India 'The Quiet Giant'

November 1, 2023 | Kriss Nelson

Earlier this year, India surpassed China as the world’s most populous country, reaching more than 1.4 billion people. And the country is only showing signs of growth. China’s population, meanwhile, is declining.

“China is in significant demographic decline, which they will not be coming out of anytime soon,” says Frank Kelly, founder and managing partner of Fulcrum Macro Advisors. By the year 2100, China’s population could be as small as 500 million.

Although China will remain a critical market for U.S. exports, including soy, Kelly believes little attention has been paid to the “quiet giant” of the globe, India.

Iowa Soybean Association (ISA) President-elect Brent Swart thinks market diversification when he hears about growth in a country, especially one that’s not a significant soybean buyer.

According to Trade Data Monitor, India imported more than 160,000 metric tons of soy products (primarily soybean oil) from the U.S. in 2022. China meanwhile, was the U.S.’s largest export destination, importing nearly 30 million tons of soy products (primarily whole soybeans) from the U.S.

“It’s exciting to be able to diversify our exports by having the potential to bring our product into a developing country like India,” says Swart, who grows soybeans and corn near Spencer in Clay County.

A reliable soy supplier

India is the world’s largest vegetable oil importer — with 75% of its sunflower seed oil coming from Ukraine. Sourcing a majority of their oil from a country engaged in war is risky, Kelly notes.

“I don’t know what India’s appetite is for soybeans, but going to where the market is safe and secure, like the United States, you would think, is going to be a huge factor moving forward,” says Kelly.

The U.S. has credibility in being a reliable supplier in recent years, says Mac Marshall, vice president of market intelligence for the United Soybean Board.

“During the 2021-22 marketing year, when there were disruptions to the global supply of vegetable oils, India turned to the United States for a couple of large spot orders of soybean oil,” says Marshall. “When other supplies became less available, the U.S. became a reliable and critical customer.”

When soybean meal became less available to India in 2021, the U.S. again stepped up with available shipments.

“When you combine this reliability with the potential of the market from an animal productivity standpoint, there are opportunities,” Marshall notes.

Growing protein markets

More people to feed means more demand for protein, Swart notes. “That presents a lot of opportunities for us as soybean farmers,” he says.

How much demand for soy? It depends on the growth in various markets, including the animal sector and its need for soy-based feed.

“Anytime we talk about markets where there is population growth and economic potential, we talk about increased protein consumption and what that means for soy, which is a critical piece for making animal protein,” says Marshall.

India is one of the largest shrimp producers, and has a rapidly expanding aquaculture industry.

“The aquaculture industry is a growing sector that is going to demand increasing amounts of soybean meal in the years to come for many reasons,” says Marshall. “Not only will they be seeking a high protein, high-quality soybean meal, but fish meal is perpetually getting harder to source, so soybean meal plays an important role in that aquaculture space.”

Soybean meal could also find its place in the terrestrial animal market.

Although there are cultural limitations to India’s protein consumption, poultry is increasingly becoming a part of the diet. Still below the world poultry consumption per capita, India’s poultry consumption has increased by nearly 40% in the last decade.

“These markets take time to develop, but the metrics around the trajectory we see on poultry consumption are encouraging in the future,” says Marshall.

A quarter of the world’s dairy cows are in India. Although the country’s dairy growers face challenges in efficiency, and their milk production pales in comparison to the United States, the inclusion of soybeans in dairy rations could heighten demand for U.S. soy. Research funded by the soybean checkoff is looking at the use of full-fat, high oleic soybeans in dairy rations and the potential to improve milk production.

“Here is a value-added channel we have for high oleic soybeans, and a market with a key trading partner that has underproduction of milk on a per-animal basis,” Marshall says. “There could be an opportunity there.”

Market headwinds

Kirk Leeds, chief executive officer for ISA, isn’t as optimistic about the India market. He’s seen the poverty while on a trade mission to India. He’s aware of the challenges as they relate to food security, consumer perceptions of food and feed production technologies, and the restrictions in place as they relate to trade.

“I wish I could be more optimistic about India, but it is not going to be a large market anytime soon,” says Leeds, who has worked with and for soybean farmers at ISA for more than 30 years. “However, that doesn’t mean we shouldn’t work to seize opportunities to export U.S. soybeans to India when they arise. They are in desperate need of increasing the protein in their diets.”

In September 2023, India, the largest world exporter of rice, began restricting rice exports to tame domestic prices.

“The people of India are worried about their agriculture and having to feed themselves. They are hoarding,” says Kelly, the founder at Fulcrum, the political and regulatory risk advisory firm in Washington, D.C. “A lot of this goes to the Ukraine War with the Black Sea Grain Initiative being broken by Russians actively attacking Ukraine grain shipments.”

Work continues in India and globally in sharing the attributes of using genetically modified technologies in food and feed production, Marshall says.

ISA Senior Director of Market Development Grant Kimberley shares Leeds’ sentiment on India.

“There may be small windows of exports, but in order for U.S. soy sales to grow in India, the country must continue to relax their regulations and trade barriers, which could happen if they experience more food shortages,” says Kimberley, adding he is more optimistic about trade opportunities in other areas of South Asia including Bangladesh, Sri Lanka and Pakistan.

“As more customers experience the attributes of U.S. soy meal, the hope is other markets will look more to the U.S. as a critical provider in the years to come.” Marshall says.

Is progress being made?

India is working on reducing trade restrictions and developing deeper relationships with the United States, Australia, Europe and Japan.

“There have been more free market agreements, more sales and building tremendous relationships between the United States and India,” says Kelly. Although India faces challenges to its infrastructure and markets, the country is rapidly evolving with the development of a large middle class, Kelly says.

With the potential of increased availability of U.S. soybean meal, now is the time to look at more global markets, including India.

“There is potential for economic growth on the heels of a very large population in India,” says Marshall. “As we think about the increasing demand for soy meal from the poultry and aquaculture space, there could be a great opportunity for customers in India to enjoy U.S. origin soy meal.”

Opportunities for U.S. Soy in India

Aquaculture

In the world of aquaculture, India is one of the top five largest producers of feed. While U.S. soy is currently not used in making aquafeed, the opportunities are endless. USSEC has consistently worked on capacity-building and knowledge sharing through events like regional animal production courses, In-Pond Raceway System workshops, on-site and in-classroom training, and more.

Feed Industry

In 2021, Indian poultry farmers were at a crossroads where they needed to feed the birds, but the feed cost was too high. The demand for feed outpaced local production. Soybean meal prices rallied to nearly $1,203 per metric ton at the benchmark location of Indore. The poultry, shrimp and feed milling industry, especially in the south, were compelled to petition the government for relief. Their petition pleas were answered with India allowing the importation of genetically modified soybean (GM) meal on August 24, 2021, for the first time in its history. This was a significant milestone for U.S. soy, and India imported around 800,000 metric tons of GM soybean meal, allowing new market access to U.S. soy.

Edible Oil

Whether it’s frying samosas or cooking dosas, food is an important part of Indian culture. Hence, it is no surprise that India is the second largest consumer and largest vegetable oil importer globally. Edible oil is also the sixth most significant import in India. It is estimated that by 2026, India’s need for edible oil will be 26-27 million metric tons (mmt). While India historically has imported soybean oil from Argentina and Brazil, in 2022, the droughts in South America led the Indians to turn to U.S. soy. India imported a record 180,000 metric tons of U.S. soybean oil.

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