Excessive oilseed stocks may hit kharif sowing

Amid general relief over expectations of a normal monsoon, oilseed aggregators are anticipating high inventories ahead of the kharif sowing season.

After two successive years of low monsoon, the country’s meteorological department has forecast a normal monsoon this year, raising farmers’ hopes for a better output. The prediction has also offered a much-needed relief to the government, which is struggling to cope with the soaring food inflation, currently at 17.22 per cent for the week ended April 3.

Normally, oilseeds like soybean, groundnut, sesame, castorseed and sunflowerseed are sown ahead of the arrival of monsoon for harvesting in September and October. But, there is a weak sentiment for oilseed sowing as farmers and aggregators are holding about half of last year’s total soybean output of 8.5 million tonnes (mt).

If processing of local seeds is not encouraged through policy measures, including levy of import duty on vegetable oil or an increase in base rates (unchanged for four years), carry-forward stocks may reach alarming level by the end of the current season which may discourage sowing for the next year, said B V Mehta, executive director of the Solvent Extractors’ Association of India.

As on April 1, over 18.5 mt oilseeds were lying uncrushed, apart from unprocessed rice bran, with Indian farmers. These include 4.5 mt soybean, 6 mt rapeseed, 2 mt groundnut and 6 mt cottonseed. Industry estimates the total output of the four major oilseeds at 8.5 mt, 6.4 mt, 5.1 mt and 9.15 mt, respectively, during the 2009-10 season, which comes to a total of 29.15 mt.

Mehta said vegetable oil imports in India would remain under pressure in the coming months until pipeline inventory was cleared out completely. The total current inventory is estimated equivalent to 35 days of the country’s overall consumption, which is much higher than the normal estimate of 25 days. The current stock of edible oils as on April 1 is estimated between 700,000 and 800,000 tonnes at ports and between 500,000 600,000 tonnes in pipelines.

India produces about 6.5 mt of vegetable oil and consumes in excess of 15 mt. The balance is met through imports from Indonesia, Malaysia and Argentina.

Also, strengthening of the rupee against the US dollar coupled with a zero import duty on crude vegetable oil and a marginal duty of 7.5 per cent on refined vegetable oil supported the import during the crushing season in India.

According to Dinesh Shahra, managing director of Ruchi Soya Industries, domestic crushing mills are currently operating between 40 and 50 per cent of their installed capacity.

Crushing mills have so far crushed hardly 36 per cent of the available oilseeds in the country. Generally, almost 60 per cent of the oilseed output is crushed between November and March when there is abundant availability of seed from farmers, aggregators and stockists at cheaper rates.

But, mills incurred a loss of Rs 1,000 for every tonne of seed crushed. The loss for crushing, however, has fallen to Rs 600-700 a tonne due to re-adjustment in seed and oil prices.

On the NCDEX, mustardseed for delivery in May declined 3.16 per cent in two days to trade at Rs 503.75 per 20 kg on Tuesday. Similarly, soybean and cottonseed oilcake fell 3.24 per cent and 1.93 per cent to trade at Rs 1939 a quintal and Rs 1014.5 per 50 kg respectively.