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MUMBAI, May 24 (Reuters) - Indian farmers are set to reduce the area given over to soybeans by up to 10 percent this year in response to falling prices, pushing up likely imports of edible oils such as palm oil and soyoil.
Soybean is the main summer-sown oilseed crop for the world's biggest importer of edible oil, but prices have dropped 10 percent in the past two years, while the prices of pulses such as red gram have nearly tripled over the same period.
Lower soybean output will force the country to increase imports of edible oils, supporting their prices. It could also limit India's soymeal exports, given prices for its GMO-free produce are already above international prices.
The further price rise due to lower supply could even make imports of soymeal viable for local consumers.
"In the last two-three years soybeans have given lower returns than competing crops like pulses," said K N Rahiman, chief research officer at Ruchi Soya, the country's biggest edible oil refiner.
"This year, since pulses prices are ruling near record high levels, farmers will be inclined to shift towards pulses. We could see 5 to 10 percent reduction in soybean area."
Farmers planted 11.63 million hectares with soybean in 2015/16. A 10 percent reduction would cut acreage to around 10.5 million hectares in the 2016/17 marketing year starting July.
Most Indian farmers begin cultivating soybean and pulses, which are rain-fed crops, in June after the arrival of the monsoon rains, and they are sown mainly in the states of Madhya Pradesh in central India, Maharashtra in the west, Rajasthan in the north-west, and Andhra Pradesh and Karnataka in the south.
Dinesh Garg, a farmer from Morena in Madhya Pradesh, plants soybean during summer, but this year he has decided instead to cultivate red gram, better known locally as tuar.
"Soybean is not remunerative due to lower prices. This year I am more interested in growing tuar," said Garg, who cultivated soybean on 5 hectares of land last year.
Soybean production plunged 20 percent in 2015/16 to its lowest in more than a decade after drought and pests hit output.
India exports soymeal mainly to Asian buyers, but the drop in production has forced it to import soymeal and soybean in small quantities for the first time in many years.
Since the country imports most of its edible oil, limited soybean supply means imports will go up in 2016/17, said Faiyaz Hudani, associate vice-president, research, at Kotak Commodity Services Ltd.
"Even though oilseed production is stagnant, edible oil consumption has been rising steadily due to growth in population and rising prosperity," Hudani said.
India imports mainly palm oil from Indonesia and Malaysia, while it brings in soyoil from Argentina and Brazil. (Additional reporting by Sankalp Phartiyal in NEW DELHI; Editing by Biju Dwarakanath and Richard Pullin)