Oil's not well

EDIBLE OILS

The total acreage of oilseeds has declined to 93.66 lakh hectares this year.

Oilseeds could become dearer this year, as farmers in states like Rajasthan, Madhya Pradesh and Uttar Pradesh have shifted to crops such as wheat and chana, anticipating bullishness in both commodities.

As on January 18, the total acreage of oilseeds was 93.66 lakh hectares, down 10 per cent from 104.11 lakh hectares in 2005-06, and 5.7 per cent from 99.50 lakh hectares in 2004-05.

The area under rapeseed and mustard is 66.40 lakh hectares, down 9.5 per cent from 73.40 lakh hectares in 2005-06, and 2.95 per cent from 68.29 lakh hectares in 2004-05.

As a result, the forecast of Indian rapeseed production is lowered to 6.2 million tonnes from 6.5 million tonnes previously and 6.8 million tonnes in 2005-06, says the United States Department of Agriculture (USDA) in a recent report.

This year's smaller domestic harvest will further enhance import needs for vegetable oil in India. Imports of soybean oil and palm oil for 2006-07 are each forecast 50,000 tonnes higher, to 1.85 million tonnes and 3.8 million tonnes respectively, it says.

According to the domestic industry estimates, arrived at in an Agriwatch conference, mustard production may decline to 57 lakh tonnes.

In 2005-06, the country had a record mustard production of 78.87 lakh tonnes, against 76 lakh tonnes in 2004-05. However, there may be a decline in the 2006-07 season.

"The global demand-supply scenario for vegetable oils in 2007 is quite lopsided. I expect the growth in demand to outstrip supply. Therefore, we will see higher prices in order to balance demand and supply," says Dorab Mistry, director, Godrej International.

The problem started in 2006, as the demand for vegetable oils for biodiesel and green energy became more prominent. "On top of that, we have had a major bull market in wheat and an emerging bull market in corn," he adds.

Prices of Chicago futures for corn rose by 80 per cent during 2006, while wheat prices rose by about 60 per cent.

Farmers all over the world have been switching over to wheat and corn, and oilseeds acreage is not expanding.
 

INDIAN EDIBLE OIL PRODUCTION
OIL	2002-03	2003-04	2004-05	2005-06	2006-07(E)
Soybean oil	580	1,000	900	1,140	1,055
Cotton oil	390	520	660	755	825
Groundnut oil	740	1,200	970	950	700
Sunflower oil	475	450	470	620	640
Mustard oil	1,185	1,800	1,570	2,250	2,150
Sesame oil	150	200	200	125	115
Coconut oil	350	400	400	400	380
Ricebran oil	550	600	610	660	700
Others	180	200	200	200	220
Total	4,600	6,370	5,980	7,100	6,785
(in '000 tonnes)                                                                E: estimates

SNIPPETS

Declining stocks
The National Agricultural Cooperative Marketing Federation (Nafed), the country's main mustard procurement agency, is left with a stock of less than 11 lakh tonnes.

Nafed had procured about 21 lakh tonnes of mustard this year worth Rs 4,000 crore at a minimum support price (MSP) of Rs 1,715 a quintal.

In addition, it had a carryover stock of 15 lakh tonnes from the previous year's procurement. However, the carryover this time would be less than 10 lakh tonnes.

The entire stock from the previous year has been disposed of. Nafed is selling mustard at a rate of Rs 1,700-1,740 a quintal.

The price of mustard has moved up by more than Rs 200 per quintal over the last five months.

In 2005-06, the country had a record mustard production of 78.87 lakh tonnes, against 76 lakh tonnes in 2004-05. However, there may be a decline in the 2006-07 season.

High on imports
India was the third largest importer of vegetable oils at 5.5 million tonnes, behind the European Union at 7.8 million tonnes and China at 7 million tonnes in the year 2005-06, according to Oil World magazine.

India consumes around 12-12.5 million tonnes of edible oil annually. Palm oil, which is primarily imported along with soybean oil, accounts for half of this, while mustard oil, groundnut oil, cottonseed oil, rice bran oil and sunflowerseed oil constitutes the rest.

According to B V Mehta, executive director of the Solvent Extractors Association of India, in future India will continue to depend on imports, primarily of palm oil, palmolein and crude soybean oil because of their lower prices.

For the oil year 2005-06 (November-October), vegetable oil imports were 44 lakh tonnes versus 51 lakh tonnes in the previous year. However, industry watchers see increase in imports in the current year.