Outlook remains bullish for most edible oils

With the waves of festivities sweeping the country, the government witnessed a tough time striking a balance between demand and supply of edible oils and keeping a check on rising prices, while protecting the interests of various stakeholders. However, the prices rocketed, due to El Niño and other factors and imports burgeoned to meet the demand. The increase in import duty backfired, with an increase in retail edible oil prices. In the days to come, the demand for edible oils and oilseeds is likely to remain steady, with weddings and other festivities till January next year but could ease thereafter, as the rabi oilseed crop will be ready for harvesting in April.

Soy complex: Soybean prices have shot up due to unfavourable weather. But, the price will soften in the near term, as demand has declined. At the current prices, bean crush doesn't seem to be viable. We expect the prices to cool off and trade Rs 3,850-4,120 per 100 kg at NCDEX by mid-November. But, with cessation of the pressure on demand, prices can ease to Rs 3,750 per 100 kg. It is expected by December 2015, soybean oil futures may trade Rs 588-640 per 10 kg at NCDEX. However, a sharp decline in futures prices is not expected in the near future.

Rape-mustard seed: The environment is quite conducive for growth of this rabi oilseed crop. Lower crop last year is pushing up prices as of now. Spot prices of rape-mustard seed is ruling at Rs 4,930 per quintal. The current season sowing area will be quite higher. Decline in production of soybean and steady demand for edible oils are likely to support prices of rape-mustard oil. December futures of rape-mustard seed is likely to test Rs 5,200-5,350 per 100 kg at at NCDEX, with an eye on the acreage of mustard seed.

Castor seed: The production of castor is expected to be 12-15 per cent higher than previous year. A large number of farmers have shifted from cotton and groundnut to castor. With abundant supplies, the prices might rally on account of export demand. So, we anticipate December futures to test Rs 3,500-3,550 per 100 kg at NCDEX. However, we do not foresee any sharp spurt in prices.

Palm oil: Its demand for bio-diesel is rising. Higher blending limit of B20 is likely to be achieved by 2016. The El Niño worries coupled with the recent forest fires in Indonesia can result in drop in yield by 20 per cent in its key-growing regions. However, new plantations might narrow the deficit. Considering the likely increase in domestic consumption in Indonesia and demand arising from India and other major importers, palm oil futures are likely to witness a spurt (provided Malaysian Ringgit strengthens). A major downtrend in MYR is not expected in the near term. We expect the CPO prices to range Rs 375-422 per 10 kg in the near future. On the upper side, the prices are likely to test Rs 440 per 10 kg level. The near-term scenario for palm oil appears bullish.

The author is head, commodities research, Nirmal Bang Commodities