in livestock production and duty-free concessions signed in trade agreements. In the 1970s and 1980s, soybean consumption slowed as EU agricultural policies subsidized a large expansion in domestically produced rapeseed and sunflower seed, eroding the market for oilseed imports. The U.S. Government challenged these subsidies and, in 1992, the EU committed to a number of reforms of its Common Agricultural Policy (CAP), including area limits on the planting of oilseeds. Further CAP reforms reduced per-hectare direct payments to oilseed producers to those received by grains producers. Until 2005, reforms encouraged EU farmers to scale back oilseeds planting. However, recent EU biodiesel policies have encouraged EU farmers to dramatically increase oilseeds area, especially rapeseed. In coming years, EU enlargement and CAP reform are projected to swell internal grain supplies and allow EU grain prices to fall even more. Despite relatively low protein-meal prices, the comparatively larger reduction in the cost of feeding grains to livestock should curb EU soybean meal consumption and imports. Historically, high import tariffs on cereals have boosted EU consumption of soybean meal, which has been favoured by duty-free access for soybeans. Over the last decade, lower grain prices and several animal disease epidemics resulted in significant increases in the feeding of grains and oilseed meals and a reduction in the feeding of nongrain feed ingredients, such as meat and bone meal .
Imports:EU(MT) 1200 1036 1000 905 794 800 800 800 600 550 Imports:EU(MT) 400 200 0 2007/08 2008/09 2009/10 2010/11 Nov Dec 2011/12 2011/12
Policy & Procedure governing import of Soybean Oil Import policies have played a key role in determining the overall level and type of India’s edible oil imports for decades. Although significant imports were permitted prior to 1994, they were controlled directly by India’s State Trading Corporation (STC) and subject to state- imposed import quotas. In 1994, the import regime changed fundamentally when, as part of its obligations under WTO rules, India eliminated the state monopoly on imports and placed imports under a privatized open general license (OGL) system. Under the new rules, India also agreed to eliminate import quotas and placed upper “bound” (maximum) limits on tariff levels. These changes made the rules governing edible oil imports more transparent and imports more responsive to market forces. Privatized Imports and Tariffication Key Policy Changes Prior to 1994, edible oil import levels were determined by the government and made by the monopoly STC, based on such factors as domestic market conditions, producer versus consumer interests, international prices, and foreign exchange availability. Although the government did at times permit relatively high imports— averaging as much as 1.3 million tons annually between 1976/77 and 1987/88—imports were sharply curtailed in 1988/89- 1993/94, when the government promoted domestic oilseeds production under its Technology Mission on Oilseeds (TMO) program. During the TMO program, oil imports averaged only 325,000 tons per year, leading to increased domestic oilseed prices and a temporary surge in domestic production. When edible oil imports were placed under the OGL system in 1994, private traders were permitted to import any quantity of vegetable oils, subject only to a tariff. The tariff was initially set at 65 percent on all edible oils—still relatively high, but significantly below the implied tariff when imports were under quantitative controls. Under the Uruguay Round Agreement on Agriculture (part of the agreement establishing the WTO) India also agreed to bound (maximum) tariffs of 45 percent for crude or refined soybean oil imports. Tariffs on all other edible oil imports were bound at 300 percent, except refined rapeseed oil and crude sunflower-safflower oils, which were subject to over-quota tariffs of 75 and 85 percent, respectively. In 1995-98, India’s tariff structure was relatively simple and increasingly liberal—with a common applied ad valorem (percentage) tariff for all oils progressively lowered to a uniform rate of 16.5 percent by the middle of 1998.5 Importers responded to the lower tariffs and declining international prices by importing 4.6 million tons of vegetable oil in 1998/99, up sharply from earlier levels, and more than double the level of imports in 1997/98. Beginning in 1998, however, the Indian Government began making frequent tariff adjustments to protect domestic oilseed producers and processors from imports and to smooth the effect of fluctuating world prices on domestic consumers (figs. 6a and 6b). Although applied tariffs fell in 1999 after an initial hike in June 1998, the trend after April 2000 were incremental increases to applied rates for all oils, with adjustments being made to the relative rates on different types of oil—e.g., palm versus soybean oil and crude versus refined oil— creating a more complicated tariff structure.
The main effect of these changes was to slow the growth of imports, which declined from 6.0 mmt in 2000/01 to 5.2 mmt in 2001/02—but rebounded to 5.8 mmt in 2002/03. The tariff hikes also made the tariff on soybean oil increasingly preferential, since tariffs on palm, rapeseed, and sunflower oils could be raised well above the 45-percent tariff binding on soybean oil, although recent adjustments to the palm oil tariff have reduced this preference (see appendix, “Chronology of Trade Policy Changes Since 2000”). In addition to adjusting tariffs, the government established a tariff rate value (TRV) system for palm oil in August 2001 and for soybean oil in September 2002. The TRV system is intended to prevent underinvoicing (reporting low import prices to evade tariffs) by importers and establishes a government reference price for tariff calculations. The reference prices are supposed to be periodically revised to reflect actual market prices, but in practice, delays in making these adjustments have resulted in tariff assessments different from what would have occurred had tariff rates been applied to actual market prices. In September-December 2002, for example, differences between reference and market prices resulted in an estimated actual tariff of 59 percent for crude palm oil (compared with the declared rate of 65 percent) and 48 percent for crude soybean oil—above India’s WTO bound tariff rate on soybean oil of 45 percent. Thus, the TRV system could shift the composition of imports between palm and soybean oils depending on the relationship between reference prices and prevailing market prices. In summary, although Indian import policy is more transparent and liberal than prior to the mid-1990s, India has also used the flexibility within its WTO commitments to make frequent policy adjustments in response to evolving domestic and international market conditions. These adjustments make overall import demand and the market shares of different imported oils uncertain. Some other policy related aspects for import of soybean oil are: • Winterised and deodorized refined soybean oil can get automatic approval for Foreign Technology Agreements and can get approval for 51% Foreign Equity • The FDA Action Level for unavoidable pesticides like DDT, TDE & DDE in soybean oil is 1 ppm • The bound and applied tariffs on soybean oil is 45% • In March 2009 the Government of India did away with the 20% import duty on soya oil thereby making soya oil more competitive with palm oil • India’s trade policy requires that all imports of biotech food/agricultural products or products derived from biotech plants/organisms should receive prior approval from the Genetic Engineering Appraisal Committee (GEAC). Refined soybean oil derived from Round-up Ready soybeans is the only biotech food/agricultural product currently approved for import.
Import planning of soybean oil for Indian markets Indian agricultural imports tend to consist of staple foods, such as vegetable oils and pulses (peas, beans, and lentils), of which there is chronic undersupply from domestic production. In 2008, vegetable oils (mostly palm oil and soybean oil), pulses and nuts accounted for 60 percent of all Indian agricultural imports. Notably, Indian imports of food grains (excluding wheat), feed grains, oilseeds, meat, dairy products, sweeteners, and processed foods were negligible in 2008. India is self-sufficient in many of these products. Currently India has about 45% bound and applied tariff duty on soybean oil. But apart from these trade related barriers India also imposes certain Non-Tariff Measures (NTMs). These NTMs allow India to curb imports on certain commodities and on soybean oil also. The Indian Government has these NTMs to encourage and increase domestic production of soybean oils. In general, high Indian tariffs and burdensome nontariff measures (NTMs) are the principal reasons impeding products from entering the Indian market. Low levels of trade in soybean oil are an outcome of Indian government policies aimed at food security, food self-sufficiency, and income support for farmers, implemented through domestic agricultural production support, tariffs and nontariff measures (NTMs), and export restrictions. Another important factor which one needs to keep in mind import planning for soybean oil is the price that one is giving in the international market. Currently, United States being the largest producer of soybean oils is the largest exporter, but many new countries like Argentina and Brazil are coming up very competitively and have reduced the world share of exports of United States for past few years. Limited imports from the United States reflect, in part, competition in the Indian market from other suppliers for soybean oil. Argentina is the largest supplier of soybean oil to the Indian market, accounting for 76 percent of Indian soybean oil imports, followed by Brazil with 18 percent. The United States accounted for only 2 percent of India’s soybean oil imports. Indian buyers reportedly buy soybean oil principally on the basis of price, and in recent years, Argentine soybean oil was priced lower than the U.S. product. It should also be kept in mind that India imports both palm oil and soybean oil. Since palm oil is cheaper than soybean oil so the duties on palm oil are less than that of soybean oil. But as of late the Government has fixed the duties on palm oil and soybean oil nearly same but soybean oil being a high selling product, still it is expensive to buy in the international markets and palm oil being a decent substitute, importers go for palm oil. India is one of the largest edible oil markets in the world, and domestic producers are unable to satisfy Indian demand. Several factors—soybean industry fragmentation; government policies that encourage small-scale activity and favour grain production instead of oilseed production; marketing and distribution inefficiencies; and irregular water supplies— negatively affect vegetable oil production in India. As a result, India imports roughly one-half of its annual consumption.
With India’s lagging domestic supply, low tariffs, and few specific nontariff measures, soybean oil producers could be in a good position to supply the Indian market except for two cost factors: prices for soybean oil substitutes and a global competitor’s export tax structure. India satisfies the overwhelming share of its vegetable oil import needs with low-cost palm oil from Indonesia and Malaysia because the Indian vegetable oil market is fairly price sensitive. When India does import soybean oil, it turns first to Argentine and Brazilian sources, as those producers have certain shipping cost and seasonal advantages. More importantly, Argentina uses a differential export tax scheme, which taxes raw soybean exports at a higher rate (35 percent) than soybean oil exports (32 percent). Although the tax on Argentine soybean oil exports raises their price on world markets, taxing raw material exports at a higher rate than processed product exports results in an export subsidy for Argentina’s oilseed processors. This export subsidy confers a competitive advantage for this commodity product over U.S. soybean oil in the Indian market.
CHALLENGES: Soybean Oil and products have had their own share of challenges pertaining to different reasons. Some reasons are:- SCM/ Warehousing Challenges:- • Low soybean yield in India is the major constraint to realizing widespread expansion across different regions and different farm groups. Expansion of soybean production in India has been sustained only by area expansion. • The presence of low number of certified warehouses • The small size of the soybean harvest (relative to processing capacity), the short marketing season and the fact that most output is purchased locally (as almost all soybean crushing plants are located within the production region) are factors that have limited price volatility and long duration storage.
• Although high yields of soybean are obtained on research plots and in demonstrations and maximization trials on the farm, their actual realization by a large segment of the farming population has not occurred. • The dependence of India on international markets for oilcakes in general is quite high. The price on the international markets depends mainly on the US crop. Given the high meal-to-oil ratio in the case of soybean, the expansion of Indian soybean cultivation will be constrained by the comparative advantage of our selling soy meal on the international market Financial Challenges:- • A price support policy is a necessary condition, but is not sufficient to sustain the accelerated expansion of soybean area and production. • Comparative economics, which is in favor of soybeans, is likely to be tilted against the crop if yields continue to decline. • Enough attention has not been paid either to the development of low cost soy foods. • The capital component in cultivation of yellow soybeans is nearly double that of black. This implies that the cultivation of yellow soybean is relatively more capitally intensive and involves higher cash expense compared to that of black. This is part of the reason that the black soybeans are favored by the farming community, who operate under severe capital constraint in M.P. Marketing Challenges:- • Enough attention has not been paid to the promotion of consumer awareness. • Lack of adequate efforts to promote consumer education on the nutritive value of soybean and soy products, and also suggestive of comparative economics working against the large scale consumption of soy products. • Lack of adequate marketing for raw soybeans is yet another major constraint in areas where developmental potential exists for soybeans. It is recalled that public support has mainly promoted production at the farm level, and the NAFED has been entrusted with
the task of implementing the procurement policy of the government at support prices. The NAFAD has for the most part been inactive in M.P., because farm-factory interactions have promoted the role of private initiative in marketing. However, in areas where soybean adoption has yet to gather momentum, the procurement policy at support prices does not appear to have been effective. Traditionally, three marketing channels for soybean:- Channel-I- Producer—Village Merchant—Wholesale dealers—Processor—Refiners— Wholesale dealers of soybean oil—Retailers of soybean oil-consumers. Channel-II-Producer—Cooperative societies—Processors—Refiner’s wholesale dealers of soybean oil retailers of soybean oil-consumers. Channel-III-Producer—Wholesale dealer’s in Regulated Market—Processor—Refiners— Wholesale dealers of soybean oil-retailers of soybean oil-consumers. In general, the total marketing cost of soybean was observed highest on channel-I and lowest on channel-II. The producer share in consumer price was almost similar in channel-II and channel- III. Exploitation by middlemen should be checked. THE PFA (Prevention of Food Adulteration Act): Some mandates under the PFA act are as below for Soybean Oil:- • In case of any package containing bread or liquid milk, sterilized or Ultra High Temperature treated milk, Soya milk, flavored milk, any package containing dhokla, bhelpuri, pizza, doughnuts, khoa, paneer or any uncanned package of fruits, vegetables, meat, fish or any other like commodity which has a short shelf life, the date, month and year in which the commodity is manufactured or prepared or pre-packed shall be mentioned, on the label. • The declaration be made as follows: "BEST BEFORE.................DATE/MONTH/YEAR" OR "BEST BEFORE .............. DAYS FROM PACKAGING" OR
"BEST BEFORE ................DAYS FROM MANUFACTURE" OR "BEST BEFORE UPTO.... DATE/MONTH/YEAR For the Period OR up to and inclusive "BEST BEFORE WITHIN ...........DAYS FROM THE of Ist DATE OF PACK • Poisonous metals :- (1) Chemicals described in monographs of the Indian Pharmacopoeia when used in foods, shall not contain poisonous metals beyond the limits specified in the appropriate monographs of the Indian Pharmacopoeia for the time being in force. • Nickel is a poisonous metal that is identified for soybean oil. It should not be more than 1.5 parts per million of the entire package. • Insecticides and Pesticides: - Triazophos should not be more than 0.05 parts per million. Imazethapyr not more than 0.1 ppm. • The annual supplement to the Indian government’s Foreign Trade Policy (2004-2009) announced by the Commerce and Industry Minister on April 7, 2006, calls for approval from the GEAC for imports of biotech food, food additives, or any food product that contains biotech material that is being used for industrial production, environmental release, or field application. Also, import consignments containing biotech products should carry a self declaration that the product is bioengineered, without which the importer is subject to penal action under the Foreign Trade (Development and Regulation) Act, 1992. This rule became effective July 8, 2006. However, the government has given a special exemption to imports of soybean oil derived from biotech soybeans for consumption after refining.

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International Trade: Soybean

  • 1.
    • Dhruba JyotiChatterjee 11C • Hasan Nayyar 16C • Jasmit Singh Chawla 19C • Kapish Kaushal 20C • Shashwat Sinha 41C • Surjodeb Sarkar 44C
  • 2.
    CONTENTS 1. Trendsin the global trade of soyabean oil 2. Global Pattern in Production of Soyabean Oil 3. Global Pattern in Consumption of Soyabean Oil 4. Production Trend in India 5. Consumption Trend in India 6. Major Exporters of Soyabean • United States • Decline of United States and Rise of Brazil and Argentina 7. Major Importers of Soyabean Oil • China • India • EU 8. Policy and Procedure governing import of soyabean oil 9. Import planning of soyabean oil for Indian markets 10. Challenges • SCM/Warehousing Challenges • Financial Challenges • Marketing Challenges • PFA (Prevention of Food Adulteration Act)
  • 3.
    TRENDS IN THEGLOBAL TRADE OF SOYABEAN OIL The soyabean oil trade is on the rise after a fall in 2008-09 due to a drop in price courtesy of the poor demand prevailing then. The total soyabean oil production increased rapidly and crossing over 42 million tons annually as of 2011. China continued to be the largest producer of the world with a total share in world production of around 24% followed by the United States, Argentina and Brazil. India stands 5th in the World production of soyabean. China is the largest consumer of Soybean Oil and consumes 27% of the global production followed by United States which consumes 18% followed by Brazil which consumes 12%. India is the fifth largest consumer of Soybean Oil and consumes 6% of the global production. Now focussing on India, The major soya bean producing areas are Madhya Pradesh, Himachal Pradesh, Uttarakhand and the Khasi and Naga Hills in the Eastern Indian states. The annual production of soya is on the rise, and has seen a 4 fold increase in the yields over the past two decades. However, the annual consumption of soya bean has outstripped the pace of production requiring India to import the commodity. United States currently stands as the leading exporter of soya bean with more than 45% share in the World’s exports followed by the two South American nations Brazil and Argentina. China doesn’t feature in the top three because of its high domestic consumption, which leads to very little being left for export of the commodity. However, a growing trend in the export of the commodity that is likely to be observed is the South American nations overtaking the North American ones. The flag bearers of this increase are likely to be Brazil and Argentina. China stands as the largest importer of soyabean oil. The rapid growth of China's economy has spurred food consumption and China's WTO accession has reduced import tariffs and quantitative restrictions to its oilseed market. EU and India are the other big importers of this commodity.
  • 4.
    Global Pattern inProduction and Consumption of Soybean Oil Production The largest producer of Soybean Oil in the world is China which produces more than ten million tons of Soybean Oil annually followed by United States of America and Argentina producing over 8.5 million tons and 7.5 million tons respectively. India is the fifth largest producer of Soybean Oil and produces over 1.7 million tons annually as of 2011. Soybean Oil World Production 14000 Thousand Metric Tons 12000 10000 8000 2007/08 6000 2008/09 4000 2009/10 2000 2010/11 0 Nov 2011/12 Dec 2011/12 Country Source: http://www.fas.usda.gov/psdonline/ Global Soybean production is on the rise after a drop in production in 2008-09 due to drop in prices due to poor demand with the total Soybean Oil production over 42 million tons annually as of 2011. Total Soybean Oil Production 44000 42000 Thousand Metric Tons 40000 38000 36000 34000 32000 2007/08 2008/09 2009/10 2010/11 Nov Dec 2011/12 2011/12 Year Source: http://www.fas.usda.gov/psdonline/
  • 5.
    China produces 24%of the world Soybean Oil followed by United States at 19% and Argentina at 17%. India produces 4% of the Total Soybean Oil production in the world. World Soybean Oil Production 1% 10% 4% Country / Year 4% China 5% 24% United States Argentina Brazil 16% EU-27 India 19% Mexico 17% Other Source: http://www.fas.usda.gov/psdonline/ Consumption China is the largest Soybean Oil Consumer in the world consuming over 12 million tons annually which is more than it produces leading to net imports of over 1.4 million tons annually. The Second largest consumer is United States consuming over 8 million tons followed by Brazil at over 5 million tons. India is the fifth largest consumer of Soybean Oil consuming over 2.7 million tons which is more than it produces leading to net imports of about 850 thousand tons of Soybean Oil annually. Soybean Oil World Consumption 14000 Thousand Metric Tons 12000 10000 8000 2007/08 6000 2008/09 4000 2000 2009/10 0 2010/11 Egypt Argentina Morocco China United States Mexico Algeria Other Brazil EU-27 Japan Bangladesh India Korea South Iran Taiwan Nov 2011/12 Dec 2011/12 Country
  • 6.
    Global Soybean consumptionis on the rise after a drop in consumption in 2008-09 due to drop in production due to poor demand with the total Soybean Oil production over 42 million tons annually as of 2011. Total Soybean Oil Consumption 44000 Thousand Metric Tons 42000 40000 38000 36000 34000 32000 2007/08 2008/09 2009/10 2010/11 Nov 2011 2011/12 Year Source: http://www.fas.usda.gov/psdonline/ China is the largest consumer of Soybean Oil and consumes 27% of the global production followed by United States which consumes 18% followed by Brazil which consumes 12%. India is the fifth largest consumer of Soybean Oil and consumes 6% of the global production. World Soybean Oil Consumption 1% 1% 1% 1% Country / Year 1% 1% 10% 4% China 2% United States 2% 2% 27% Brazil 6% Argentina 6% India 6% EU-27 18% 12% Egypt Mexico Source: http://www.fas.usda.gov/psdonline/
  • 7.
    Import Procedure &Strategy of Soya-bean oil (1507) and its fractions, whether or not refined, but not chemically modified Production & Consumption Trends of Soya-bean Oil in India from 1990 to 2010: India is the 5th largest producer of Soya bean oil in the world, following countries like China, Brazil, USA and Argentina. The major Soya bean producing areas in India are Madhya Pradesh, Himachal Pradesh, Uttarakhand and the Khasi and Naga Hills in the Eastern Indian states. Source: Indexmundi (United States Department of Agriculture) The annual production of Soya bean in India from 1990 onwards has been graphically plotted which shows an increasing trend, more than a 4-fold rise in the yields in the past 2 decades. Soya bean being a Kharif crop is usually sown in June in India. In some states, it is cultivated twice a year. The harvesting period for soya bean comes around September to October. It is highly dependent on monsoons, and any change in the rainfall pattern affects the production of soya bean significantly.
  • 8.
    Year Production (1000 MT) 1990 425 1991 400 1992 500 1993 650 1994 495 1995 712 1996 657 1997 859 1998 972 1999 774 2000 805 2001 833 2002 607 2003 1004 2004 810 2005 1239 2006 1157 2007 1499 2008 1287 2009 1340 2010 1715 Source: Indexmundi (United States Department of Agriculture)
  • 9.
    Year Domestic Consumption (1000 MT) 1990 445 1991 425 1992 562 1993 711 1994 555 1995 772 1996 706 1997 1095 1998 1805 1999 1564 2000 2080 2001 2231 2002 1910 2003 1942 2004 2737 2005 3000 2006 2500 2007 2330 2008 2300 2009 2810 2010 2650 As Domestic industrial consumption is very low, the domestic food consumption is a good measure of the total consumption in India. India ranks 5th in Soya Bean Oil consumption in the world as well. The annual consumption of Soya bean in India from 1990 onwards has also been graphically plotted which again shows an increasing trend, but a more than 5-fold rise in the demand in the past 2 decades, hence creating a need to import the crop to meet the rapidly increasing domestic demands.
  • 10.
    MAJOR EXPORTERS OFSOYABEAN IN THE WORLD Soy has been grown for three millennia in Asia and, more recently, has been successfully cultivated around the world. Today, the world’s top producers of soy are the United States, Brazil, Argentina, China and India. United States Large-scale development of soybean production and processing in the U.S. began during the 1940s and 1950s spurred on by a rapid increase in both domestic and worldwide demand for protein meal and oil. Harvested acreage for soybeans in the U.S. more than tripled between 1940 and 1955, from 4.8 million acres to 18.6 million, while total production of soybeans increased nearly five-fold, from 78 million bushels to 374 million. As the number of acres devoted to soybeans continued to grow during the 1960s, the United States became a world soybean superpower and began exporting large quantities of soybeans, as well as meal and oil, to Europe and Asia. Despite substantial growth in oilseed and oilseed product output in the past 25 years and recent gains in export volume, the U.S. share of global exports has steadily diminished. In the mid- to late 1970s, the United States dominated world trade in unprocessed oilseeds, with a global market share of more than 70 percent. Recently, this figure has fallen below 50 percent. From a smaller percentage base, the United States has seen its share of oilseed meal and vegetable oil exports decline even more sharply, particularly before 1990.
  • 11.
    DECLINE OF UNITEDSTATES AND THE RISE OF BRAZIL AND ARGENTINA While soybean exports from the United States have grown over the past 25 years, the share of U.S. exports in global oilseeds trade has declined. A key development has been the phenomenal growth of foreign soybean output and exports, particularly by Brazil and Argentina. Foreign soybean output now exceeds that of the United States, and Brazil and Argentina currently share more than half of the soybean export market, up from less than 15 percent before 1980. With increased soybean production and rapid growth in crushing capacity, Brazil and Argentina have each surpassed the United States in soy meal and soy oil exports. Another factor is the recent expansion of U.S. meat exports, which stimulates domestic meal use rather than exports of soybeans or soybean meal. Brazilian and Argentine soybean and meal exports are projected to continue capturing market share from the United States in the next decade. Brazil now trails only the United States in soybean production. Brazilian soybean growing regions used to be concentrated in the south, relatively near the major ports. In recent years, soybeans have expanded into the vast farmland of the centre-west states, as infrastructure improvements have cut internal transportation costs. Brazil's vast reserves of farmland could permit a continued significant expansion in soybean area, though expansion is currently limited due to insufficient transportation infrastructure. Argentina's soybean growing regions and crushers are located close to port facilities, where the country’s highly developed crushing industry and relatively small domestic market makes it the world's largest exporter of soybean meal and oil. A lower export tax on processed commodities than on unprocessed commodities also favours the export of soybean oil and meal from Argentina. Recent increases in production by Argentine and Brazilian grain and oilseed producers could foreshadow continued gains on the strength of abundant undeveloped agricultural resources, more stable economies, and expanding trade liberalization Given the amount of available arable land and water resources in Brazil, it is expected to eventually become the number one soybean-producing nation. Already, South America as a continent produces more soybeans than North America (combined U.S. and Canada production). In the past decade, large tracts of fertile land and low labour costs have fuelled explosive growth in South America’s soy industry. Poor road and rail infrastructure, as well as economic instability and environmental concerns, have been the primary checks to further expansion. In the U.S., soybeans are grown mostly in the Midwest. The top soy-producing states are Iowa, Illinois, Minnesota, Indiana and Nebraska. Many farmers in this region grow corn and soybeans in rotation. The Brazilian states with the greatest soybean production are Mato Grosso, Paraná and Rio Grande do Sul.
  • 12.
    List of Exportersfor Soyabean in 2010 20000000 18000000 16000000 14000000 12000000 10000000 8000000 6000000 Exported Value, USD thousand 4000000 2000000 0 Source: TradeMap As shown by the above graph, the leading exporter of soyabean in the world is United States followed by the two South American nations Brazil and Argentina. The percentage share in world exports is shown in the following graph 50 45 40 Share in World Exports (%) 35 30 25 20 15 10 5 0 United States Brazil Argentina Paraguay Canada Uruguay Netherlands Countries Source: TradeMap
  • 13.
    Major Importers ofSoybean Oil World oilseed trade consists of many closely substitutable commodities, such as soybeans, rapeseed, sunflower seed, and cottonseed. Countries also trade oils and meals obtained from crushing oilseeds. Foreign import demand depends on the difference between countries' domestic oilseed output and consumption. Divergent demand for protein meal and vegetable oil, as well as limits on domestic processing capacity, determines the ratio of oilseeds to oilseed products that countries import. The volume and source of foreign imports depends on seasonal availability and relative prices, credit and delivery terms, local preferences, and quality. Country policies, such as tariffs and domestic subsidies, also can affect prices and the availability of competing products. Some of the major importers of soybean oil in the world are: China: China is the world's fourth-largest producer of soybeans. The major Chinese soybean growing regions are in the northeast part of China. Yet, rapid growth of China's economy has spurred food consumption, turning the country into the world's leading soybean importer. Changes in China's agricultural and trade policies have greatly influenced world oilseed markets. China's WTO accession has reduced import tariffs and quantitative restrictions to its oilseed market. China:Imports(MT) 3000 2727 2494 2500 2000 1514 1319 1400 1400 1500 1000 500 0 2007/08 2008/09 2009/10 2010/11 Nov Dec 2011/12 2011/12 India: The major Indian soybean growing region is in the central state of Madhya Pradesh. Indian production of soybeans and other traditionally grown oilseeds—such as peanuts, rapeseed, and cottonseed—has increased in the last decade, although yields are among the worlds poorest. India often imposes prohibitive barriers on oilseed imports, so its domestic crushing industry relies on domestic oilseed supplies. Domestically produced oilseeds are highly valued sources of vegetable oil, but domestic consumption has risen faster than
  • 14.
    domestic production sothat India is now among the world's largest vegetable oil importers. India is a smaller (but growing) consumer of soybean meal, and exports its surplus to other Asian countries. India:Imports(MT) 1800 1598 1600 1400 1200 1060 945 1000 850 850 800 733 India:Imports(MT) 600 400 200 0 2007/08 2008/09 2009/10 2010/11 Nov Dec 2011/12 2011/12 European Union: The European Union is self-sufficient in vegetable oil production, but its protein deficit still makes it the world's largest importer of soybean meal and second-largest importer of soybeans. Since the 1960s, EU imports of soybeans swelled because of rapid growth in livestock production and duty-free concessions signed in trade agreements. In the 1970s and 1980s, soybean consumption slowed as EU agricultural policies subsidized a large expansion in domestically produced rapeseed and sunflower seed, eroding the market for oilseed imports. The U.S. Government challenged these subsidies and, in 1992, the EU committed to a number of reforms of its Common Agricultural Policy (CAP), including area limits on the planting of oilseeds. Further CAP reforms reduced per-hectare direct payments to oilseed producers to those received by grains producers. Until 2005, reforms encouraged EU farmers to scale back oilseeds planting. However, recent EU biodiesel policies have encouraged EU farmers to dramatically increase oilseeds area, especially rapeseed. In coming years, EU enlargement and CAP reform are projected to swell internal grain supplies and allow EU grain prices to fall even more. Despite relatively low protein-meal prices, the comparatively larger reduction in the cost of feeding grains to livestock should curb EU soybean meal consumption and imports. Historically, high import tariffs on cereals have boosted EU consumption of soybean meal, which has been favoured by duty-free access for soybeans. Over the last decade, lower grain prices and several animal disease epidemics resulted in significant increases in the feeding of grains and oilseed meals and a reduction in the feeding of nongrain feed ingredients, such as meat and bone meal .
  • 15.
    Imports:EU(MT) 1200 1036 1000 905 794 800 800 800 600 550 Imports:EU(MT) 400 200 0 2007/08 2008/09 2009/10 2010/11 Nov Dec 2011/12 2011/12
  • 16.
    Policy & Proceduregoverning import of Soybean Oil Import policies have played a key role in determining the overall level and type of India’s edible oil imports for decades. Although significant imports were permitted prior to 1994, they were controlled directly by India’s State Trading Corporation (STC) and subject to state- imposed import quotas. In 1994, the import regime changed fundamentally when, as part of its obligations under WTO rules, India eliminated the state monopoly on imports and placed imports under a privatized open general license (OGL) system. Under the new rules, India also agreed to eliminate import quotas and placed upper “bound” (maximum) limits on tariff levels. These changes made the rules governing edible oil imports more transparent and imports more responsive to market forces. Privatized Imports and Tariffication Key Policy Changes Prior to 1994, edible oil import levels were determined by the government and made by the monopoly STC, based on such factors as domestic market conditions, producer versus consumer interests, international prices, and foreign exchange availability. Although the government did at times permit relatively high imports— averaging as much as 1.3 million tons annually between 1976/77 and 1987/88—imports were sharply curtailed in 1988/89- 1993/94, when the government promoted domestic oilseeds production under its Technology Mission on Oilseeds (TMO) program. During the TMO program, oil imports averaged only 325,000 tons per year, leading to increased domestic oilseed prices and a temporary surge in domestic production. When edible oil imports were placed under the OGL system in 1994, private traders were permitted to import any quantity of vegetable oils, subject only to a tariff. The tariff was initially set at 65 percent on all edible oils—still relatively high, but significantly below the implied tariff when imports were under quantitative controls. Under the Uruguay Round Agreement on Agriculture (part of the agreement establishing the WTO) India also agreed to bound (maximum) tariffs of 45 percent for crude or refined soybean oil imports. Tariffs on all other edible oil imports were bound at 300 percent, except refined rapeseed oil and crude sunflower-safflower oils, which were subject to over-quota tariffs of 75 and 85 percent, respectively. In 1995-98, India’s tariff structure was relatively simple and increasingly liberal—with a common applied ad valorem (percentage) tariff for all oils progressively lowered to a uniform rate of 16.5 percent by the middle of 1998.5 Importers responded to the lower tariffs and declining international prices by importing 4.6 million tons of vegetable oil in 1998/99, up sharply from earlier levels, and more than double the level of imports in 1997/98. Beginning in 1998, however, the Indian Government began making frequent tariff adjustments to protect domestic oilseed producers and processors from imports and to smooth the effect of fluctuating world prices on domestic consumers (figs. 6a and 6b). Although applied tariffs fell in 1999 after an initial hike in June 1998, the trend after April 2000 were incremental increases to applied rates for all oils, with adjustments being made to the relative rates on different types of oil—e.g., palm versus soybean oil and crude versus refined oil— creating a more complicated tariff structure.
  • 17.
    The main effectof these changes was to slow the growth of imports, which declined from 6.0 mmt in 2000/01 to 5.2 mmt in 2001/02—but rebounded to 5.8 mmt in 2002/03. The tariff hikes also made the tariff on soybean oil increasingly preferential, since tariffs on palm, rapeseed, and sunflower oils could be raised well above the 45-percent tariff binding on soybean oil, although recent adjustments to the palm oil tariff have reduced this preference (see appendix, “Chronology of Trade Policy Changes Since 2000”). In addition to adjusting tariffs, the government established a tariff rate value (TRV) system for palm oil in August 2001 and for soybean oil in September 2002. The TRV system is intended to prevent underinvoicing (reporting low import prices to evade tariffs) by importers and establishes a government reference price for tariff calculations. The reference prices are supposed to be periodically revised to reflect actual market prices, but in practice, delays in making these adjustments have resulted in tariff assessments different from what would have occurred had tariff rates been applied to actual market prices. In September-December 2002, for example, differences between reference and market prices resulted in an estimated actual tariff of 59 percent for crude palm oil (compared with the declared rate of 65 percent) and 48 percent for crude soybean oil—above India’s WTO bound tariff rate on soybean oil of 45 percent. Thus, the TRV system could shift the composition of imports between palm and soybean oils depending on the relationship between reference prices and prevailing market prices. In summary, although Indian import policy is more transparent and liberal than prior to the mid-1990s, India has also used the flexibility within its WTO commitments to make frequent policy adjustments in response to evolving domestic and international market conditions. These adjustments make overall import demand and the market shares of different imported oils uncertain. Some other policy related aspects for import of soybean oil are: • Winterised and deodorized refined soybean oil can get automatic approval for Foreign Technology Agreements and can get approval for 51% Foreign Equity • The FDA Action Level for unavoidable pesticides like DDT, TDE & DDE in soybean oil is 1 ppm • The bound and applied tariffs on soybean oil is 45% • In March 2009 the Government of India did away with the 20% import duty on soya oil thereby making soya oil more competitive with palm oil • India’s trade policy requires that all imports of biotech food/agricultural products or products derived from biotech plants/organisms should receive prior approval from the Genetic Engineering Appraisal Committee (GEAC). Refined soybean oil derived from Round-up Ready soybeans is the only biotech food/agricultural product currently approved for import.
  • 18.
    Import planning ofsoybean oil for Indian markets Indian agricultural imports tend to consist of staple foods, such as vegetable oils and pulses (peas, beans, and lentils), of which there is chronic undersupply from domestic production. In 2008, vegetable oils (mostly palm oil and soybean oil), pulses and nuts accounted for 60 percent of all Indian agricultural imports. Notably, Indian imports of food grains (excluding wheat), feed grains, oilseeds, meat, dairy products, sweeteners, and processed foods were negligible in 2008. India is self-sufficient in many of these products. Currently India has about 45% bound and applied tariff duty on soybean oil. But apart from these trade related barriers India also imposes certain Non-Tariff Measures (NTMs). These NTMs allow India to curb imports on certain commodities and on soybean oil also. The Indian Government has these NTMs to encourage and increase domestic production of soybean oils. In general, high Indian tariffs and burdensome nontariff measures (NTMs) are the principal reasons impeding products from entering the Indian market. Low levels of trade in soybean oil are an outcome of Indian government policies aimed at food security, food self-sufficiency, and income support for farmers, implemented through domestic agricultural production support, tariffs and nontariff measures (NTMs), and export restrictions. Another important factor which one needs to keep in mind import planning for soybean oil is the price that one is giving in the international market. Currently, United States being the largest producer of soybean oils is the largest exporter, but many new countries like Argentina and Brazil are coming up very competitively and have reduced the world share of exports of United States for past few years. Limited imports from the United States reflect, in part, competition in the Indian market from other suppliers for soybean oil. Argentina is the largest supplier of soybean oil to the Indian market, accounting for 76 percent of Indian soybean oil imports, followed by Brazil with 18 percent. The United States accounted for only 2 percent of India’s soybean oil imports. Indian buyers reportedly buy soybean oil principally on the basis of price, and in recent years, Argentine soybean oil was priced lower than the U.S. product. It should also be kept in mind that India imports both palm oil and soybean oil. Since palm oil is cheaper than soybean oil so the duties on palm oil are less than that of soybean oil. But as of late the Government has fixed the duties on palm oil and soybean oil nearly same but soybean oil being a high selling product, still it is expensive to buy in the international markets and palm oil being a decent substitute, importers go for palm oil. India is one of the largest edible oil markets in the world, and domestic producers are unable to satisfy Indian demand. Several factors—soybean industry fragmentation; government policies that encourage small-scale activity and favour grain production instead of oilseed production; marketing and distribution inefficiencies; and irregular water supplies— negatively affect vegetable oil production in India. As a result, India imports roughly one-half of its annual consumption.
  • 19.
    With India’s laggingdomestic supply, low tariffs, and few specific nontariff measures, soybean oil producers could be in a good position to supply the Indian market except for two cost factors: prices for soybean oil substitutes and a global competitor’s export tax structure. India satisfies the overwhelming share of its vegetable oil import needs with low-cost palm oil from Indonesia and Malaysia because the Indian vegetable oil market is fairly price sensitive. When India does import soybean oil, it turns first to Argentine and Brazilian sources, as those producers have certain shipping cost and seasonal advantages. More importantly, Argentina uses a differential export tax scheme, which taxes raw soybean exports at a higher rate (35 percent) than soybean oil exports (32 percent). Although the tax on Argentine soybean oil exports raises their price on world markets, taxing raw material exports at a higher rate than processed product exports results in an export subsidy for Argentina’s oilseed processors. This export subsidy confers a competitive advantage for this commodity product over U.S. soybean oil in the Indian market.
  • 20.
    CHALLENGES: Soybean Oil andproducts have had their own share of challenges pertaining to different reasons. Some reasons are:- SCM/ Warehousing Challenges:- • Low soybean yield in India is the major constraint to realizing widespread expansion across different regions and different farm groups. Expansion of soybean production in India has been sustained only by area expansion. • The presence of low number of certified warehouses • The small size of the soybean harvest (relative to processing capacity), the short marketing season and the fact that most output is purchased locally (as almost all soybean crushing plants are located within the production region) are factors that have limited price volatility and long duration storage.
  • 21.
    • Although high yields of soybean are obtained on research plots and in demonstrations and maximization trials on the farm, their actual realization by a large segment of the farming population has not occurred. • The dependence of India on international markets for oilcakes in general is quite high. The price on the international markets depends mainly on the US crop. Given the high meal-to-oil ratio in the case of soybean, the expansion of Indian soybean cultivation will be constrained by the comparative advantage of our selling soy meal on the international market Financial Challenges:- • A price support policy is a necessary condition, but is not sufficient to sustain the accelerated expansion of soybean area and production. • Comparative economics, which is in favor of soybeans, is likely to be tilted against the crop if yields continue to decline. • Enough attention has not been paid either to the development of low cost soy foods. • The capital component in cultivation of yellow soybeans is nearly double that of black. This implies that the cultivation of yellow soybean is relatively more capitally intensive and involves higher cash expense compared to that of black. This is part of the reason that the black soybeans are favored by the farming community, who operate under severe capital constraint in M.P. Marketing Challenges:- • Enough attention has not been paid to the promotion of consumer awareness. • Lack of adequate efforts to promote consumer education on the nutritive value of soybean and soy products, and also suggestive of comparative economics working against the large scale consumption of soy products. • Lack of adequate marketing for raw soybeans is yet another major constraint in areas where developmental potential exists for soybeans. It is recalled that public support has mainly promoted production at the farm level, and the NAFED has been entrusted with
  • 22.
    the task ofimplementing the procurement policy of the government at support prices. The NAFAD has for the most part been inactive in M.P., because farm-factory interactions have promoted the role of private initiative in marketing. However, in areas where soybean adoption has yet to gather momentum, the procurement policy at support prices does not appear to have been effective. Traditionally, three marketing channels for soybean:- Channel-I- Producer—Village Merchant—Wholesale dealers—Processor—Refiners— Wholesale dealers of soybean oil—Retailers of soybean oil-consumers. Channel-II-Producer—Cooperative societies—Processors—Refiner’s wholesale dealers of soybean oil retailers of soybean oil-consumers. Channel-III-Producer—Wholesale dealer’s in Regulated Market—Processor—Refiners— Wholesale dealers of soybean oil-retailers of soybean oil-consumers. In general, the total marketing cost of soybean was observed highest on channel-I and lowest on channel-II. The producer share in consumer price was almost similar in channel-II and channel- III. Exploitation by middlemen should be checked. THE PFA (Prevention of Food Adulteration Act): Some mandates under the PFA act are as below for Soybean Oil:- • In case of any package containing bread or liquid milk, sterilized or Ultra High Temperature treated milk, Soya milk, flavored milk, any package containing dhokla, bhelpuri, pizza, doughnuts, khoa, paneer or any uncanned package of fruits, vegetables, meat, fish or any other like commodity which has a short shelf life, the date, month and year in which the commodity is manufactured or prepared or pre-packed shall be mentioned, on the label. • The declaration be made as follows: "BEST BEFORE.................DATE/MONTH/YEAR" OR "BEST BEFORE .............. DAYS FROM PACKAGING" OR
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    "BEST BEFORE ................DAYSFROM MANUFACTURE" OR "BEST BEFORE UPTO.... DATE/MONTH/YEAR For the Period OR up to and inclusive "BEST BEFORE WITHIN ...........DAYS FROM THE of Ist DATE OF PACK • Poisonous metals :- (1) Chemicals described in monographs of the Indian Pharmacopoeia when used in foods, shall not contain poisonous metals beyond the limits specified in the appropriate monographs of the Indian Pharmacopoeia for the time being in force. • Nickel is a poisonous metal that is identified for soybean oil. It should not be more than 1.5 parts per million of the entire package. • Insecticides and Pesticides: - Triazophos should not be more than 0.05 parts per million. Imazethapyr not more than 0.1 ppm. • The annual supplement to the Indian government’s Foreign Trade Policy (2004-2009) announced by the Commerce and Industry Minister on April 7, 2006, calls for approval from the GEAC for imports of biotech food, food additives, or any food product that contains biotech material that is being used for industrial production, environmental release, or field application. Also, import consignments containing biotech products should carry a self declaration that the product is bioengineered, without which the importer is subject to penal action under the Foreign Trade (Development and Regulation) Act, 1992. This rule became effective July 8, 2006. However, the government has given a special exemption to imports of soybean oil derived from biotech soybeans for consumption after refining.