Business Daily from THE HINDU group of publications
Friday, Aug 10, 2007
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Business Daily from THE HINDU group of publications Friday, Aug 10, 2007 ePaper |
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Exports & Imports Agri-Biz & Commodities - Dairy & Dairy Products Global butter oil prices double to $6,000/t
The hardening of butter oil prices makes Indian ghee – perhaps for the first time – competitive in the world market.
Harish Damodaran New Delhi, Aug 9 Spiralling international prices of edible oils are rubbing off on butter oil. Prices of butter oil – which, unlike vegetable fats such as palm or soyabean oil, is an animal fat derived from milk – have virtually doubled in the last three months and are now ruling at $6,000 per tonne plus levels in European markets. Since the start of this year, global butter oil prices (free-on-board, Western Europe) have soared from $2,200-2,500 to $5,200-6,300 per tonne, which is much more than the rise seen for skimmed milk powder (SMP) – from $2,950-3,150 to $5,400-5,500 per tonne. Premium over SMP
Butter oil is currently even trading at a premium over SMP, reversing the usual international market pattern, where milk fat is valued less than the protein and other non-fat solids fraction. This is, in fact, more in line with what one sees in India, where consumers always pay more for ghee than for SMP. (Butter oil and ghee are essentially the same. Both contain 99 per cent plus fat and are made by heating butter, the former to around 80 degrees and the latter to 110-130 degrees Celsius. The difference lies mainly in the distinct aroma and wholesome flavour of ghee, against the blandness of butter oil). Indian ghee competitive
The hardening of butter oil prices makes Indian ghee – perhaps for the first time – competitive in the world market and rendering not only imports unviable, but also exports possible. Butter oil now attracts 46.8 per cent import duty, inclusive of a 40 per cent basic customs duty, a four per cent special additional duty and three per cent education cess. “The European quotes are on the higher side because they reflect an acute shortage situation in the continent. Butter oil of New Zealand is available much cheaper at $3,800-4,000 per tonne f.o.b. But even in this case, the imported product, after adding duties, would cost at least Rs 250 per kg,” said Mr Kuldeep Saluja, Managing Director of the Delhi-based Sterling Agro Industries Ltd. In comparison, bulk ghee in Delhi is selling at Rs 151-153 a kg. According to Mr R.S. Sodhi, Chief General Manager, Gujarat Cooperative Milk Marketing Federation (GCMMF), “there is scope now for Indian dairies to enter the export market in butter oil, though we may not have enough supply after meeting domestic requirements”. Influencing factors
The spurt in global butter oil prices is part of an overall boom for dairy products fuelled by a host of factors – increased cost of maize and other cattle feed, drought in Australia, weakening dollar, milk demand in China soaring by about 25 per cent per year, supplies in Europe being limited by production quotas and diversion to China, etc. In butter oil, there has also been an additional stimulus from the surge in edible oil prices. Although milk fat is three times more expensive than vegetable fat, Mr Sodhi believes that the recent bullishness in palm and soya oil has definitely rubbed off on butter oil and ghee.
More Stories on : Exports & Imports | Dairy & Dairy Products | Oilseeds & Edible Oil
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