Overseas trend may lift palm, soy oil prices

Domestic edible oil prices are likely to remain mixed this week with rise in local supplies along with costlier imports, traders said on Friday.

Daily mustard seed arrivals of over a million 85 kilograms bags will put a downward pressure on the market but firm overseas sentiments may push prices soy and palm oils prices upwards.

Traders feel conflicting pressures will result in volatile price movement in both directions during the week.

India prices are guided not only by domestic oilseeds harvest but also global prices, as the country is world's largest importer of the commodity.

"Massive mustard seed arrivals, of over 1 million bags per day, will increase supply and pull prices down," said Govindlal G Patel, a trader with Rajkot-based Dipak Enterprise.

Confusion over the implementation and impact of value-added tax regime will add to the weak sentiments, traders said. However, the recent hike in import tariff values of crude soyoil and all grades of palm oil will push the prices of these oils upwards, Patel said.

This may have a contagion effect and even reflect in prices of some locally produced oils as well, traders said.

Price movement is expected in a range of 10 rupees per 10 kg, Patel added.

The tariff value hike is likely to make import of all grades of palm oil expensive by Rs 5-10 per 10 kilograms and those of soyoil by Rs 3-5 per 10 kg, said Sandeep Bajoria, the president of the Central Organisation of Oil Industry and Trade.

This may even result in a slight fall in imports in the short-term, reduce supplies and add to an upward price movement. The government Thursday increased the tariff value or the base price on which import duty is levied on palm and soy oils in line with the international

On Friday, the Indore spot price of soyoil was Rs 389-390 per 10 kg, down Rs 3 from Thursday. The National Board of Trade April contract (of soyoil) ended Rs 394.20 per 10 kg, down Rs 3.40 from the previous close. This week, traders expect the NBOT April soyoil contract to range between Rs 390 and Rs 400 per 10 kg.

Castoroil may see a rally amid fresh bouts of speculative buying and short covering. The commodity's March exports were at 41,000 tonnes, an all-time high for a month.

Mustard oil prices however, are expected to see a decline on the back of ample supplies of seeds for processing and extraction. Rajkot physical market saw mustard oil prices unchanged at Rs 410 per 10 kg.

NCDEX April contract saw a decline of Rs 2 to Rs 383 per 10 kg. Overseas soy futures on the Chicago Board of Trade are expected to see an upward movement on positive fundamentals, traders said.

Fundamentals are strong due to the likely cut in South American soybean crop estimate on account of dry weather. Similarly, there is threat of Asian Rust fungus and dry weather in South Asian palm oil production areas.

The US acreage report released recently has reported area coverage at 98 per cent of 2004 and is likely to give a fillip to buying by funds, said an analyst with Refco Commodities.

"USDA March intentions report indicates that the Asian rust scare may not result in large shift in acreage as initially feared," he added.

Brazil's agriculture agency IBGE revised downwards the 2004-05 soybean output forecast to 54.79 million tonnes, down by a sharp 12.2% from previous projection of 63.15 million.

Crude palm oil futures on the Bursa Malaysia Derivatives in Kuala Lumpur may move in line with the trends in Chicago.

On Friday, the Malaysian palm oil futures declined, taking cue from overnight fall in soyoil quotes in CBOT. The benchmark CPO June futures ended 1,429 Malaysian ringgits a tonne, down 32 ringgits from the previous close.

Traders feel rise in Malaysian palm oil exports will have only a limited impact on prices.

SGS cargo surveyors pegged the exports at 1.22 million tonnes (up 31 per cent on month) and Intertek estimated them at 1.18 million (up 29 per cent on month). However, traders said that exports seem to be on the higher side as large quantum of Indonesian palm oil was shipped from Malaysian ports.