COMMENTARY. Bleak outlook for oilseeds

Given the less-than-satisfactory distribution of south-west monsoon so far and lower planted acreage as of August 25, the kharif oilseeds situation – especially that of groundnut in-shell and soyabean – looks worrying. However, there are no signs of concern among policymakers in New Delhi over the emerging situation, which is fraught with possibilities.

The data speak for themselves. According to the India Meteorological Department, as of August 23, all-India area weighted rainfall was in the negative territory (-6 per cent), with Karnataka, Madhya Pradesh, Uttar Pradesh, Haryana and Maharashtra’s Vidharba region in the deficient category. Moisture stress is certain to impact the yield of oilseed crops, especially soyabean and groundnut.

A look at the production target and planted acreage suggests the upcoming harvest size is most likely to fall well below the season’s target. While 254-lakh tonnes is the target for all kharif oilseeds, soyabean target is 147-lakh tonnes and groundnut in-shell 75-lakh tonnes.

Planted acreage for both the oilseeds substantially lags last year’s levels. According to government data, soyabean acreage this year is down by 8-lakh hectares to 113-lakh hectares, while groundnut sown area is down by 5-lakh hectares to 38.8-lakh hectares.

Soyabean is likely to be the worst sufferer in terms of yield because of erratic rains in Madhya Pradesh and Vidharba. Assuming there will be no major jump in planted area reported, on current reckoning, soyabean harvest could well end up at 110-115-lakh tonnes, well below last kharif’s 138-lakh tonne and current year target of 147-lakh tonnes. Groundnut, too, could suffer yield losses in Karnataka and Andhra Pradesh, and the harvest may decline to 55-58-lakh tonnes from 62.2-lakh tonnes. These numbers, if realised, will surely reduce the availability of domestically produced oilseeds for crushing and, thereby, reduce production of local oils in 2017-18. The increase in dependence on imports will be even more.

It is this emerging scenario – somewhat worrisome – that has been lost on the policymakers, who succumbed to lobby pressure and hiked the customs duty on imported oils earlier this month. It was touted to be a farmer-friendly move, but market prices for major oilseeds, including soyabean, have not picked up.

The policymakers and the industry – especially those in the refining business – seem to be in a ‘comfort zone’ created by largescale imports and easy availability of edible oil. It may only be a matter of time before farmers’ protests erupt again; they are not going to take low and unremunerative prices lying down even as largescale imports continue to flood the country.

Is there a case for restricting imports of edible oil, similar to those on pulses (tur/arhar, moong and urad) imposed recently?

Life in the comfort zone may not last forever. We saw in 2015 and 2016 how the crisis in pulses – lower production, escalating prices and rampant speculation – nearly destabilised the government with policymakers fighting hard to douse the fire.

A dal-type crisis can seize the edible oil market anytime. It is better avoided through judicious policies that support all stakeholders and strike a harmonious balance.

The writer is a global agribusiness and commodities market specialist. Views are personal

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