The Securities and Exchange Board of India suspended futures trading for soyabean and its derivatives, amongst six other agricultural commodities on 20th December. The restrictions have been put in place following sustained high prices, amid a rise in demand for biofuels from the US, Brazil and Argentina, which has limited supply available for major soyabean oil importers such as India. Despite the government’s decision to cut excise taxes previously, India’s domestic food products prices have continued to increase. In particular, Mintec’s Indian soyabean market prices were up by 50.95% year-on-year (y-o-y) at INR 598,912/MT (EU 696/MT) on 15th December. Accordingly, the trading suspension is expected to last for a year in order to ease upward pressure on prices. However, market participants suggest that this might not be effective in the long run and could only ease prices in the short term, as local prices move in tandem with international prices.
In addition, the emergence of the fast-spreading Omicron variant has raised concerns about reduced demand for vegetable oils such as soyabean oils for biofuels. If conditions persist, it is likely prices will continue to decline in H1 of 2022. Additionally, Brazilian soybean farmers are expected to harvest their crop around Christmas 2021, earlier than usual, despite potential dry weather concerns. This early harvest is likely to provide further downward pressure for prices in the short term, as more supply enters the market.