Low estimates of domestic oilseed production in the coming oil year (November 2012-October 2013) and recent instability in currency rates are likely to put edible oil prices are on the boil. Prompted by domestic and international factors, refining companies as well as branded oil marketing companies will pass on the increase in prices to consumers, making the daily food platter costlier.
According to industry experts, edible oil prices have gone up by 5-10 per cent since February and are likely to stay firm for about a quarter.
“There are international factors, such as rupee fluctuation and lower soyabean output estimate in the US, while domestically mustard output is estimated lower than last year. This has created bullish sentiment in prices over the past few weeks,” said Angshu Mallick, chief operating officer, Adani Wilmar Ltd.
Prices have started firming up since January. However, prices have moved up much faster during February, prices of most edible oils have risen by 5-10 per cent in a month.
| OIL ON BOIL | |||
| Edible Oil | Price as on Feb 1 (Rs) | Price as on Mar 6 (Rs) | Change % |
| MCX Spot CPO-Kandla | 514.9 | 547.1 | 6.25 |
| MCX Spot Mustard Oil Jaipur | 715 | 755 | 5.59 |
| Groundnut Oil * | 1030 | 1120 | 8.73 |
| Sunflower Ref * | 685 | 700 | 2.18 |
| Cotton Seeds Refined * | 610 | 636 | 4.26 |
| Rbd Palmolein * | 561 | 576 | 2.67 |
| Soyabean Ref * | 660 | 680 | 3.03 |
| (Prices are for 10 kg) (*Mumbai spot market) | |||
MCX spot mustard oil at Jaipur rose from Rs 715 per 10 kg on February 1 to a high of Rs 783.50 by the end of the month. Similarly, in the spot markets at Mumbai, RBD Palmolein rose from Rs 561 per 10 kg to Rs 576 on March 6. Groundnut oil rose from Rs 1,030 per 10 kg to Rs 1,120 per kg and soybean refined rose from Rs 660 per 10 kg to Rs 680 on March 6.
High prices have already started hampering refining operations. According to industry players, refineries are operating at lower capacity utilisation levels. “Currently, there is disparity in oil seed crushing. Hence, most refineries in the country are operating at lower utilisation levels of 40-50 per cent,” said Ashok Sethia, vice-president, Central Organisation for Oil Industry and Trade (COOIT).
The depreciation in the rupee against the dollar has made imports of key edible oils costly. On Wednesday, the rupee traded at Rs 50.47 against a US dollar. This is the lowest level for the rupee since January 18, when it recorded Rs 50.76 a dollar.
“Dollar has been unstable for the last one week. The rupee has depreciated by Rs 1.5 per dollar, making imports costlier by $1,200 per tonne. This would increase retail prices by Rs 2 per kg,” said Mallick of AWL, which sells edible oils under the brand name of Fortune.
“There has been bullish sentiment in most edible oils over the past one month. Rupee depreciation in the past few weeks is one of the factors for the price rise in the short term. This trend may continue till the rupee shows some major improvement,” informed Biren Vakil of Paradigm Commodities in Ahmedabad.
According to industry insiders, the branded edible oils segment controls about 40 per cent of the total market of around Rs 75,000 crore. AWL is one of the leading players in the edible oils segment, besides Ruchi Soya and Cargill.
In a recent paper presented at Malaysia, Dorab Mistry, director of Godrej International had said imported vegetable oil would constitute 57.54 per cent of India’s total consumption in the current year, up from 55 per cent last year.
The country’s edible oil output is estimated to fall by three per cent to 6.95 million tonnes this year against 7.15 million tonnes a year ago. Mistry has estimated India’s per capita consumption to rise this year to 13.18 kg, compared to 12.96 kg in the previous year.
Meanwhile, the share prices of most edible oil refining and marketing companies have witnessed a beating since February 1, 2012. While share prices of players such as Gujarat Ambuja Exports Ltd, Gokul Refoils Ltd and Ruchi Soya have fallen by 3.77, 4.61 per cent and 1.95 per cent, respectively, others like N K Industries Ltd, K S Oils Ltd, Vimal Oil & Foods Ltd have shed 11.21 per cent, 6.99 per cent and 16.28 per cent, respectively, on the Bombay Stock Exchange (BSE) since February 1. The benchmark Sensex has gained by around 2.35 per cent since February 1, 2012.
