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Edible oil prices likely to rise 10% early next year

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Dilip Kumar Jha Mumbai

Domestic edible oil prices are likely to rise 10 per cent in the first quarter of the calendar year 2011 on firm global guidance, narrowing the gap with the global prices.

Prices in the global market have risen 60-65 per cent in the last one year, while domestic prices increased a marginal 10-12 per cent due to excess availability through high imports.

Prices of imported RBD palmolein at Mumbai port rose a staggering 57 per cent to $1,255 a tonne on December 24, as against the average of $798 a tonne in December 2009. Similarly, crude palm oil (CPO) import price rose 63 per cent to $1,225 tonne from $753 per tonne, while sunflower oil surged 47 per cent to $1,400 a tonne from $952 per tonne.

 

Palm oil futures in Bursa Malaysia rose to fresh 33-month high at 3,792 ringgit in the intraday trade on Tuesday, triggered by prospects of erratic weather hitting vegetable oil supplies.

Heavy rain during the monsoon season hampered the harvesting of palm fruits and made transportation to refineries difficult in Malaysia and Indonesia, the world’s two largest palm oil producers. Dry weather in Argentina has slowed plantings and could prevent soy crops from normal development.

But, edible oils in the domestic market remained comparatively stable. For instance, groundnut oil price perked up 11.58 per cent to Rs 76,000 a tonne on December 24, as compared to the average of Rs 68,115 a tonne in December last year. Similarly, rapeseed oil, refined soya oil and refined cottonseed oil jumped 7.6 per cent, 21.92 per cent and 26.26 per cent to Rs 59,000, Rs 57,500 and Rs 56,800 a tonne, respectively.

However, refined sunflower oil rose sharply by 40 per cent to Rs 66,000 a tonne on December 24 from Rs 46,908 a tonne average in December last year due to lower output.

Meanwhile, the cost of imported crude and refined edible oil may rise further, as the Indonesian government has raised the export duty to $223.70 a tonne effective January 1, 2011, from $150 a tonne now.

India imports large quantity of crude palm oil from Indonesia due to quantitative restriction imposed by the Malaysian government.

Though, Indian vegetable oil importers are looking at alternative source, including Malaysia, the cost of import may rise if supply routes through any third country.

The rise in cost of transport would translate into nearly 10 per cent increase in edible oil prices, said B V Mehta, executive director of the Mumbai-based trade body Solvent Extractors’ Association (SEA).

Subscribing to his view, Satyanarayan Agarwal, chairman of the Central Organisation for Oil Industry & Trade (COOIT), said, “Erratic weather in major producing countries, including Malaysia, Indonesia and Argentina, has affected the current year’s crop. This is expected to reduce overall availability of edible oil globally.”

If weather continues to remain favourable, India’s overall edible oil availability will increase to seven million tonnes this season, as against 6.2 million tonnes in the previous year.

With the increased acreage under rabi oilseed, total mustardseed output is estimated at seven million tonnes this year, as against 5.8 million tonnes last year.

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First Published: Dec 30 2010 | 12:50 AM IST

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