Massive stockpiles, coupled with Indonesian government’s decision to slash export duty on crude palm oil, are likely to keep edible oil price under check in Indian markets.
With the revision in tariff rate by the Indian government about a month ago to make it market-linked (currently at $1,022 a tonne) against the fixed tariff rate of $484 a tonne earlier, the incidence of import duty doubled. The increase in the cost of import, however, would be nullified by a cut in export duty by Indonesia of which India is a big importer of crude palm oil and a decline in global oil prices.
The Indonesian government, however, decided to levy 100 per cent more on crude palm oil (CPO) than refined, bleached and di-iodized (RBD or refined oil), in order to protect domestic refineries there which made import of CPO costlier. But, in a major relief for Indian importers, the government of Indonesia has cut exports duty on crude palm oil to 13.5 per cent for September as compared to 14 per cent in the previous month and 18 per cent around same time last year.
Also, CPO for delivery in November the Bursa Malaysia Derivatives Exchange recorded around four per cent decline in the last one month to trade at 3004 ringgit (Rs 53,460 ) a tonne on Thursday as against 3,122 ringgit on August 1. Despite lower acreage under kharif oilseed, the overall edible oil price to remain range-bound this year.
“For the next couple of months, edible oil price may go up marginally due to the lean crushing season in the domestic market. But, once soybean harvesting begins in late September-early October season, the price would move downwards,” said Satyanarayan Agarwal, president, Central Organisation for Oil Industry and Trade (COOIT).
Meanwhile, edible oil prices remained firm so far this month amid reports of crop damage in the US due to drought and lower availability from domestic sources. In August, most edible oil price jumped between three-five per cent. Both RBD palmolein and refined soya oil were quoted range-bound in Vashi APMC market on Thursday at Rs 624 per 10 kg and Rs 765 per 10 kg. Sunflower oil also traded unchanged at Rs 775 per 10 kg.
“Market will move fairly in range-bound as the rationalisaion in export duty by Indonesia would have hardly any impact on Indian market,” said Atul Chaturvedi, chief executive officer (edible oil), Adani Wilmer Ltd, the company that produces Fortune brand edible oils.
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Investors are looking to the speech for any hint on further US stimulus scheduled for Friday that could boost sentiment and support demand for risky assets such as palm oil, which has lost ground so far this year. The edible oil has posted two straight weeks of gains as the worst drought in over half a century damaged soybean crops in the US Midwest, hurting soybean oil supply and shifting more vegetable oil demand to the cheaper palm oil.
Indonesia, the world’s largest palm oil producer, reviews the rates and base export prices every month to make it closer with the movement in its price in the spot market. The duty is based on average rates in Kuala Lumpur, Rotterdam and Jakarta. Palm oil on the Malaysia Derivatives Exchange, the global benchmark, has fallen 5.4 per cent so far this year on a drastic decline in demand due to the sovereign debt crisis in Europe and a slowdown in China.