07.10.2021 (www.thehindubusinessline.com) - Global shortage of edible oils due to a slew of factors likely to keep prices firm
Cooking oil prices will likely continue to pinch the pockets of Indian consumers as they are expected to rule firm at least until the year-end in view of a shortage in global supplies.
“Gone are the days of cheaper edible oils (for Indian consumers),” said BV Mehta, Executive Director, Solvent Extractors Association of India (SEA), the apex body of the oilseed crushing industry.
“We don’t see any relief for India on the edible oil price front in the near-future,” said Govindbhai G Patel, founder of GGN Research and an edible oil industry veteran.
Things are not looking bright for the festival season as crude palm oil prices have increased to a record high in Malaysia with other edible oils such as soyabean following suit.
“There is a labour shortage in Malaysian palm oil plantations which is affecting production. Also, a large quantity of palm oil is being diverted to biodiesel in Indonesia. Besides, China is buying a good quantity of palm oil and soyabean oil,” Patel said.
Malaysia and Indonesia are the two largest global producers of palm oil. Malaysia is facing labour shortage as plantation workers from neighbouring countries such as Myanmar and Indonesia have not returned after going home due to the Covid pandemic.
Indonesia is tapping palm oil more for biodiesel as crude oil prices have surged in the last few weeks and topped $80 a barrel earlier this week. China is buying more palm oil and soyabean oil as its oilseed crushing industry has been affected by the power crunch in key provincies such as Jiangsu.
CPO tops 5,000 MYR
On Wednesday, palm oil futures on Bursa Malaysia topped a record 5,000 ringgits (MYR) for November and December contracts. With crude oil prices easing on Thursday, the contracts dropped a tad. Crude palm oil contract for November delivery quoted at 4,985 MYR (₹89,225) a tonne.
According to SEA data, crude palm oil is currently quoted at ₹121.8 a kg, RBD (refined, bleached and deodorised) palmolein at ₹126.5, degummed soyabean oil at ₹130, rice bran oil at ₹121, groundnut oil at ₹145, sesame (til/gingelly) oil at ₹ 239 and rapeseed oil at ₹178.
Prices are higher by ₹14 (groundnut oil) to ₹66 (rapeseed oil) a kg year-on-year. Rates are also higher by 10 per cent to 58 per cent compared with September.
“Besides Chinese purchases, Indian importers have bought a record 1.25-1.3 million tonnes (mt) of palm oil in September,” said Mehta, pointing to increased demand for the cheaper cooking oil.
“China is buying since the margin is negative for its crushers. It is also energy insurance,” Patel said.
No impact of duty cut
“The trend shows that India has not gained anything despite the Centre lowering the import duty twice this year. Exporting countries gain from such decisions by pushing up the prices,” said Davish Jain, Chairman, The Soyabean Processors Association of India.
Pointing out to the global shortage in edible oil supplies, Jain said while the Centre has lost revenue, customers have also not stood to gain from the duty cut.
Earlier this year, the Centre lowered the import duty on crude oils such as palm and soyabean to 24.75 per cent and on refined oils to 35.75 per cent.
Mehta said edible oil prices are likely to stay firm since at least 20 per cent of vegetable oils produced globally are used in biodiesel. “We have no choice as we import nearly 70 per cent of our edible oil demand,” he said.
One positive outcome of the high edible oil prices is that oilseed farmers will stand to gain, the SEA official said. Patel concurred with the view, saying they would benefit.
Jain said soyabean prices, in particular, had run up sharply earlier this year and therefore, they may not rise to the level in the short-term. “Correction has taken place and currently, soyabean is quoted at ₹5,800 a quintal. The market could rule around the same level or drop marginally once arrivals increase,” he said.
Higher than MSP
On NCDEX, soyabean December contracts ruled at ₹5,629 a quintal on Thursday, down ₹106 from Wednesday. Soybean in Indore, per NCDEX data, ruled at ₹5,787 in Indore (Madhya Pradesh) and ₹6,252 in Kota (Rajasthan) and ₹6,020 in Nagpur (Maharashtra). These prices are against the minimum support price of ₹3,950 a quintal fixed for this year.
“The soyabean crop is good in the Malwa region of Madhya Pradesh besides some other areas in the State. It is good in Rajasthan and Maharashtra, too,” Jain said.
Though the new soyabean crop has begun arriving, the arrivals are likely to peak around December due to an erratic monsoon this year, said Patel.
Patel and Mehta said soyabean and groundnut crops are far better this year compared to last year and their production could be higher.
“Edible oil prices may soften from January when soyabean arrivals peak,” he said.
“We don’t see much relief from the current firm trend in edible oil prices until February,” said Mehta.