Edible oil prices under pressure

The oilseed output in the country is expected to reach a record level of 33.60 million tonnes in 2016-17 against 25.30 million tonnes in the previous year. Exporters feel that China could emerge as a major destination for the Indian groundnut oil.

The anticipation of higher output prompted the central

government to open up bulk exports of edible oils such as groundnut oil, soybean oil, sesame oil and maize oil. It’s a major policy shift, which was announced on March 27.

Before this move, export of edible oils like coconut oil and rice bran oil were allowed in bulk, while other oils were allowed only under the branded consumer packs of up to 5 kg with the minimum export price of $900 per tonne. Major oils exported in consumer packs are groundnut oil, sesame oil, sunflower oil and mustard oil.

However, India has been a major importer of edible oils with almost 65-70 per cent of the requirement being met through imports. Palm oil is the major edible oil imported during 2016-17, followed by soybean oil and sunflower oil.

But import of edible oil during the current oil season, which started in November 2016, is expected to be lower, mostly because of high availability of soybean, mustard and groundnut seeds for crushing.

Going by the Solvent Extractors Association (SEA) of India’s statistics, edible oil imports fell a little over 7 per cent on year to 1.1 million tonnes in March. Imports in November-March were at 2.12 million tonnes, down from 2.67 million tonnes a year ago. Meanwhile, soy oil imports during the same period were down over 44 per cent to 1.044 million tonnes while crude palm oil (CPO) imports were down only 1.4 per cent to 3.55 million tonnes.

SEA, the edible oil industry body, has now urged the central government to again exempt oilseeds and vegetable oils from the storage control order (SCO) for free market and movement. “We have been making appeals and representations to the government that in current situation the storage control order has become irrelevant and lost its utility,” said BV Mehta, SEA executive director. “We have requested the government to exempt the domestic edible oilseed processors or traders from the purview of stock limit for oilseeds and oils,” he remarked.

The government under the storage control order 1977 imposed the stock limit on oil and oilseeds. The order was amended from time to time, the SEA said. SEA has sent a memorandum to Union consumer affairs, food and public distribution minister Ram Vilas Paswan.

Meanwhile, the high availability of edible oil stock has been having its impact on the future prices also. In a recent report, Ritesh Kumar Sahu (fundamental analyst, agri commodities), Angel Commodities Broking, said, “The edible oil (soy oil and crude palm oil) futures prices have been trading at 7-8 month lows mainly due to reports of record oilseed production, higher available stocks of edible oil in the country and cheap edible oil imports due to declining tariff values.”

But when it comes to the wholesale market pricing, rates of select edible oils rose by up to Rs 50 per quintal last week on pickup in demand from vanaspati millers as well as retailers.

ritwikmukherjee @mydigitalfc.com