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G. Chandrashekhar

Mumbai, Aug 15 Excellent rainfall across major oilseed growing regions – central, western, southern States – for a fortnight since July 25 has surely helped remove the risk of a major crop failure. With precipitation, the overall production prospects have considerably improved.

Acreage numbers (155 lakh hectares) too suggest no big change from cultivated area in kharif 2007. Sunshine for about 12-15 days followed by one more round of rains would boost yields.

Some industry representatives are already talking about soyabean crop size of over 100 lakh tonnes, going up to 120 lakh tonnes. These forecasts have to be taken with a pinch of salt. Nothing dramatic has happened to anticipate an improvement over the average yield of last three seasons.

Assuming 1,000 kilograms per hectare as the national average for soyabean (there could be regional variations), production should be about 90 lakh tonnes, give or take two lakh tonnes. The latest acreage report from the Indore-based Soyabean Processors Association is 92.7 lakh hectares.

The other major kharif oilseed crop is groundnut. It is shaping up well too, after initial scare following three-week long dry spell in July. The acreage numbers are not flattering though. At about 45 lakh hectares, groundnut in-shell output could be around 45 lakh tonnes.

According to the Ministry of Agriculture, in kharif 2007 season, soyabean production touched the magical 100 lakh tonnes and groundnut in-shell 74.8 lakh tonnes. Many in the industry and trade circles perceive these numbers as being overstated.

If the production of nine major oilseeds during 2007-08 was a record 288.2 lakh tonnes (versus 243 lakh tonnes in 2006-07) then the market prices of major oilseeds (for instance soyabean at Rs 22,000-25,000 a tonne) were most unrealistic and not supported by physical supplies. Trade estimate of 2007-08 oilseed production was lower at 255 lakh tonnes.

If we assume that the Government estimates for 2007-08 were correct, or very nearly correct, then in 2008-09 season the harvest size is unlikely to be as high. This will mean no big relief from high prices.

However, some industry and trade bodies have already begun discussing the need to pressure the Government to change the consumer-friendly duty structure, by projecting a bumper crop of oilseeds. If not already done, they are soon most likely to represent for re-imposition of customs duty on crude vegetable oils (which currently is zero) and to raise the duty on refined oils (from the present 7.5 per cent). There is no case for change in the customs duty structure. If anything, the duty on refined oils should be withdrawn too. Crop prospects in the country are good, but not so good as to warrant a reversal of the zero-duty regime. New Delhi should tread with caution.

Even if oilseed prices were to decline, they would be much higher than the minimum support price. Incidentally, the Government has not, even as late as mid-August, announced the MSP for many crops including oilseeds. Assuming MSP stays unchanged at 2007 levels, open market prices of major oilseeds such as groundnut and soyabean are sure to stay considerably higher at fairly elevated levels.

Growers are surely going to be able to fetch a decent price, an attractive premium above the MSP. While growers continue to be better off, consumers deserve to be supported. Such support can come in the form of continuing supplies of edible oil through the public distribution system and no change in duty structure.

Over the coming weeks, the market is sure to debate the merits or otherwise of the duty structure. Trade and industry associations are sure to use the facade of farmers interest to argue their case for higher duty on imported oils. In the last one year, domestic producers earned enormous profits because of continually rising market prices. They would hate to see profits erode. With elections round the corner, New Delhi cannot afford to ignore the fact that the fall in international prices of vegetable oils is sure to benefit consumers here, without affecting oilseed growers.

More Stories on : Oilseeds & Edible Oil | Commodity Commentary

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