Soya, cotton seeds glut pulls down oil prices

Oversupply of soya and cotton seeds, coupled with a lack of demand, pushed down edible oil prices by Rs 15-20 in the last one week. As festival demand is already over and no pick-up in the situation is seen. Global bird flu scare and huge mustard arrivals are also contributing to the decline.

In Madhya Pradesh, total soya seeds arrival was at 2.25 lakh bags (1 bag = 90 kg) on last Thursday, which more than doubled yesterday to 4.75 lakh bags. In Maharashtra alone, around 3 lakh bags arrived yesterday as against 1.5 lakh bags last Thursday.

Rajasthan also witnessed a similar growth in arrivals at 50,000 bags yesterday. About 7-8 lakh bags of seeds are floating in the market daily since last Monday. Speculations are rife that the total arrivals would cross 10 lakh bags shortly, a leading Mumbai-based trader said.

Soyoil is also seen flooding the market, with imports rising over 100 per cent on year. The domestic meal production is also in full swing aimed at meeting the rising export demand.

Soya oil today is quoted in the range of Rs 348-350 per 10 kg today as against Rs 361-363 per 10 kg last Thursday. Similarly, solvent extracted oil is sold in the range of 321-324 per 10 kg.

"Soybean, soyoil or mustard, the supply is just too much in the market. Farmers were offloading bean ahead of the festival season hoping for higher price but it does not seem happening as mustard stockists began offloading their stuff. This resulted in a depression with the edible oilseeds in oversupply," said Govindbhai, an Indore-based trader.

A section of traders feel that cotton seeds and edible oil would start witnessing pressure starting November 10 and November 15, respectively.

The fall in domestic bean prices may get support, as farmers may keep away from the market following reluctance to sell stocks at lower levels. Further, heavy selling interest ahead of Diwali and offloading of old crop every time plant prices trend upwards of Rs 1,200 (per 100 kg), could keep Ncdex soybean futures weak, said a Mumbai-based analyst.

Gujarat-which is going to harvest bumper 20-22 lakh tonne of groundnut and sesame seeds-has witnessed arrivals of about 2 lakh bags of groundnut seeds.

"Concerns about weather linger. Torrential rains in the south India must have damanged some quantity of sunflower, cotton and groundnut seeds on the reports are expected very soon. Then possibly market would take some upwards movement,"Said a trader.

There are rumours that the government would reduce import duty on crude palmolein oil (CPO) by 15 per cent from about 80 per cent now.

Traders are hopeful that the prices would decline further as supply has been hitting the market very badly. "We bought about 20-25 thousand CPO on Wednesday itself to make the supply smooth," a trader said.

"The market is full of supply and takers are absenting as stock building seasons are over now. The next season we are expecting by the first week of December. Gujarat is going to create a history by producing about 20-22 lakh tonne of oilseeds this year," said P M Chheda, president, The Bombay Commodity Exchange. Currently, oil prices are quoted lower in Chicago and Malaysia and domestic prices are moving in tandem.

"If groundnut oil prices are moving close to Rs 500 and soya oil price at around Rs 350 than the gap would be narrowed down in the future because of seed supplies," Chheda added.