In 2016, the price of Crude Palm Oil (CPO) in the futures market jumped more than 36 per cent, while refined soy oil jumped 10.3 per cent from its lower level in January. The increase in prices of edible oils is due to the firm international market, amid lower palm oil production caused by El Niño and high exports.

The increasing price trend in edible oils is expected to continue due to higher consumption and lower stock positions in the global markets.

Per the latest US Department of Agriculture (USDA) reports, domestic consumption of CPO and soy oil has been forecast to increase by 5 per cent and 3.6 per cent, respectively, while ending stocks may decrease by about 3.5 per cent for CPO and soyoil.

Import and consumption

India is a net importer of edible oils and prices mainly depend on import prices. Last year, it imported more than 14 million tonnes (mt) of edible oil out of its annual consumption of about 18-19 mt.

Moreover, according to data released by the Solvent Extractors’ Association (SEA), import of vegetable oils during the first nine months of the current oil year 2015-16 (November–July) touched 10.9 mt, up 5 per cent from last year.

According to the USDA, the consumption of CPO is expected to increase 8.8 per cent to 10.5 mt compared to 9.7 mt last year.

The edible oils industry has urged the Centre to increase the import duty on crude oil and refined oil to 37.5 per cent and 45 per cent, respectively, to increase the parity for the domestic industry for crushing oilseeds.

Tariff value

Moreover, the tariff value — the base import prices of edible oils — was increased by the government last month. The value is revised every fortnight after taking into account movement in international markets, as well as changes in the foreign exchange rate.

The Centre raised the tariff value of refined soy oil to $775 per tonne from $752, while CPO and RBD palmolein rose 5.4 per cent and 10.3 per cent, respectively, in the last month.

Recently, exports of Malaysian palm oil products jumped more than 30 per cent month-on-month during the first 15 days of August. Moreover, lower-than-expected production and higher biodiesel mandates in Malaysia and Indonesia will support the prices medium-to-long term.

Prices of CPO and refined soyoil will remain firm in the medium-to-long term as the festival season approaches.

Tight supplies of CPO and reports of an import duty hike may keep prices supported in the domestic market. We expect CPO prices on the futures market to touch ₹600 per 10 kg (CMP: 560), while refined soy oil may cross ₹680 per 10 kg (CMP: 659).

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