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M.R. Subramani

Chennai, May 8 Prices of cooking oils, which have increased by between Rs 3.50 and Rs 11.60 a kg since March 1, are likely to increase further in the medium term.

With crude oil showing signs of recoveryfrom the downturn, as also is the global economy, a host of commodities, led by vegetable oils, are showing signs of rising.

Vegetable oil prices have been gaining due to a slew of factors, including strengthening of crude oil prices, falling inventories (particularly in the case of palm oil) and fears of lower soyabean output.

Palm oil has been the one that has increased the most since March 1. It has increased in Mumbai market to Rs 457 for 10 kg as on Friday from Rs 339 on March 1. The increase has been the least in the case of rapeseed/mustard oil to Rs 520 for 10 kg (Rs 485). Rapeseed/mustard oil still is the second costliest edible oil in the country after sesame oil, which is currently ruling at Rs 740 for 10 kg.

“One of the major drivers of vegetable oil prices has been the lower projection of soyabean production in Argentina. The crop there is now forecast at 36 million tonnes against initial projections of 48 million tonnes. A downgrade of 12 million tonnes is not something small,” said trade sources.

The other reason is the fall in Malaysian stocks of crude palm oil. From a high of 2.27 million tonnes in December, the stocks on Thursday were estimated at 1.2 million tonnes, a two-year low. Besides, unrest in Argentina, where farmers are up in arms over export tax on commodities such as soyabean, has also led to increase in the prices.

“In fact, in view of the problems in Argentina, Indian importers contracted over one lakh tonnes of US soya oil last month. It is after a long time that such a quantity has been contracted from the US. There are two advantages due to this. One, the quality and two, lower freight charges,” the sources said.

In fact, Indian edible oil industry players see imports into the country continuing as long as RBD palmolein rules below Rs 50 a kg. “Imports will continue to be heavy in the coming months or until kharif crop arrivals,” the sources said.

Till March, vegetable oil imports for the current oil year to October were 59 per cent to 35.92 lakh tonnes. Going by the current trend, the industry sees the shipments into the country at a record 75 lakh tonnes with crude palm oil making up 50 lakh tonnes.

Other factors seen bullish for the vegetable oils counter are shrinking soyabean supplies in the US and dropping yield in South America. China has bought a record five million tonnes of soya for May and another four million tonnes for June.

Though purchase by Beijing is expected to be lower during July and August, the news that Chinese farmers will grow less of soyabean this year would still continue to impact bullishness in the market.

Crude palm oil for delivery in July was quoted at $765 a tonne, rounding off with gains for the 11th consecutive week. If soyabean closes above $11.14 a bushel in Chicago during the weekend, then it would be fifth time in six weeks that it would have gained.

“Indian imports will continue for some more time. The new government that will take over later this month may not tamper with the duty-free imports, at least until a clear picture emerges on the kharif crop,” the sources said, adding that any decline in the prices would only be for further consolidation.

More Stories on : Oilseeds & Edible Oil | Outlook

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