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Key highlights
- After a sharp increase in 2020-22, the average selling prices of soybean have been declining
- On average, the oilseed sold for INR 4,305 per quintal in July 2024, below the prevailing Minimum Support Price of INR 4,600 per quintal
- The trend is not specific to India – global prices have been falling and are predicted to decrease further
Soybean (also called soyabean or soya bean), a kharif crop, has a variety of uses. From soy sauce to tofu, refined soya oil and soybean nuts, to being one of the most important sources of animal and cattle feed, the oilseed is a rich source of protein. In fact, the Indian Institute of Soybean Research calls it the “numero uno oilseed crop in India” on the homepage of its website.
However, farmers cultivating the crop, currently find themselves in a difficult spot. On average, farmers sold off their soybean at INR 4,305 per quintal during July 2024. This was lower than the prevailing Minimum Support Price (MSP) of INR 4,600 per quintal, and significantly lower than the modal market price of the legume till recent months (Figure 1).
But this fall in prices is not specific to India – with improved supplies, global prices of soybean have been on the decline since last year, and are forecast to fall further in the near future. While cooling prices of edible oils may offer relief to households’ budgets amid stubborn food inflation, for farmers, the picture looks very different, and grim. With many of them having taken loans against their crop, falling prices are a source of distress.
In this analysis, we take a dive into soybean prices in more detail – the landscape of production and consumption, price trends in the past few years, and the implications of falling prices for farmers.
Soybean production and consumption
India was the fifth largest producer of soybean in the world in 20231, behind Brazil, USA, Argentina and China, and produced roughly three percent of the global soybean production, data from USDA’s Foreign Agricultural Service shows. An estimated 130.5 lakh tonnes of soybean is projected to be produced in the country in 2023-24 (Jul 23 -Jun 24), the Department of Agriculture and Farmers’ Welfare’s third advance estimates show, comprising one-third of the total estimated oilseed production in the country (395.9 lakh tonnes) for the year.
India’s total consumption of soybean was 136 lakh tonnes in 2021-22, according to the International Grains Council data. This is forecast to remain the same for 2024-25. The crop is primarily a rainfed crop cultivated during the summer (kharif season), with Madhya Pradesh, Maharashtra and Rajasthan producing the bulk of the oilseed. In addition to domestic production, India also relies on imports to meet its domestic demand for soybean oil and products (Figure 2).
Soybean prices in the past few years
Arrival prices of soybean in India’s mandis (agricultural markets) had been growing at a relatively flat pace for much of the 2010s. By the second half of 2020, however, they started rising, slowly at first, and by March and April 2021, the prices had increased by 11.8 percent and 24 percent month-on-month respectively (see Figure 1).
This trend was mirrored by average wholesale and retail prices of soya oil as well, data from CEDA’s Daily Food Price tracker sourced from the Department of Consumer Affairs show. From costing consumers under INR 100 per kg on average at the beginning of 2020, average retail prices of soya oil had grown 1.5 times by January 2021, and peaked in May 2021. By September 12, 2024, they had come down to INR 118.92 per kg on average.
The jump in prices was due to a mix of domestic and global factors. Excessive rainfall and pest attacks damaged soybean crops in Madhya Pradesh and Maharashtra in 2020. A parallel reduction in palm oil imports added to supply shortages of edible oils in general. Drought in Argentina and Brazil, two global leaders of soybean production, hit global supplies even as demand remained high, pushing up prices. With soaring oil prices putting pressure on household budgets, and soymeal prices putting the poultry industry under pressure, the Indian government tweaked its import policies to ease the inflow and improve supplies. As supplies have improved, prices have decreased in response.
The global scenario
Soybean prices have been on the decline globally too. Soybeans were trading at USD 604 per metric tonne (1 metric tonne is 10 quintals, or 1,000 kg), in 2021-22, and rose to USD 668.5 per metric tonne in 2022-23, data from the World Bank’s pink sheet shows. By 2023-24, the price came down to USD 586.6 per metric tonne, and further to USD 463.4 per metric tonne in 2024-25 (till August 2024). Similar trends are observed in the prices of soybean oil and soybean meal.
“Downward pressures on soybean prices stemmed from near-record production in Brazil, a near-doubling of production in Argentina, and subdued Chinese demand,” the World Bank noted earlier this year. Further, the global soybean production is set to increase to a record high, the Bank noted, forecasting that soybean prices would decrease by 16 percent in 2024 and five percent in 2025. The Bank also anticipated an increase in soybean’s harvested area, which will bring prices down further.
What’s hurting the farmers
Six percent of India’s agricultural households cultivated soybean in the kharif season of 2018, the Situation Assessment of Agricultural Households and Land and Holdings of Households in India, 2019 (NSS Round 77) estimates. The oilseed was the fifth most cultivated crop in the same period, behind paddy, maize, bajra, and cotton (cultivated by 53.2 percent, 11.3 percent, 8.3 percent and 7.2 percent of agricultural households, respectively). In the top three cultivating states – Madhya Pradesh, Maharashtra, and Rajasthan – this share was significantly higher (36.3 percent, 32.2 percent and 11.4 percent, respectively). The average cropped area per household was 1.175 hectares, and the average value of production of soybean was INR 37,584 per household as per the survey. While this value was only lower than cotton and sugarcane among the crops cultivated in the period Jul-Dec 2018, but only 54.5 percent of households expressed satisfaction with the sale outcome, with 39.8 percent expressing dissatisfaction due to the sale being “lower than market price”).
This share (and value) is likely to have increased in recent years, with several farmers having turned to cultivating soybean as it fetched better prices. The area under cultivation has grown from 10.3 million hectares in 2017-18 to 12.5 million hectares in 2023-24 (numbers for 2023-24 are as of Sep 09).
A year ago, in August 2023, the modal selling price of soybean was INR 4,752 per quintal across India (with the MSP fixed for INR 4,300 per quintal). The Indian government increased the MSP to INR 4,600 per quintal for the 2023-24 Kharif season. The average arrival price has remained below this price for most months in the past year.
Political pressures and policy measures
The government fixes the MSP at 1.5 times the cost of cultivation of any crop. The cost of cultivation is estimated based on all the paid-out costs incurred by farmers, such as physical inputs, labour costs, rent for leased-in land etc (called the A2 cost), and the imputed value of family labour (called the FL costs). In its recommended Price Policy for 2024-25, the Commission for Agricultural Costs & Prices that recommends the MSP for various crops, estimated that it would cost a farmer INR 3,261 to cultivate a quintal of soybean. Based on this, the MSP for soybean has been hiked further to INR 4,892 for the upcoming Kharif season of 2024-25. The MSP is already a conservatively estimated price, and therefore, when average selling prices remain consistently below this, farmers barely recover their costs, and may run the risk of incurring losses.
A special characteristic of soybean is its ability to be stored for up to two years. Farmers in India can avail loans against the crop they have stored in warehouses, based on the prevailing market prices. With prices falling, farmers who had availed these loans some time ago, find themselves in a precarious spot on loan repayment.
Earlier this year, the government extended the lower import duties on edible oils for another year till March 2025 to keep prices in check. The previous deadline for the same was March 2024. Soybean farmers, who were expecting prices to improve, were left disappointed. Some have started considering moving to other crops (see field reports here, here, and here).
Maharashtra, one of the primary producer states, is all set to hold assembly polls later this year. With farmers in the state impacted, soybean prices have become a sensitive political concern. The Central government recently announced that it would be procuring soybean at the MSP from Maharashtra, Telangana and Karnataka under the central Price Support Scheme. The Maharashtra government is also urging the Indian government to increase import duties to limit supply, and improve prices. The Reserve Bank of India, in the meantime, continues to remain cautious of edible oil prices.
Global prices of soybean are likely to fall further in the near future. While that may spell respite for consumers and India’s monetary policy makers, for farmers, the outlook is less optimistic.
1 Marketing year 2023 (covers the period Oct 2022 to Sep 2023).
To cite this analysis: Akshi Chawla & Kulvinder Singh (2024). “A summer of discontent for India’s soybean farmers” Centre for Economic Data and Analysis (CEDA), Ashoka University. Published on ceda.ashoka.edu.in
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