G. Chandrashekhar

Mumbai, Feb. 4

VEGETABLE oil imports last month touched four lakh tonnes, thanks to a decline in international prices. In the previous two months, imports averaged a little over three lt a month.

According to estimate made available to Business Line by industry portal Oilmandi.com, arrivals in January comprised mainly 1.3 lt of de-gummed soyabean oil, 1.97 lt of crude palm oil, 46,800 tonnes of crude palmolein, 22,400 tonnes of refined palmolein and the rest crude palm kernel oil.

With this, vegetable oil imports in the first three months of the new oil year, beginning November 2004, aggregated 10.3 lt. up from 8.7 lt during the same period last year.

Arrivals in February are projected at about 3.3 lt. Price disparity, uncertainties relating to revision of tariff and Budget considerations are being cited as reasons for anticipated arrivals.

Notwithstanding prognosis of a large rapeseed/mustard crop to be harvested and import trends for the first three months, total imports during the 2004-05 oil year, ending October, are expected to surpass the previous year's 44 lt and move closer to the 50-lt mark. Projected higher imports for the year are seen as the function of income growth and soft prices.

On the international front, the vegetable oil market is likely to remain subdued over the next three months, thanks to a huge increase in global production during 2004-05, excellent crop conditions in South America and burgeoning stocks of palm oil. Consumption growth, though robust, trails an increase in production.

Crude palm oil prices have declined well below the Malaysian ringgits 1,300-a-tonne levels not seen in the last two years. According to Mr Pradip Desai of Palmtrade Services, a well-known intermediary, the ABC factors could come to the rescue of the battered market.

Asian rust fungus could spread and pose a threat to crop yields in South America. Bio-diesel is a rapidly emerging area for non-food application of vegetable oils one that can potentially alter the global demand-supply scenario. Currency is the third factor. The question is whether the dollar will continue to skid, improving the purchasing power of importing countries.

The month of May would be crucial for the market to take a direction.

Planting intentions, especially in the face of soyabean rust threat in the US, will have to be watched. China's crop conditions, as also onset and progress of monsoon in India would be important factors.

What the forthcoming Budget has in store for the vegetable oil sector is anybody's guess. Without taking a holistic view on various issues confronting the industry and trade, tinkering with Customs duties in the name of rationalisation could prove to be counter-productive.

(This article was published in the Business Line print edition dated February 5, 2005)
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