Groundnut oil price slip 40 per cent since May

Amid bumper crop production expected to double to 2.6 million tonnes

In a bumper crop year for groundnut, Saurashtra-based oil millers see groundnut oil prices to remain low as availability of the oilseed has increased for crushing whereas demand has remained subdued. Groundnut oil prices, which had crossed Rs 2110 per 15-kg tin in April-May this year, has now fallen to around Rs 1240-1250 per 15-kg tin early this week, showing a decline of over 40-45 per cent in past seven months.

Trader sources maintained that fall in groundnut oil is due to poor retail demand and limited buying by stockists. Also, millers have higher stock of groundnut available, which has further put downward pressure on the groundnut oil prices.

Currently, groundnut oil prices hover in the range of Rs 815-820 per 10 kg loose, while 15-kg tin is priced between Rs 1350 in the Saurashtra market.

"We expect almost 2.6 million tonnes of groundnut production this year. Hence, groundnut prices have declined to even below the minimum support price levels. This decline is reflected in groundnut oil prices," said Samir Shah, president, Saurashtra Oil Millers Association (SOMA) - a leading trade body for groundnut oil millers. Experts noted that groundnut oil prices were high due to larger part of groundnut crop was getting diverted for packaged peanuts, which were exported to different countries.

"But this year, the crop is expected to be almost double than the average of past three years. Therefore, there will be more groundnut available for crushing. All those mills, which had closed down their operations due to lack of raw material, have once again started crushing," said Shah, who also owns an oil mill - Rajmoti Oils. There are around 150-200 groundnut oil mills operational in Saurashtra region.

Further, millers expect at lower prices, demand for groundnut oil will rise.

"Those who had quit consuming groundnut oil due to its fiery prices, are expected to return to groundnut oil consumption as prices have fallen to around Rs 1250 a tin," Shah added.

Weakness in oil prices is mainly due to lower groundnut prices. Good quality groundnut is quoted in the range of Rs 720-750 per 20 kg or Rs 3400 to Rs 3700 per quintal.

"The prices are below minimum support prices of Rs 4000 per quintal fixed by the government. We expect groundnut prices to remain in this range only, hence groundnut prices will also stabilize at the current level. There is no possibility of major decline or increase in prices," said Kishorbhai Patel, owner of Arvind Oil Mills.

This year SOMA has projected Gujarat's groundnut crop at around 2.6 million tonnes, as against 500,000-600,000 tonnes last year. However, with last year being a drought year in the groundnut sowing areas, past three years average groundnut production is around 1.2-1.5 million tonnes.

Around 600,000-700,000 tonnes of groundnut get exported in the form of peanuts, while groundnut oil exports is banned. This year with higher availability of groundnut, peanut export is likely to increase as well. However, mills will not face shortage of groundnut.