Agri Business

Edible oil prices zoom

TV Jayan New Delhi | Updated on November 14, 2019 Published on November 14, 2019

Malaysia, Indonesia move to hike bio-diesel content in auto fuel sparks price hike

The major palm oil exporting countries’ decision to increase bio-diesel content in auto fuel and crop damage due to heavy rains across the country have pushed up the prices of edible oils significantly in the last few weeks.

“The supply situation has become tight with both Indonesia and Malaysia — the countries that account for most of palm oil production globally — deciding to increase their bio-diesel mandate substantially from next year,” said BV Mehta, Executive Director of Solvent Extractors' Association of India (SEA).

While Indonesia has decided to increase bio-content of the fuels used in vehicles to 30 per cent from 20 per cent from January 2020, while Malaysia plans to hike it to 20 per cent from 10 per cent to cut down on oil imports.

“Indonesia's requirement for palm oil for blending would go up to 9 million tonnes from the current 6 million with the transition to B30 programme, while Malaysia may require an additional 7.5 lakh tonnes of palm oil for meeting the blending demand,” said Sandeep Bajoria, CEO of Mumbai-based Sunvin group. The prices of sunflower and soyabean have also firmed up by ₹6/kg each, he said.

According to Bajoria, this has led to international prices moving up. “In the last 50 days, since last week of September, palm oil import price has moved up from $515 per tonne to $630 per tonne as of now . With 45 per cent import duties, the price of palm oil available in domestic market has gone up by ₹10-11 per kg in a short span,” he said.

Mehta said edible oil imports this year would be close to 15 million tonnes, up from 14.5 million tonnes last year. The government has promised to give more attention to oilseeds production in the coming years. The edible oil imports have been going up by 2 to 3 per cent annually in the last few years. “If we can increase our oilseed production, we may be able to cap the imports at 15 million tonnes, which could be a great achievement,” Mehta said.

Sudhakar Desai, CEO of Emami Agrotech Ltd and President of trade body IVPA, said that there has been a huge rally of $100 per tonne in global palm prices in last one month. It translates to about ₹10 per kg increase in domestic prices post-duty. Good exports from Malaysia and Indonesia, the B30 programme of bio-fuel in Indonesia and Chinese buying also contributed to the palm rally. Indian soya crop damage, mustard MSP increase, delayed planting of next season mustard crop can also lead to the rally in Indian price table.

“The sales during the festive season were lacklustre and many traders postponed buying as they anticipated that prices may fall subsequently like last year . This led to drying up of supply post-festival season, leading to resumed buying from india,” Desai said adding that next few months will continue to be bullish for edible oil complex.

According to Desai, the bullish trend in the edible oil market may continue for a few months, at least till March next year. This in fact could be one of the major reasons for inflation going up in the country over the next few months, he said.

Published on November 14, 2019
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