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Edible oil gets costlier due to kharif crop damage, global price rise

Floods in key producing regions resulted in major damage to standing kharif soybean crop

Dilip Kumar Jha  |  Mumbai 

Edible Oil

After onion, cereals, and vegetables, prices of oilseeds and have started moving up over the apprehension of a supply shortage in the domestic market following damage and a sharp jump in their quote in the international market.

(CPO) for delivery at Kandla became costlier by 16 per cent in the past month to trade at Rs 712/10 kg currently; it was Rs 613/10 kg a month ago. The price of refined soy oil in Indore jumped 8 per cent to Rs 843/10 kg, from Rs 780/10 kg a month ago.

The sudden increase in prices of edible oilseeds and oil can be attributed to a combined effect of a similar price rise in the global market and apprehension of a lower kharif oilseeds output following crop damage.

Floods in key producing regions resulted in major damage to standing kharif soybean crop.

“With the governments of Indonesia and Malaysia pushing ahead with policies raising palm-oil content in biodiesel, nearly 5 million tonne (mt) of CPO for edible purposes is likely to be diverted. Besides, the palm oil output in the world’s two largest producing countries is expected to decline this year because of unfavourable climatic condition. So, the overall availability of CPO is expected to remain low. Additionally, the domestic oilseed output is estimated to decline this year because of crop damage. Oilseed and oil prices may remain firm in the medium term until the rabi season output estimates are out,” said Ajay Kedia, director, Kedia Stock and Commodity, a city-based commodity broking firm.

India’s leading soybean trade body, Indore-based Soybean Processors Association (SOPA), has forecast India’s total soybean output at 8.98 mt for the 2019-20 season, as against 11 mt for the previous year. Soybean is a leading kharif oilseed crop, which sets the benchmark for availability for India.

The governments of Indonesia and Malaysia have decided to upgrade their vehicles to use of more CPO as fuel, thus reducing their reliance on export markets, including India and China — the world’s two largest edible oil-consuming countries.

“India imports around 70 per cent, equivalent to around 15.5 mt, of its annual demand from Indonesia and Malaysia. Thus, prices in India move in tandem with their variations in the international market,” said B V Mehta, executive director, Solvent Extractors’ Association (SEA).

Edible oil gets costlier over kharif crop damage, global price rise

Meanwhile, CPO prices in the benchmark Malaysia shot up 14.7 per cent to trade at 2,760 ringgit a tonne, from 2,406 ringgit a tonne about a month ago. Soybean prices in the Chicago Mercantile Exchange (CME), however, reported a decline of 4 per cent to $8.9/bushel, as compared to $9.28/bushel a month ago. The decline in soybean prices on the CME is attributed to the excess availability from the United States after its exports to China stopped following the latter’s hike in import duty.

India’s annual edible oil consumption is estimated around 25 mt, of which the domestic supply meets only around 30 per cent of the needs. India imports around 9 mt of CPO, primarily from Indonesia, and 3 mt of refined soybean oil from Argentina. Malaysia supplies the rest in the form of refined, bleached and deodorised (refined or RBD) palm oil for ready blending with other oils. Rupee depreciation, too, has made imported edible oil costlier in the past month.

First Published: Mon, December 09 2019. 23:09 IST
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