Edible oil prices slip after bumper crop

Edible oil futures contracts have been on a slippery wicket over the past three months, tracking bearish global prices, a bumper domestic crop and reduction in import duty. A strengthening rupee has also aided the bearish trend, making imports cheaper.

On Wednesday, refined soya oil for April delivery on the NCDEX dropped to ₹629 per 10 kg, a decline of 11 per cent from the ₹703 registered on January 2. The May and June contracts dropped 3 per cent over the previous close to ₹617 and ₹609, respectively, on Wednesday.

On the MCX, crude palm oil for April delivery stood at ₹509 per 10 kg, down 9 per cent from the ₹559 logged on January 2. The May contract has plunged by 12 per cent to ₹483 per 10 kg (on Wednesday) over the past three months. The June contract slipped further to ₹470.

BV Mehta, Executive Director of the Solvent Extractors’ Association, said that besides the bumper oilseed crop and fall in international prices, the intense summer has also played a role in bringing down edible oil demand and prices.

“If the bearish sentiments in oilseeds continues till June, farmers will switch to other remunerative crops in the forthcoming kharif season,” he said.

More than the oil mills, Mehta said refiners have been impacted as their capacity utilisation has dropped to 45 per cent from 60 per cent, as refined oil imports have risen sharply in the last few months due to the inverted duty structure in exporting countries.

Last September, the government had reduced the import duty on crude palm oil to 7.5 per cent from 12.5 per cent, and on refined palm oil by 15 per cent from 20 per cent.

This apart, the government has cut the base import price of edible oils this month. The steepest cut was for crude palm oil, by $22 to $725 per tonne, while the base import price of crude soya oil was cut by $14 to $770 per tonne. This is the fifth consecutive cut in the base import price of CPO and soya oil.

Ritesh Kumar Sahu, Research Analyst, Angel Commodities Broking, said the appreciation of the rupee against the dollar also played a role in the price decline. The rupee has hit a 20-month high, at 64.31, in April and it has appreciated by 5.6 per cent this calendar year. A stronger rupee makes imports cheaper, he added.

The government had forecast oilseed output to surpass its previous record of 32.75 million tonnes registered in 2013-14 to 33.59 mt this year on the normal monsoon in 2016.

Soyabean output this year is estimated to increase 60 per cent to 11.49 mt (7.2 mt), the highest in last four years.

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