Groundnut shortage may push oil prices to new high

Short supply and higher seed demand from farmers has led to the price of groundnut oil rising to a two year high. Oil price has reached Rs 2,130 per 15 kg and may touch Rs 2,500 in the next two months.

According to groundnut oil millers, as groundnut production was short last year, mills have been facing shortage of groundnut for crushing. Added to that, groundnut oil exports in consumer packs have increased this year, pushing groundnut oil prices since the last two months. During June alone, groundnut oil prices grew by Rs 150 per kg.

"Currently, farmers are buying groundnut in big quantities for sowing, which has resulted in shortage for crushing. As a result, groundnut oil prices have gone up and will continue to firm in coming time," said Ravji Mandanaka, president of Gondal Oil Mills Association.

Benchmark prices of groundnut oil (loose) have reached Rs 1,250 per 10 kg, having increased by Rs 75 per 10 kg in June and Rs 15 per 10 kg in the past two months. In retail, a new 15 kg tin of groundnut oil is being traded at Rs 2,130, having gained by more than Rs 300 per 15 kg tin during the current month in the retail market.

The other reason for the constant rise in groundnut oil prices is attributed to good export demand during March and April which was unexpected. Exporters have contracted about 15,000 tonnes export order from China in March this year.

Suresh Kaneriya, managing director of Kaneriya Oil Industries, said: "A sudden spurt in export demand for groundnut oil has pushed up prices since the last two months. Moreover, because of weak production of Kharif groundnut has created scarcity of raw material for mills. While arrivals are short, most of the stock is consumed by the farmers."

Gujarat government has already stepped in to control prices. Recently, the state government reviewed groundnut oil prices and planned to check stocks with traders and millers.

"Mills have no stocks of groundnut as prices are unaffordable. Many of the groundnut mills in Gujarat have closed since the last three or four months due to lack of supply," said Mandanaka.

There are about 200 groundnut oil mills in Gujarat. Currently, only 30 mills are operation partially.