The world's two leading producers of vegetable oil, Malaysia and Indonesia, are eyeing the $10-billion market in this country. "Both are competing in export policy, making India a dumping ground for palm oils," complained B V Mehta, executive director of the Solvent Extractors' Association (SEA).
Data compiled by SEA showed vegetable oil import into India rose 76 per cent (over a year) to 1.33 million tonnes in August, the highest monthly figure since its import was allowed under open general licence (OGL) in 1994. Subdued prices were the biggest factor. After a five-year low of ringgit 1,914 a tonne last week in Bursa Malaysia, crude palm oil (CPO) is currently at R2,000 a tonne.
Surging import despite an estimated rise in domestic oilseed production is expected to discourage mills from procuring seeds at the minimum support price (MSP) announced by the government. In case, farmers do not fetch even the MSP from seed crushers, many would choose alternative crops for better realisation the next season. Through last year, groundnut was sold at Rs 3,200-3,300 a quintal against the MSP of Rs 4,000 a quintal.
Also Read
Malaysia, the world's second largest producer of palm oil, with annual production of little over 19 mt, announced a nil export duty for two months effective September 1. The government's aim was to reduce inventory, at a record of 2.05 mt for August, a 22 per cent rise from 1.69 mt in July. Analysts say, as a result, their palm oil export rose 41 per cent between September 1 and 10, compared to the same period in August. And, responding to Malaysia's decision, Indonesia, the world's largest palm oil producer, with 30 mt of annual output, announced an export duty to cut to nil effective October 1 from the existing nine per cent. Analysts estimate their crude oil inventory at 2.9-3 mt.
Together, Malaysia and Indonesia contribute 85 per cent of the world's palm oil production. Dorab Mistry, Director of Godrej International, says the CPO price is unlikely to fall below its cost of production at Ringgit 1,900 a tonne.
"The big problem with the palm market has been the absence of the much hyped El Niño. Plantations were complacent that with El Niño this year, prices would rise. So, they under-sold. Yet, production has been better than expected. And, both Indonesia and Malaysia failed to implement their palm bio-diesel mandates. We also have the biggest soybean crop in history likely to be harvested shortly in USA. 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," said Mistry.
India's vegetable oil import, as a consequence to the price fall, is expected to set a new record this year at 11.5 mt (Rs 60,000 crore or $10 billion), of which 9.5 mt has already arrived. Total annual vegetable oil consumption in India is estimated at 19.5 mt.