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Branded edible oil producers will soon cut prices by at least 10 per cent, passing on a global fall. That includes leading companies such as Cargill India, Adani Wilmer and Ruchi Soya.
Malaysian palm oil futures for delivery in November slumped on August 22 to 1,999 ringgit ($655) a tonne, lowest since October 2009, due to an oversupply of alternative oilseeds. Soya oil on the Chicago Board of Trade (CBoT) was traded at 32.79 cents a pound on Monday, a marginal recovery from a four-year low of 32.66 cents a pound on Friday. Edible oil prices declined by up to 19 per cent in the domestic market, with crude palm oil (CPO) down to Rs 516 per 10 kg on Monday from Rs 632.35 per 10 kg on April 1.
The world is facing a big oversupply of CPO from both Malaysia and Indonesia, the two countries comprising 85 per cent of world output. Malaysia, second-biggest producer after Indonesia, reported 9.1 million tonnes of CPO churning between January and June, up from 8.4 mt in the same period last year. The government of Indonesia has estimated a total CPO output this year at 29.5 mt, up 6.3 per cent from 27.8 mt in 2013.
“Plantations were complacent that with El Niño this year, prices would rise. Production has actually performed better than expected. And, both Indonesia and Malaysia have failed to implement their palm biodiesel mandates. When producer countries fail on mandates, it becomes very difficult to support prices. We also have the biggest soybean crop in history likely be harvested shortly in USA,” said Dorab Mistry, Director of Godrej International. “Palm production should reach a peak in the September to November period. This will coincide with the US soya harvest and with big plantings of soya in place of corn in South America.”
Of 18.5 mt of annual demand, branded oil is 15 per cent; the bulk is sold in loose form.
To keep margins intact, Saraiwwalaa Agrr Refineries has decided to build inventory to sell on a rebound, said managing director Ravinder Kumar Gupta. With a 3.04 per cent weightage in the price index, the decline in edible oil will provide relief to the government, trying to keep food inflation under control.
