The Hindu Business Line : Edible oils turn bearish on imports, better crop

HOPES of better than expected oilseeds crop, cut in the vegetable oil tariff rate and increasing imports have brought in a bearish outlook to the edible oil scenario in the country, according to industry players.

"The entire oilseed belt in the country has received good rains in September. The overall situation for the crop looks better. But if the rains currently lashing western parts of the country, it could pose problems," said Mr B.V. Mehta, Executive Director, Solvent Extractors Association of India.

The good rains would mean that the oilseed crop could be around last year's level as estimated by the industry. The Government and the industry had come out with different estimates of the oilseed crop year, wherein the Agriculture Ministry's projections were higher by nearly 40 lakh tonnes (lt). While the industry put the estimate of oilseed crop at around 220 lt, the Centre fixed it at a little over 260 lt.

For the current kharif season, the Centre has estimated the oilseeds crop at 145 lt against 149.4 lt last year but the industry feels it is on the higher side.

For example, while the Government says the soyabean crop could reach 65.8 lt, the industry feels it would be 58 lt only.

Still, with the crop looking better than what it was one and a half months ago, edible oil imported in anticipation of a lower crop is a cause for worry, according to Mr Mehta.

On the other hand, edible oil imports during the current season up to August have increased by 27 per cent 41.73 lt. The season ends in October. "Another 8-9 lt of edible oils have been contracted and will be arriving before October ends," he said.

Besides these imports, imports by the vanaspati units are expected to be two lt for the season, while non-edible oil imports are projected at 3.5 lt. "Totally, vegetable oil imports could be a record 56 lt," Mr Mehta said.

This could mean that stocks of edible oil will be high at a time when growers bring harvested crop to the market.

According to industry sources, it is here that the recent cut in tariff value for vegetable oils could hurt the growers. The tariff value is the base price at which the Customs duty is worked out for edible oils.

"Prices of edible oil have already declined after the revision," industry players said.

Not only that, the National Agricultural Cooperative Marketing Federation (Nafed) is holding a stock of 20 lakh tonnes of mustard procured from the growers as part of market intervention operation of the Centre. This, market players expect, could come to the markets at a time when arrivals of kharif crop peak.

"Then, there is a record cotton crop which could bring in about eight lt of oil and cast further pressure on oilseed prices. Lower price for cottonseed oil means people can switch over and begin consuming it," Mr Mehta said.

According to industry players, all these factors could mean that the soyabean growers could be the worst hit. "The Union Government may have to undertake market intervention operation to help them," they said.

When contacted, Mr Rajesh Agrawal, Chairman, Soyabean Processors Association of India, said things were not looking bright for the sector.

He also expressed concern over continuing rains. "The rains after the crop is ripe could cause damage," he said.

On Friday, crude soyabean oil was quoted at Rs 3,180 a quintal, down from Rs 3,320 at the beginning of the month. Groundnut oil ruled at Rs 4,790 a quintal against Rs 5,350 and crude sunflower oil at Rs 2,395 against Rs 2,440.

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