Edible oil may stay firm for now

Domestic edible oil prices are likely to remain firm for the next fortnight because of the monsoon delay in June, bad international weather and oilseed farmers in Maharashtra, Gujarat and Madhya Pradesh diverting to other crops.

According to industry sources, in the absence of any bearish sentiments at the moment, the prices were unlikely to come down.

With the recent revision of the tariff value for edible oils by the finance ministry on July 14, palm oil and crude soybean oil prices have been increased, which, analysts feel, will prove good for farmers as it is the sowing season for many commodities.

The present market price of crude palm oil is Rs 399 per 10 kg where as RBD palmolein price is reported to be at Rs 417 per 10 kg.

"The market is up and there is no sign of any price decline. As the market is very sensitive, we expect an increase in the tariff value," said B V Mehta, executive director, Solvent Extractors' Association of India (SEAI).

He added that the prices would remain firm and the farmers finding it profitable might increase the acreage.

"International weather condition, warm weather in the US, increased use of palm oil in the bio-diesel sector and delayed monsoon in India are among the many factors which lead to the increase in the revised tariff value of edible oils," he said.

Effective in the second fortnight of July, the government has increased the basic import prices of crude palm oil from $428 to $432 per metric tonne. In the case of RBD palmolein and crude soybean oil, the prices are raised by $10 and $37 to $463 and $566, respectively.

Moreover, the continuous reduction of land under oilseed cultivation in India is another major factor.

"In Gujarat, groundnut cultivation is being taken over by cotton cultivation, Maharashtra is witnessing soybean land being taken over by sugarcane and pulses. Same scenario prevails in MP too," he said.

According to him, even a reduction of five per cent in the oilseed cultivation land would affect the market.

The government has been revising the tariff value every 15 days for the last five months. However, earlier there was no timeframe fixed.

"With prices being revised every fortnight, it is now easier for us. Earlier, there used to be large gap between the prices which used to upset the market," said Mehta.

At present, the country imports 42 per cent of its total edible oil demand. Total area under oilseeds cultivation is 26 million hectares in India. This is expected to go up to 28 million hectares by 2010.

The present demand for edible oil is 12 million tonne which is projected to shoot up to 15.6 million tonne in five years.

With the low yield of 0.97 tonne of edible oil per hectare, analysts say India would continue to be dependent on imports to the extent of 40 per cent of its consumption requirement.

The import of edible oils during June 2006 was reported at 388,278 tonne, up by 37 per cent from 282,478 tonne in June 2005.