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M.R. Subramani

Mumbai , Sept. 25

WITH bio-diesel fuelling demand, vegetable oil prices are seen heading higher during the next 12 months, according to trade experts.

The experts, who came up with their view on various aspects of vegoil trade at Globoil India, also projected the country to import over 50 lakh tonnes of edible oil starting November with most of them pegging it around 55 lakh tonnes. A couple of players feel the imports could be less at around 45 lakh tonnes since the country holds 20 lakh tonnes of mustard stocks.

According to Mr Dorab Mistry, Director, Godrej International Ltd, crude palm futures in Malaysia could rule between 1,400 and 1,500 Malaysian ringgit a tonne, with the prices creeping towards the top-end around February.

"This will put RBD olein in the $400-450 a tonne range from the current $370-420 range f.o.b, while crude de-gummed soyabean oil could rule at $460-500 f.o.b," he said in his outlook for world edible oil price.

The price could also be aided by the six million tonnes increase in global demand against 5.3 million tonnes rise in production. Though drought in Brazil cut production, higher palm production from August 2004 to July 2005 has helped ease the situation.

"However, the production pattern between October and November should be interesting since the trees need rest and recuperation. If that happens, then palm oil will rise only marginally," Mr Mistry said.

Area under soyabean in Brazil could either stagnate or decline during 2005-06, but the yield could be higher. A larger canola crop and high rapeseed prices in Europe currently will help get an additional one million tonnes of rapeoil next season. Production of coconut oil, on the other hand, could decline.

"If crude palm oil prices trade consistently at 1,500 or 1,600 ringgits, plantations will experience unparalleled prosperity and acreage under the crop will expand," he said.

Again, if energy prices continue to rule high at the current level, then additional acres need to be found for the annual six million tonnes rise in demand. "But let the bulls not get carried away, we must never underestimate human resourcefulness and ingenuity," he said.

On the Indian scenario, Mr Mistry said imports this season were 10 lakh tonnes higher than initial projections of 48 lakh tonnes. Next season's import could be the same as this season, he said.

Stating that Indian prices no more dictated global prices, he said domestic prices would rise only if the rates increased in the international market.

Dwelling on bio-diesel demand, Mr Mistry said taking into credit the upcoming capacity of bio-diesel demand, there may be additional demand for 1.6 million tonnes of soyabean oil. This, in theory, he said, could wipe out the entire carryover stocks of the US, which currently is 7.25 lakh tonnes. Tax exemptions and installation of new capacity in Mid-West of US could make production of bio-diesel from soya oil attractive. This, in turn, could lead to sharp hike in soya oil prices, he said.

Earlier at the price outlook session, experts said edible oil prices could rise in the next three months after witnessing an initial dip. According to them, soyabean oil could rise to $530-545 a tonne f.o.b in the next three months, while that of palm oil could range between 1,430 and 1,500 ringgits.

However, the experts said the market would have to consider an overbought situation in India and Pakistan. But the oncoming festivals of Diwali and Ramzan could see a rise in consumption besides a fall in production. All these could keep the prices steady.

According to the experts, current rains in Madhya Pradesh and Rajasthan could help the rabi oilseeds crop but much would depend on the moisture content.

Domestic prices, according to them, are expected to dip in the short-term and may gain towards November.

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