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Thursday, Dec 28, 2006
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Oilseeds & Edible Oil Agri-Biz & Commodities - Commodity Markets Vegetable oil prices seen firming up further Gargi Shah
Reasons for flare-upOpening stock of vegetable oils this oil year starting November was a low 3 lakh tonnes. Imports declined to 44 lakh tonnes from 51 lakh tonnes last oil year.
Mumbai , Dec. 27 Lower domestic oilseeds production in kharif season, slowing imports, high international prices and suspect prospects for the rabi crop have combined to keep the vegetable oil market on the boil. As the domestic market moves away from the last harvest (the next harvest is over two months away), prices are expected to further strengthen, aided by strong rise in palm oil. Crude palm oil touched an 8-year high on December 26, threatening to breach the psychological level of Malaysian ringgit 2,000 a tonne.
Diversion
Large diversion of vegetable oils - palm oil, rapeseed oil and soyabean oil - for bio-diesel production around the world is the trigger for the price spurt. The market may gain further in the first quarter of 2007 is the consensus view of players. "Edible oil prices are expected to be 10-15 per cent higher during January-March next year," said Mr Pradip Desai of Palmtrade Services, a trade intermediary.
Opening stock
The opening stock of imported oils for the new season beginning November was relatively low at about 3.0 lakh tonnes. Large stocks of rapeseed/mustard with the National Agricultural Cooperative Marketing Federation, uncertainties relating to their sale as also suspense over rates of tariff value and customs duty discouraged importers from contracting for large parcels. For the oil year ended October 2006, vegetable oil imports aggregated 44 lakh tonnes (lt) versus 51 lt in the previous year. It is too early to assess the prospects for the next oilseed crop (mainly rapeseed/mustard and groundnut) to be harvested in March/April; but looking at acreage numbers, there could be reduction in rabi oilseeds output. Weather conditions over the next eight weeks would also play a critical role in deciding yields.
Import needs
Therefore, India's vegetable oil import requirement in oil year 2006-2007 may rise by 15-20 per cent or about eight lakh tonnes. Imports to the tune of 12 lt are expected during the first three months of 2007 with palm oil products accounting for 80 per cent at 11 lt, estimated Mr Desai. Soya oil imports are expected to be two lakh to three lakh tonnes during the first quarter of 2007, according to Mr K.S. Swaminathan, Vice-President, Marketing, Liberty Oil Mills. International oil market is expected to remain bullish during the first quarter with slowing production of palm oil on seasonal considerations. Supplies would ease in April on account of the South American harvest. Crop conditions there are so far favourable. This has allowed the gap between palm oil and soyaoil to be narrow.
Decline in seed stocks
According to Oil World, a Hamburg based industry magazine, 2006/07 will be the first in three years in which world oilseed stocks will decline. The prospective decline in stocks of 10 oilseeds will be rather moderate at around 3 million tonnes, but a substantial production deficit of 8-13 million tonnes is likely to occur in 2007/08. Oilseed stocks are likely to fall to 17.2 per cent of annual usage compared with 18.8 per cent a year and 18.2 per cent two years earlier. Fundamentals clearly show that world demand for vegetable oils and oilmeals has been larger than expected during the past two quarters. Total world consumption of eight vegetable oils has increased steeply by 8.45 million tonnes or eight per cent to 114. 9 million tonnes in Oct/Sept 2005/06, according to Oil World. Even greater tightness is expected ahead in 2007/08, if world oilseed plantings and production decline (in favour of grains) and palm oil cannot fill the gap on the supply side.
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