The Hindu Business Line : World vegoil prices seen firm on tight supplies

IN continuation of the rally that started in October last year, world vegetable oil prices are expected to remain considerably firm over the next six months, aided by tightening supplies and depleting stocks. From May/June, weather in important origins such as the US, China and India would play a dominant role in influencing the direction of the market.

This was the broad consensus arrived at by experts from different parts of the world during the Annual Palm and Lauric Oils Price Outlook 2004-05 conference organised by the Malaysian Derivatives Exchange (MDEX) here.

Speaking on the impact of India's excellent monsoon rains on price outlook in the current year, Mr Dorab E. Mistry, the London-based director of Godrej International Ltd, said that the bullish trend would continue till April after which some pressure on prices could be expected from seasonal supplies of soyabean oil from South America.

The period between July and October could become interesting "if the demand engines of China, India, Pakistan and Bangladesh begin to crank in union," he warned, adding that weather concerns could strengthen the import demand in these markets from July onwards.

On the other hand, prices during October-December period could ease off if normal rainfall resulted in the harvest of a big oilseed crop, the expert pointed out. Remarking that China, and not India, holds the key to price behaviour, Mr Mistry said that China will become the world's biggest importer of oilseeds as well as oil in 2003-04.

Terming 2003-04 as one of lost opportunity for India, Mr Mistry criticised the government for its failure to increase acreage for oilseeds. Also, he was critical of the import policy of the government in stipulating carotene value for palm oil because it placed impediments in the way of orderly trade.

Notwithstanding a 2.1 million tonnes increase in domestic production, India would import about 4.5 mt of oil (excluding industrial oils) during 2003-04 compared with 5.1 mt last year, according to him.

Earlier, speaking on the China palm oil market outlook for 2004, Mr Tian Yu of Pansun Cereals and Oils observed that the country's vegetable oil consumption growth trend would continue into 2003-04.

A sizable increase in China's edible oil consumption in recent years is attributed to rapid economic development and improvement in people's living standards. From 13.4 million tonnes in 2000-01, consumption increased to 14.1 mt the following year, followed by a significant expansion to 17.5 mt in 2002-03. For the current year, it is forecast at 18.2 mt

China's edible oil imports in 2003-04 are projected at 5.3 mt, up from 4.9 mt of last year, catapulting the country once again to the top slot as world's largest importer. Amongst oilseeds, import projection for soyabean is 22 mt.

While import of oilseeds and oils will maintain strong momentum owing to a big shortage of domestic supplies, "China will import oil prudently as prices in domestic and international markets have reached a high of recent years amid mounting risks," he cautioned.