Edible oil prices decline

Even as consumers received some relief from high edible oil prices following the government's decision to cut the import duty, many domestic edible oil producers have adopted a "wait and watch" policy till the market stabilises.

Prices of various categories of edible oils went down marginally on Tuesday following the government announcement, with mustard oil prices declining by Rs 1 to Rs 54 per kg and soybean slipping by Rs 1 to Rs 50 per kg.

"We expect prices to go down further in the coming days. Moreover, the impact of kharif oilseeds sowing would also be seen on prices after August 15, when we get a clear estimate of the kharif production," said Ramesh Garg, chairman of K S Oils.

On Monday, the government announced the reduction of import duty on crude palm oil from 50 to 45 per cent, RBD palmolein from 57.5 to 52.5 per cent, soybean (crude/refined) from 45 to 40 per cent, crude sunflower oil from 50 to 40 per cent and refined sunflower oil from 60 to 50 per cent.

"The effect of the duty cut was seen on Tuesday and prices can go down further depending on the international trend," said Rajesh Agarwal, spokesperson of the Soybean Processors Association of India.

According to the fourth advance estimates released by the agriculture ministry last week, oilseeds output in 2006-07 is estimated at 23.88 million tonnes, down 14.65 per cent from the final production estimates of 27.98 million tonnes in 2005-06.

Due to the lower production of oilseeds, import of edible oils has been rising. According to the Solvent Extractors Association, the total import of edible oils between November-June (2006-2007) stood at 27.48 lakh tonnes, up 6.2 per cent over the corresponding figure of 25.88 lakh tonnes in 2005-06.

Edible oil has a weightage of 2.76 per cent in the Wholesale Price Index (WPI), higher than the cement's 1.73 per cent, wheat's 1.38 per cent and 2.45 per cent of rice. Containing edible oil prices by duty cut is an important step in the government's inflation controlling measures.

But many like Dinesh Shahra, managing director of Ruchi Soya Industries, a major soya oil producer, while being categorical on passing the duty cut to consumers, are planning to wait for 2-3 days for the market to stabilise before passing on the benefit.

"We are closely watching the development in the domestic as well as international markets, and if the situation permits, we would cut the price," said Shahra.

Anil Agrawal, MD of Sanwaria Agro Mills feels that domestic producers may cut prices by up to Rs 2 per kg in the short term as rising domestic and international prices would not permit them to continue the trend for long.

Indian Vanaspati Manufacturers' Association Executive Director I R Mehra, however, was confident of consumers getting relief from the duty cut.

"It's very difficult to quantify at this point of time as the market is yet to adapt to the impact of the duty cut," said Agrawal.

However, it is unlikely that Indian producers would be able to import edible oil at lower prices as exporting countries, including Indonesia, Malaysia, Brazil and Argentina, may jack up their respective selling prices as on earlier occasions when the Indian government cut import duties, thus almost nullifying the impact on retail prices.

Meanwhile, palm oil futures in Malaysia, the benchmark for the commodity, fell for a second day after rival soybean oil posted its biggest drop in more than six weeks on expectations of a bigger US crop.

Palm oil for October delivery on the Malaysia Derivatives Exchange dropped as much as 21 ringgit, or 0.9 per cent, to 2,459 ringgit ($722) a tonne. It closed at 2,476 ringgit at the end of the morning session.

Soybean oil on Chicago Board of Trade dropped 2.2 per cent to 36.67 cents a pound on Monday, its biggest decline since June 8. A drop in the price of crude oil Monday contributed to a slide in palm oil, which is used as a fuel additive.

Indonesia, too, is likely to witness a rise of 7 per cent in its crude palm oil output to 18.6 million tonnes next year from 17.4 million tonnes this year on rising productive area to 5.3 million hectares (13.1 million acres) from about 4.9 million hectares.

In India, oilseeds sowing so far this year stood at 12.2 million hectares, up by 4.3 per cent from the corresponding period last year. Groundnut sowing has also increased to 3.35 million hactares (3.15 million hactares) and soybean planting at 7.16 million hectares recorded a growth of 6.4 per cent.