Correction looms over edible oil market

MARKET OUTLOOK

A steady-to-downward sentiment is likely to prevail in the edible oil sector this week because of profit-booking by a section of traders and the "wait-and-watch" policy adopted by others. Fundamentals, however, continue to remain upbeat in the wake of rising global demand for cooking and fuel oil.

After surging to a lifetime high of 7,200 cents a pound early last week, soyoil on the Chicago Board of Trade (CBoT) declined late last week and continued to hover around 6,533 cents towards the end.

Traders believe that the profit-booking on top is likely to continue. Last Thursday, soyoil on CBoT hit the lower circuit, injecting a fresh round of fear among participants.

According to a market source, two unnamed US fund houses are facing huge monetary supply crunch, which has been creating panic in the commodities markets.

Besides, global traders are holding their stocks, expecting a 20 per cent drop in soy output this year in the US at 700,000 tonnes.

"The market overdid last week and therefore, a correction was imminent," said Rajesh Agarwal of Soybean Processors' Association (SOPA). India continues to be on the global radar for oilseed production and edible oil consumption as the country depends largely on imports.

It is capable of meeting only 60 per cent of its edible oil requirements of approximately 1.3 million tonnes, while about 40 per cent is met through imports from Argentina, Malaysia, Indonesia, etc.

"Unless the government proposes to create some buffer stock, India's edible oilseeds are unlikely to see any further price appreciation," Agarwal said and added that the country's tariff was at par with international standard and therefore, needed no further cut.

In the domestic physical market, however, groundnut oil jumped to Rs 790 per 10 kg on Friday from Rs 730 a week ago. Refined soyoil, refined palmolein oil, refined sunflower oil and expeller mustard oil followed suit and perked up to Rs 758, Rs 665, Rs 860 and Rs 658 respectively, witnessing a rise of 60-80 per 10 kgs across the board.