 "Edible Oil")
Edible oil refineries across the country have reduced their operating capacity to 40-50 per cent due to non-availability of raw materials following delay in clearance of imported crude oil consignments and oilseeds supply disruptions on lockdown of spot Agricultural Produce Market Committee (APMC) mandis to prevent spread of coronavirus (Covid-19).
This has fostered instability in the prices of both, oilseeds and oils in the futures markets following their disconnect from the prevailing trend in spot mandis. Prices of all edible oilseeds and oils remained highly volatile depending upon their fundamentals, with soybean and mustard seed moving in very wide ranges in the past two weeks.
Another issue is of import clearance which is hindering critical crude oil supplies to refineries.
India’s total consumption of edible oils is about 23 million tonnes, of which domestic production stands at about 7.5 million tonnes and the deficit of about 15 million tonnes is met through import. Over the past few weeks, a large quantity of imported crude edible oil has been stocked at Kandla and Mundra ports for clearance.
The decline in operating capacity comes at a time when harvesting of mustard seed was expected to have gone in full swing. But, due to the three-week lockdown to prevent coronavirus spread, mustard seed farmers are left in lurch. Farmers across major mustard seed growing states including Rajasthan, Gujarat and Madhya Pradesh among others, have delayed harvesting of mustard seed. With the hailstorms continue to disrupt on regular intervals, mustard seed output is expected to have damaged. Normal circumstances could have reduced India's dependence on raw edible oil import which current stands at around 65 per cent.
"Currently, edible oil units are operating with 40 – 50 per cent of their installed capacity with all due precautions. Demand has shifted to house hold consumption (small packs) due to the ongoing lockdown. Hence, supply of raw material / packing material to these units should be resolved. Needless to say, without stores and chemicals required for refining apart from packing material factories cannot function and maintain supply chain," said Atul Chaturvedi, President, Solvent Extractors' Association (SEA), the premier industry body representing edible oilseeds and oils sector in India.
Soybean futures have recovered nearly Rs 700 in less than two weeks amid panic buying during lockdown across the nation, falling stocks of oilseed with Nafed (less than 1.07 million tonnes as on last week of March) and steep rise in CBOT soybean in last few sessions.
"Besides, falling soybean supply across the country (due to closure of operations in all the major mandis) has also added fuel in the rally of oilseed last many sessions. However, demand for oilseed from crushing unit has come to nearly a stand-still after the lockdown," said Mohit Vyas, an analyst with Kotak Commodity.
Atul Chaturvedi urged to the government to allow inter-state movement of oils in both raw and packed forms without any restrictions to ensure supply chain should remain undisturbed.
Non availability of oilseeds of crushing has also impacted operation at local refineries. Markets yards are also either closed or working irregularly or supplies of seeds there are lesser leading to shortage of raw materials. As a preventive measures, therefore, SEA has suggested the government to exempt oilseeds crushing / processing units (oil millers and solvent extraction units) from APMCs to enable them to purchase oilseeds at their factory gate directly from farmers.
"Soybean prices dropped on profit booking amid deepening worries over a plunge in demand as more countries go into lockdown due to the coronavirus outbreak. Edible oil demand is set to decline amid nationwide lockdown. During the lockdown period, both soybean and mustard seed prices moved in a wide range of Rs 3,800-4,500 and Rs 3,500-4,200 a quintal respectively by moving in tandem with supply and demand. Oilseeds and edible oils prices are likely to remain subdued in near term on falling global demand on worldwide lockdown," said Ajay Kedia, managing director, Kedia Commodity.
