Edible oil rates to stay high

Edible oil consumers in India are unlikely to get a respite from higher prices despite the expected increase in oilseed production and the import duty cuts announced by the government at regular intervals.

According to industry experts, India's higher production estimates of oilseeds with low oil content will have no impact on prices as the country may have to depend on more imports on rising domestic demand.

Attributing the higher prices of oil seeds also to global concerns, including reduced acreage in Brazil and declining production in the US, a source at IL&FS estimated the soybean price to rise by 12 per cent to Rs 1,750 a quintal towards the end of the current year from Rs 1,560-80 a quintal now.

Similarly, the price of refined soy oil is likely to rise to Rs 570 per 10 kg from the current level of Rs 480 per 10 kg.

Surprisingly, the acreage of seeds with higher oil content such as sesamum has declined in the ongoing kharif season. According to government estimates, as of August 23, the sesamum seed sowing area has declined to 14.64 lakh hectares from 15.66 lakh hectares during the same period last year.

In contrast, the area under soybean and groundnut cultivation increased to 86.87 lakh hectares and 50.91 lakh hectares from 70.75 lakh hectares and 44.90 lakh hectares, respectively.

Sunflower seeds with an oil content of 36 per cent has also witnessed a decline in acreage to 6.90 lakh hectares from 7.83 lakh hectares during the same period last year.

Meanwhile, edible oil prices have surged by nearly 10 per cent in the last one year on rising Indian demand, with refined soya oil touching Rs 475 per 10 kg from Rs 409 per 10 kg a year ago.

Similarly, groundnut oil jumped to Rs 560 per 10 kg from Rs 535 per 10 kg a year ago. Refined palmolein oil also shot up to Rs 452 per 10 kg compared with Rs 422 per 10 kg a year ago. Refined sunflower oil rose by Rs 70 to Rs 575 per 10 kg from Rs 505 per 10 kg a year ago.

According to the latest report by Kotak Commodity Services (KCSL), the new crop is expected to hit the market in the next two weeks. However, the soybean crop in Madhya Pradesh is reportedly damaged due to pest attacks, and is likely to strengthen the prices further.

Globally, China's may increase soybean imports, which could put upward pressure on prices in the global market.

Soybean futures for November delivery rose 17.5 cents, or 1.8 per cent, to $9.885 a bushel on the Chicago Board of Trade, after earlier reaching $9.9675, the highest since May 12, 2004. The prices have risen 80 per cent in the past year after farmers in the US reduced acreage to the lowest in 12 years.

The October contract for refined soy oil gained marginally by Rs 10 to Rs 487.80 per 10 kg as against Rs 477.50 per 10 kg a month ago on the National Commodity & Derivatives Exchange (NCDEX).