Poor demand piles up edible oil at ports

Following a liquidity crunch in the edible oil market, softer overseas prices and lack of domestic demand, processors and traders are avoiding lifting stocks from ports. The port stocks are estimated to be around 4.5-5 lakh tonne, market sources said.

Another dampener is that imports in August may not see an expected slow down on month and are estimated between 4.5-5 lakh tonne. Of the total, around 2-2.2 lakh tonne is likely to be soyoil and the remaining palm oil.

Morover, the industry estimates of edible oil imports for the oil year 2004-05 (November-October) are likely to be revised to an all-time high of 52 lakh tonne.

Following the lower international prices, India's imports have been good. In 2004-05 oil year (October-September), imports are likely to touch 5.2 lakh tonne compared with 4.4 lakh tonne last year.

The huge port stocks have reduced the demand for forward booking. "Currently it is seemingly a hand-to-mouth situation. Cheaper imports are coming in and the prices being lower, at times are being sold in market at prices below parity also," said Rajini Panicker, head - commodities, Refco Commodities.

Cheaper imports have resulted in a glut situation in the domestic market. With demand no where near chasing supply, the port stocks are building up.

According to a Mumbai-based trader, "At ports, crude soyoil stocks are around 2.25 lakh tonne and palm oil accounting for the remaining."

Another trader said, "Most imports are coming in unpriced and lying bondaged at ports. Further, the stocks are just around a month's consumption. However, its impact is deeper on the market as it is pushing towards negative parity and thus, liquidity crunch."

Unpriced consignments are meant to be priced on arrival. The processors and importers can pay for them when the consignments are unbondaged.

This also tends to free them from the risk against price volatility as the imports of soyoil from South American origin have a 60 days' delivery period and palm oil from Malaysia and Indonesia have a 10-15 days' delivery period.

Though a new trend in India - as it has been seen over the last 3-4 months only - unpriced and unsold consignments are an acceptable international trend. Analysts say with India's preculiar behaviour of keeping minimal requirement in its pipeline, even stocks piling up at ports is not a bad indicator.

However, most are concerned with the liquidity crunch developing in the market.This year, there is a glut situation globally leading to prices of all edible oils being down by Rs 6-7 per kilogram on year.

ON A WEAK NOTE

Traders are not lifting stocks on account of liquidity crunch

Cheaper imports have resulted in a glut situation in the domestic market

As demand is no where near supply