Surge in demand from China in the month of March has led to a rise in groundnut oil prices by almost 15% over the past two weeks. Additionally, the price rise in the overall cooking oil market globally led by tight supply of palm oil has also pushed groundnut oil prices in domestic markets.
The surge in demand, however, has not been met by sufficient quantity of groundnut crushing, resulting in lower production of groundnut oil this year. Moreover, with prices going up, domestic retail demand for groundnut has declined, too.
At the wholesale level, groundnut oil price increased to Rs 1,070 per 10 kg from Rs 935 per 10 kg a fortnight ago, a rise of 15%. Groundnut oil prices have gained from Rs 1,620 per 15 kg tin to Rs 1,800 a tin in the past fortnight. Since the beginning of the season that started in October 2015, groundnut oil prices have risen by 26% in retail markets.
"Current uptrend in groundnut price has been mostly driven by huge surge in export which was unexpected. Exporters have contracted about 15,000 tonnes export order for China in March and now they are buying heavily to fulfill it. At present, mills are not capable of supplying such a big amount as raw material is not available," said Suresh Kaneriya, managing director of Kaneriya Oil Industries.
While demand is for about 250 tonnes, mills are crushing only 100-120 tonnes a day. This is because groundnut arrival has fallen to 8,000 bags a day in Gujarat and other states such as Rajasthan, Karnataka, Andhra Pradesh and Telangana where the combined arrival is not more than 10,000 bags.
"At this time supply is not sufficient to match the demand. In this situation prices may even go up to Rs 1,100 per 10 kg in wholesale market soon," said Ravaji Mandanaka, president of Gondal Oil Mills Association (GOMA).
The Central Organization for Oil Industry and Trade (COOIT) has estimated 3.23 million tonnes of groundnut production in India for the year 2015-16 as against 3.52 million tonnes in 2014-15. Recently it predicted a summer production of 1.24 million tonnes as against 1.28 million tonnes.
Govind Patel, former president of Solvent Extractors’ Association (SEA), and edible oil expert said, "As global edible oils prices have gone up because of supply crunch mainly in palm oil, this has impacted in Indian market."
Traders believe that there might not be much relief from the price rise in near future with prices expected to rise in April as well.