'Edible oil output to dip 5%'

Crude palm oil (CPO) market is likely to remain sideways with Bursa Malaysian Derivatives (BMD) futures likely to trade between 2300 and 2500 ringgit in the next two months till evolving fundamentals get clearer, according to a paper presented by Dorab Mistry, director, Godrej International.

"If the picture indicates the sustained rise in CPO production then we could assume a 10 per cent price decline but it is premature to arrive at this conclusion at this stage," said the paper presented at SIOOC 2007 in Singapore last week.

The paper said that India's edible oil production was likely to decline by 5 per cent to 67,75,000 tonnes in the oil year 2006-07 (November-October) compared with 71,00,000 tonnes in the corresponding period last year.

In contrast, total edible oil consumption in the country is expected to increase by 2 per cent to 12,500,000 tonnes in 2006-07 compared with 12280,000 tonnes in the previous year.

The per capita consumption, however, is likely to remain unchanged at 11.16 kg.

Edible oil prices had shot up to 16 per cent in the last one year because of higher consumer demand and lower availability.

Meanwhile, sunflower oil has become the price leader and could still go higher from current levels of $1100 to as high as $1300 cif Rotterdam.

Rapeseed oil prices are in the region of $950 ex-mill Europe and should remain at those levels, the paper projected.

However, the high prices of sunoil and of rapeoil have in the past month given scope to soya oil and to palm oil to move higher. The paper further estimated the South American soya oil to remain at current levels of $800 for FOB Argentina for the next few months.

Palm is once again at its traditional discount to soya oil and is likely to remain so for the foreseeable future.

High sea freight rates have given palm oil some advantage in its traditional markets of China, India, Pakistan and Bangladesh.

However, the US soya crop is yet to be made and there are a huge number of uncertainties in the market at present. South American plantings and weather are an open question at this stage.

Groundnut oil shot up by 7.47 per cent to settle at Rs 575 per 10 kg while refined soya oil jumped 9.81 per cent to Rs 470 per 10 kg.

Refined palmolein oil, refined sunflower oil and mustard oil surged by 11.87 per cent, 8 per cent and 16 per cent in the last one year to close on Saturday at Rs 452, Rs 545 and Rs 490 per 10 kg respectively.