Edible oil set to move north on demand

MARKET OUTLOOK

Bullish domestic demand coupled with the failure of the soy crop in South America and China are likely to propel the edible oil complex up in India. Stockists from these two destinations are turning towards India, which could result in a buoyant edible oil market next week.

Prices are likely to go up by Rs 15-20 across all sectors led by the soy complex, said an analyst with Religare Enterprise.

Edible oil may also get a boost from the lower output estimates this year globally, with the world oilseed production likely to decline by 4.5 per cent in the current oil year (November-October) to 379 million tonnes from 397 million tonnes last year.

China, a traditional soybean importer, prefers Indian soy, which is not produced from genetically modified (GM) seeds. According to industry estimates, China consumes about 35 million tonnes of soybean meal against the country's production of 17 million tonnes. This year, however, China's output is expected to remain lower between 14 and 15 million tonnes.

Lower production estimates in the US, down to 80 million tonnes this year from 85 million tonnes last year, is expected to trigger prices at the Chicago Board of Trade (CBOT), the benchmark global edible oil trading platform.

According to analysts, the use of soybean in biodiesel in the wake of rising energy prices are pushing the entire edible oil complex up, which is unlikely to ease in the foreseeable future.

Meanwhile, edible oil prices in the spot Indian market surged between Rs 8-15 per 10 kg last week, with groundnut oil ending the week at Rs 640 per 10 kg, with a gain of Rs 10 , while refined soya oil and refined palmolein closed at Rs 532 (up Rs 8) and Rs 498 (up Rs 12) per 10 kg, respectively. Refined sunflower oil, mustard oil and refined cottonseed oil closed the week at Rs 675 per 10 kg, Rs 540 per 10 kg and Rs 520 per 10 kg, respectively, on Saturday. Groundnut in shell and oil contracts remained unavailable for trade on NCDEX. But rapeseed-mustardseed oilcake ended the week with a gain of Rs 30 at Rs 880.65 per 20 kg.

A thin but scattered trading was witnessed in castor seed last week as prices surged to Rs 427.30 per 20 kg compared with Rs 418.70 last week. India exported 35.26 lakh tonnes soyameal last year and is expecting an overseas sales of about 45 lakh tonnes during the 2007-08 season due to a bumper output.

Exports to China alone is estimated at about four lakh tonnes. SOPA has pegged the soybean production during kharif 2007 at 94.73 lakh tonnes, up 32.5 per cent, compared with the last year's output of 71.49 lakh tonnes. The soyameal output is expected to be about 67-68 lakh tonnes during the current season. Of this, 20-22 lakh tonnes would be consumed by the domestic poultry industry, while the remainder would be exported.

Malaysian palm oil exports rose 2.28 per cent during the December 1-20 period to 946,210 tonnes.

China was the biggest importer of Malaysian palm oil so far this month, importing 259,650 tonnes, up from 231,247 tonnes in the first 20 days of November.

Argentina shipped 1,616,426 tonnes of soybeans in October, up 180 per cent from the 576,579 tonnes exported in October 2006. China was the leading buyer of Argentine soybeans in October, purchasing 1,363,146 tonnes.