29/04/2010 (Bloomberg) - Soybean prices in India must drop by about 9 percent to help domestic crushers end losses caused by competition from cheap edible oil imports, an analyst said.

The benchmark Indore soybean price needs to drop to 1,800 rupees ($40) per 100 kilograms (220 pounds), from 1,978 rupees yesterday to make crushers competitive, Nagaraj Meda, managing director at traders' advisory company TransGraph Consulting Pvt., said in an interview.

"Soybean prices have to come down to a realistic level," Meda said by phone from the southern city of Hyderabad yesterday.

Crushers are losing "600 rupees to 1,000 rupees" per ton of soybeans processed, said Ashok Sethia, president of the Solvent Extractors' Association of India, on April 24. "If we don't process, we lose on overheads and fixed expenses. No plant in India has made a profit in the last six months."

Crushing of oilseeds has declined in India as farmers and traders withhold supplies on expectations that domestic prices will rise after a drought in 2009 cut output. Reduced processing has boosted oilseed stockpiles, while cheap duty-free imports of edible oils have cut prices, reducing profit margins for domestic oil producers and likely lowering overseas purchases of products like palm oil.

India was the world's biggest palm oil importer in 2009, and is Asia's biggest exporter of soybean meal, used in animal feed.

The country's imports of crude and refined, bleached and deodorized palm oil may drop in the two months ending May 31 to 740,000 metric tons, 34 percent lower than the same period last year, Meda said. Processors are losing 15 rupees on every 10 kilograms of crude palm oil they refine, he said.

Exports Drop

India's output of oilseeds including soybeans and peanuts may total 23.1 million tons in the year ending June, down from 24.26 million tons a year earlier, according to the Solvent Extractors' Association.

Exports of soybean meal from India may drop this year to about 2.65 million tons in year ending September, from 3.59 million tons a year earlier, as duty-free imports makes crushing of domestic oilseeds unprofitable, Thomas Mielke, executive director at Oil World, said in an interview on April 24.

The South Asian nation's ports have vegetable oil stockpiles of 650,000 to 700,000 tons this month, compared with a normal stock of 200,000 to 300,000 tons, Meda said.

India's total oilseed stockpile may total 15.2 million tons on June 1, about 40 percent higher than normal levels, Meda said.