Edible oils' demand to rise 5% this year despite price fall

Demand growth muted as prices of other necessities rise

In spite of the steep fall in edible oil prices, local demand has not increased due to the surge in prices of other commodities of daily use. According to sector sources, demand growth is likely to be five per cent this year.

“For six months, prices have been under pressure due to higher production of seeds in India. But despite this, demand growth was a bit slow, as other commodities were trading higher owing to the rise in inflation during the past year,” said Angshu Mallick, chief operating officer, Adani Wilmar Ltd.

Mallick said the demand was likely to increase five per cent this year. “Oils have almost bottomed out and the pressure may reduce.” Experts said this year prices of most oils had gone down 10-40 per cent against a year ago. While prices of imports like soya oil and RBD palm oil have decreased 11 per cent and 7.5 per cent, respectively, sunflower oil saw a dip of 5.5 per cent and grapeseed oil declined 16 per cent.

Wholesale prices of oils have come down 10-12 per cent, while retail ones are down six-seven per cent. “Good climatic conditions in South America, Canada, Russia and Ukraine, the main producers, and even in India resulted in higher productivity. Malaysia and Indonesia have also seen favourable conditions,” an official of an oil company said. “The prices will continue to be lower for six months.”  Palmolein and palm oils have not declined as much as others because the demand for biodiesel was good.

Govindbhai Patel, managing director of Deepak Enterprises, said, “Prices may continue to decrease further for some time as crushing is still higher. Crushing will gradually decline and pressure will reduce on prices. The palm oil price will not decline much as the crop size is small.” According to the data compiled by The Solvent Extractors’ Association of India (SEA), imports of oils during December 2013 (second highest since 1994) were one million tonnes compared to 908,587 tonnes a year ago, up 18 per cent.

B V Mehta, executive director, said, “This year all prices are reeling under pressure due to expectations of a higher production of seeds not only in India but across the world.”

Groundnut oil has been trading at a four-year low. Also, poor export demand has resulted in a further fall.

In January 2013, the price was Rs 2,250 for a 15-kg tin, an all-time high, but now is Rs 1,340-1,350, down 40 per cent. This was seen in January 2010. Suresh Kaneria, managing director of Kaneria Oil Industries, said, “The main reason for the fall is the higher availability of groundnut. Most has been diverted to mills as exports have been nominal this year.”

According to the ministry of agriculture the estimated seed area as on October 17, 2013, was 19.5 million hectares against 17.8 million a year ago, up 1.7 million. The summer crop is estimated at 17 million tonnes for 2013-14 against a year ago's 15 million. The yield increased to 867 kg a hectare during the current summer crop from 855 kg a hectare a year ago. According to the second advance estimates of production, nine seeds' production is likely to be 33 million tonnes in 2013-14 against 31 million a year ago. The report said groundnut production was estimated at nine million tonnes for the summer and winter crops this year against five million a year ago. Rape seed and mustard are estimated at eight million tonnes.

The groundnut oil price on Wednesday was Rs 1,315-1,320 a 15-kg tin, down from Rs 1,425-1,430 a 15-kg tin in January. Soya oil was Rs 644-647 per 10 kg against Rs 654-655 a quarter ago while palm oil moved up from Rs 567-568 to Rs 598-600 per 10 kg in two months.