The Hindu Business Line : Bear grip on edible oils may extend till June

FACED with a good kharif crop and prospects of a better rabic production, edible oil prices in the country are expected to be bearish at least until June.

"Domestic availability of edible oil is expected to be higher by at least three lakh tonnes as a result of good oilseeds crop this year. Also, the National Agricultural and Cooperative Marketing Federation (Nafed) has a stock of 15 lakh tonnes of rapeseed. These are likely to affect the sentiments in the edible oil market," said industry sources.

According to Mr B.V. Mehta, Executive Director, Solvent Extractors Association of India, the Centre may have to step in to procure oilseeds such as soyabean if the current trend in oilseeds continues.

"The Centre may have procure soyabean at minimum support prices (MSP) to help the growers," he said.

Kharif oilseed output this season (July 2005-June 2006) has been estimated at 133.7 lakh tonnes compared with 123.6 lakh tonnes last season. This season's gain comes from 5.0 lakh tonnes rise in groundnut and 3.1 lakh tonnes increased in soyabean production.

"Rapeseed mustard sowing during rabi has been good. I think if the conditions remain favourable, we could get a production of 65 lakh tonnes," Mr Mehta said.

Rabi oilseeds sowing is up by over three lakh hectares currently, with rapeseed acreage rising by 4.87 lakh hectares. "Sowing in other oilseeds such as groundnut could catch up in the next couple of weeks," industry sources said. Currently, groundnut coverage is lagging behind by 74,000 hectares at 2.65 lakh hectares.

"There are two things to the current domestic developments. One, edible oil prices will be ruling low. Two, imports of oil for edible purpose could be static at 50 lakh tonnes, lower by one lakh tonnes compared with the last oil year (November 2004-October 2005)," said Mr Mehta.

Besides, imports for vanaspati units and non-edible uses could be around 6.5 lakh tonnes. That means, total vegetable oil imports of 56.5 lakh tonnes during the current oil year compared with the estimated 56.6 lakh tonnes last season.

At the global level too, a rise in soyabean production in the US, Argentina and Brazil is casting pressure on the prices.

"The scenario both global and domestic is bearish despite vegetable oil being used as bio-fuel in Europe," Mr Mehta said.

The global developments has led to crude palm oil hovering around the 1,400 Malaysian ringgits a tonne level from around 1,430 ringgits three months ago.

In the domestic market, the projections of a good crop has seen groundnut prices decline by Rs 200 a quintal in the last couple of months to Rs 2,240 currently. Similarly, soyabean prices are down Rs 100-125 a quintal to Rs 1,125.

Groundnut oil prices have dipped to Rs 455 for 10 kg currently from Rs 520 on August 1, when monsoon was suspected to have affected production. Refined soyabean oil has slid to Rs 432 from Rs 460.

MSP prices for groundnut (in shell) is Rs 1,520 a quintal and for soyabean it is Rs 1,100.

"There should be no problem as long as the prices are above MSP. We feel this time too the Centre may have to procure rapeseed," the sources said.