The Hindu Business Line : Edible oil prices seen steady on rising output, stocks

EDIBLE oil prices are likely to be kept on leash on increased domestic oilseed production and rising palm oil stocks in the global market, according to industry experts.

"Though the US Department of Agriculture has painted a bullish picture, with soyabean stocks being estimated at an 18-year low, the market is seen finding its level soon. One reason is that imports will come down drastically this crop year," analyst say. The edible oil season runs from November to October.

Supporting the analyst's view is the steep fall in Indian imports during December. Shipments into the country fell by 1.15 lakh tonnes (lt) to 2.02 lt.

India is the one of the largest importers of edible oil, especially palm oil. Last season, imports topped 51 lt, down from 44 lt the previous year. This year, imports are seen at least 10 lakh tonnes lower by the trade.

This is in view of a record oilseed crop during kharif and hopes of good crop during rabi. For the kharif season, oilseed output has been projected at 142.4 lt against 101.5 lakh tonnes last year.

"Already, palm oil stocks have increased beyond the psychological one million-tonne mark. If the trend of slow purchases by India continues, then the stocks could touch 1.5-million-tonne mark sometime around April," an analyst said.

Palm oil prices had bounced back last week after the US said soyabean stocks would be down to 125 million bushels (27.2 kg) from 178 million bushels during the same period last year. It also put its soyabean production at 2.418 billion bushels, down from earlier estimate of 2.452 billion bushels. It has also projected soyabean oil output at 1.006 billion tonne, the lowest since 1980.

Malaysian crude palm oil futures for April closed at 1,760 ringgit a tonne on Friday.

Imports into the country are seen slowing down during the next few months on arrivals rabi oilseed crop such as mustard/rapeseed, groundnut and sunflower.

"From February onwards, soyabean arrivals are expected from Argentina and Brazil. These could exert pressure on the prices," he said.

"Imports are likely to slow down in view of the record kharif oilseed crop and hopes of higher rabi crop," Mr B.V. Mehta, Executive Director, Solvent Extractors Association of India, told Business Line.

Traders say during March-May people financing edible oil trade divert their money to mango business and hence, it could also have further impact on imports.

"The record cotton crop will also subdue oil prices since cottonseed oil can help fill any shortfall," analysts said.

As such, domestic edible oil prices have been witnessing a decline since December 16. For example, groundnut oil has declined to Rs 495 per 10 kg from 512. RBD palmolein, too, has declined from Rs 428 per 10 kg to Rs 405.

However, the trade is trying to find out if there is any shift in the European market towards palm oil.

"If that happens, then price could continue to rule firm," analysts said.