Farmers hurt by low soybean prices shift to maize, lured by rising demand for ethanol

Mint

3 days ago

New Delhi: The government's aim of reducing agricultural imports and making the country self-sufficient in oilseeds seems to be facing setbacks this kharif season due to unremunerative prices for farmers and growing demand for ethanol.
The area on which import-dependent crops such as oilseeds is sown has declined, according to data from the Ministry of Agriculture and Farmers Welfare on 25 July. The area under oilseeds dropped by 383,000 hectares from last year.
The fall in oilseeds sowing is mainly due to a sharp decline in the cultivation of soybean — India's main kharif oilseed crop — although there were small increases in areas under groundnut and sesamum. The total area of oilseeds cultivation dipped 2% to 16.7 million hectares, primarily due to fall in soybean area by 3.8% to 11.7 million hectares. Soybean constitutes 65% of the total area under oilseeds.
Farmers said market prices are lower than the minimum support price (MSP) that the government offers to purchase soybean. However, unlike for paddy or wheat, there's no large-scale procurement infrastructure for soybean. In some states, state-run agencies may buy soybean under a price support scheme, but these are limited in scope and budget. These factors force soybean farmers to switch to crops like maize, which offers better marketability.
'For an acre, the input cost varies from ₹18,000 to ₹20,000, and the production ranges between 5-6 quintals per acre, while the market price of one quintal of soybean was between ₹4,000 and ₹4,100 — which was much below the MSP (minimum support price) of ₹4,892 for crop year 2024-25," said Ganesh Nanote, a soybean farmer from Vidarbha in Maharashtra.
Although the government increased the MSP of soybean to ₹5,328/quintal on 28 May, it still failed to attract farmers to cultivate the key oilseed.
Ethanol blending
'Since maize is in demand and has higher saleability than soybean, farmers are diversifying towards maize production due to its demand in the ethanol blending programme," said Nanote.
India blends as much as 20% of ethanol—a byproduct of some crops—in petrol to reduce carbon emissions from use of the automobile fuel.
The decline in oilseed output comes even after repeated government efforts to boost domestic production and reduce import dependence, especially after recent global supply disruptions caused edible oil prices to rise. India imports over 60% of its edible oil needs and has targeted expanded cultivation under the National Mission on Edible Oils – Oil Palm.
Apart from the farmers, the edible oil processing industry also faces pressure as shrinking margins due to lower oilmeal prices and uneven supply of oilseeds make it harder to operate at scale. Industry executives argued that unless oilseed cultivation is made economically viable for farmers through targeted support and stable pricing, supply-side constraints will continue to hurt both producers and processors.
'In Punjab, farmers initially picked up sunflower cultivation, but the prices were not remunerative, so they stopped," said A.R. Sharma, chairman of the Sangrur (Punjab)-based Ricela Group of Companies, which processes rice bran oil. 'Secondly, maize is widely used as a feedstock for ethanol in recent years. This has led to increased availability of distillers dried grains with solubles (DDGS), a by-product of ethanol production, primarily from maize, which is widely used in the cattle and poultry industry."
The increased availability of DDGS has affected demand for traditional oilmeals and has led to a significant drop in their prices and as a result, processors are finding it difficult to offer farmers a remunerative price, Sharma added.
Blow for farmers
'Last year (2024-25), the prices were not good, so we switched to maize this year as it offers better returns. The decline in earnings from soybean, coupled with rising input costs, has affected farmers badly, leading many of them to diversify," said Mahesh Kumar, a farmer from Morena in Madhya Pradesh.
According to him, non-remunerative prices have come as a significant blow, especially for small and marginal farmers.
Production of oilseeds stood at 41.35 million tonnes in FY23, which decreased to 39.9 million tonnes in FY24 before rising to 42.6 million tonnes in FY25. Soybean production was 14.98 million tonnes in FY23, 13.06 million tonnes in FY24, and 15.18 million tonnes in FY25.
Queries sent to the ministry of agriculture remained unanswered.
Cotton, a key crop for both the government's self-reliance plan and the textile industry, was sown on 10.3 million hectares as on 25 July compared with 10.5 million hectares last year.
In the case of cotton sowing, Nanote — who diversified from cotton to soybean initially and is now shifting to maize — said labour shortages, poor price realisation, and outdated seed technology have pushed him to opt for other crops.
The MSP of cotton for the 2025-26 crop year was increased to ₹7,710 per quintal from ₹7,121 per quintal for medium-staple cotton, and to ₹8,110 per quintal from ₹7,521 per quintal for long-staple cotton.
India's cotton production stood at 33.66 million bales in FY23, declined to 32.52 million bales in FY24, and further dropped to 30.69 million bales in FY25. (1 bale = 170 kg).