With an estimated 10 per cent fall in availability from domestic sources, imports of vegetable (veg) oil are likely to set a new record this oil year (October 2011 – September 2012).
To meet the growing demand, despite high prices, at 17 million tonnes (mt), India will require a record 9.3 mt of imported veg oil this year, as compared to 8.37 mt reported in the previous year. The previous record was set in 2009-10 when the country imported around 9.2 mt to bridge the demand-supply gap.
“Domestic veg oil supply is unlikely to surpass last year’s level due to lower oilseed output forecast for the rabi crop. With per capita consumption rising three-four per cent every year and another 20 million consumers added with an increase in population, the overall import will set a new record of 9.3 mt this year,” said B V Mehta, executive director of apex trade body, the Solvent Extractors’ Association (SEA).
SEA’s latest forecast indicates mustard seed output would decline 8.54 per cent to 6.27 mt during the current rabi harvesting season compared to 6.85 mt in the previous season. A survey conducted by SEA attributed the estimated fall in mustard seed output to a dramatic decline in acreage. The survey showed a nine per cent decline in sowing area under this major rabi oilseed crop at 7.25 million hectares (ha) this year, compared to 6.58 million ha last year. Mustard seed constitutes over 70 per cent of the total rabi oilseed output in the country.
This year due to late sowing and high temperature during December, the crop is delayed by 15 to 20 days. Also, cold weather conditions have damaged the standing crop in Gujarat and Rajasthan. The exact damage will be reviewed once the crop is fully harvested, Mehta said.
The Central Organisation for Oil Industry & Trade (COOIT) estimated total oilseed output in the kharif season at 16.50 mt in 2011-12, compared to 14.37 mt in the previous season. But, with an estimated 10 per cent fall in the rabi output, the overall oilseed production may remain at around last year's level of 24.25 mt.
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A report by commodity broking firm Religare Commodities said, “Veg oil availability from domestic sources will decline by 793,000 tonnes to 7.73 mt in the current oil year as compared to 8.53 mt in the previous year. Consequently, India’s reliance on imports will increase by five percentage points to 54.5 per cent during 2011-12, as compared to 49.5 per cent in the previous year.”
“The overall import of veg oil may increase by 10.72 per cent or 897,000 tonnes to 9.27 mt this year, compared to 8.37 mt reported in the previous year,” said Prasoon Mathur, an agri commodity analyst with Religare Commodity.
The forecast may marginally differ among analysts, but the overall quantity of imports is set to hit a new record this year.
Therefore, overall consumption of veg oil (edible and non-edible) is set to increase by 0.62 per cent to 17 mt in 2011-12, compared to 16.90 mt in the previous year.
Edible oil prices during January broke all-time high levels due to increased demand and fear of less domestic production of oilseeds as compared to last year. Further, the international market sentiments, too, are supportive of the bulls in the medium to long term. Hence, prices are likely to remain firm in the near term, said the report.
According to Naveen Mathur, associate director, Angel Broking, “Domestic oilseed complex surged during the last three-four weeks with prices of mustard seed gaining the most, up 13 per cent, followed by soybean (nine per cent) and refined soyoil (eight per cent) on account of global supply concern due to prolonged dry weather condition in South America (Argentina and Brazil). Further, the upward movement in prices was supported by a sharp decline in production estimates of domestic rape/mustard seed this year. CBOT soybean also rose around seven per cent during the last three-four weeks on account of estimated lower global ending stock of soybean.”
Global ending stocks of oilseeds are expected to decline due to estimated sharp fall in soybean production in Brazil and Argentina. AgRural, a Brazilian commodities consultancy firm, estimates soybean output in these two countries to decline to 68 mt, from the January forecast of 70.2 mt.
Along with a continuous surge in demand, high volatility in the dollar value against the rupee during 2011, also impacted the import cost of edible oils.