Despite overproduction of soybeans, India imports large volumes of soybean oil

Despite the government’s active policy to support the oilseed sector, India is facing a paradoxical situation: domestic soybean prices remain below the minimum procurement price (MSP), while soybean oil imports are increasing. For two consecutive seasons, starting from October 2023, procurement prices in the main producing states – Madhya Pradesh, Maharashtra and Rajasthan – have been consistently below the MSP. Meanwhile, soybean oil imports from Brazil, Argentina and the US have been increasing steadily.

It would seem that cheaper imports could explain this trend, but analysis shows the opposite: soybean oil produced in India is cheaper than imported by 16-21 rupees per liter. Despite this, there is a shortage of buyers for local soybeans in the domestic market, which leads to its overproduction and a further fall in prices in agricultural farms.

The main reason for the stagnation of prices is the surplus of soybean meal, which arose due to the global record soybean harvest and aggressive production of processed products in the USA and Brazil. In addition, Indian farmers have faced competition from DDGS (Distillers’ Dried Grains with Solubles) – a cheaper alternative to soybean meal in the feed industry, which is actively growing due to government programs to develop bioethanol.

The difficult situation with overproduction of soybeans requires urgent intervention by politicians and agricultural analysts. Instead of reducing production, it is necessary to reconsider the strategy of supporting farmers, promote the expansion of domestic and foreign markets for soybean meal and invest in increasing yields. Without an integrated approach, India risks finding itself in a situation where a strategically important sector becomes economically unprofitable for producers.

Tags: soybean oil, soybean, India