Seasonal demand to boost oil prices

MARKET OUTLOOK

Rates set to rise as rabi season crushing comes to an end, stocks dwindle.

Edible oil prices are likely to rebound this week on strong seasonal demand. The prices of nearly all cooking oils are set to go up by at least Rs 2 a kg as crushing activities for the rabi season come to an end.

If this happens, the government's efforts to keep edible oil prices, and subsequently inflation, under check will take a hit. Seasonal demand begins in April, when rabi crushing comes to an end, and continues till September. This also sets a trend for farmers to decide the crop for the next kharif oilseed season. 

ON THE BOIL Oil prices Rs/10kg
Date	Groundnut oil	Sunflower refined	RBD palmolein	Soyabean refined
Apr 2, '07	650.00	532.00	451.00	462.00
May 2, '07	640.00	527.00	458.00	469.00
Jun 1, '07	665.00	545.00	468.00	465.00
Jul 2, '07	755.00	605.00	457.00	483.00
Aug 1, '07	745.00	575.00	461.00	478.00
Sep 1 '07	705.00	550.00	450.00	462.00
Oct 1, '07	725.00	575.00	461.00	470.00
Nov 1, '07	650.00	630.00	502.00	502.00
Dec 1, '07	660.00	700.00	497.00	527.00
Jan 1, '08	640.00	680.00	507.00	540.00
Feb 1, '08	685.00	775.00	541.00	572.00
Mar 1, '08	740.00	850.00	648.00	620.00
Mar 18, '08	720.00	770.00	595.00	650.00
Apr 2, '08	710.00	715.00	535.00	560.00
Apr 19, '08	670.00	660.00	540.00	585.00

"Demand is rising. Therefore, bearish sentiments, which overshadowed the edible oil trade following government's raids and seizure of stocks, will turn positive," said Sanjay Aggarwal, chief executive officer and manging director, K S Oils, India's largest mustard oil producer.

According to an estimate, the output of the oilseed crop in the rabi season (that is mustard seed) is likely to decline to 5 million tonnes in 2007-08 as compared with 6.2 million tonnes last year.

Diversion from mustard seed to other remunerative crop, including soybean and cotton, has resulted into a decline in acreage area under mustard seed to 38 lakh hectares as compared with 52.76 lakh hectares last year.

The Central Organisation for Oil Industry and Trade (COOIT) has scaled up its 2007-2008 (July-June) castor seed output estimate to 910,000 tonnes from 850,000 tonnes.

In 2006-07, India's castor seed output stood at 780,000 tonnes.

With an eye on the inflation rate, the Centre, with the help of state governments, has raided a number of warehouses across the country and seized tonnes of oilseeds and oils.

Prices, which are softenening, will turnaround after May as estimated by Dorab Mistry, director, Godrej International, as demand continues to move upwards.

Essentially, the government's another decision to avail edible oil to people below poverty line (BPL) through public distribution system (PDS) at a price which is Rs 15 lower than the market price is also set to reverse the market sentiment.

"Prices are unlikely to go down further," said B V Mehta, executive director, Solvent Extractors' Association (SEA).

Next season is expected to remain favourable for kharif oilseeds, during which about 80 per cent of the total oilseeds are produced in the country.

Driven mainly by expectations that farmers would be inclined more towards oilseeds this kharif season, industry sources estimate 10 per cent growth in output this year. "Soybean output this year is estimated to remain stable at 93 lakh tonnes as crop diversion is unlikely," a trader said.

According to COOIT estimate, India is likely to produce 8.5 million tonnes of vegetable oils during the current oil year (November 2007-October 08) and import about 6 million tonnes.

Meanwhile, the prices of nearly all edible oils jumped up to Rs 1 a kg last week with groundnut oil quoted at Rs 67 a kg, refined soya oil at Rs 59.50 a kg, refined palmolein oil at Rs 55.50 a kg, refined sunflower oil at Rs 67.50 a kg while expeller mustard oil is hovering around Rs 55.80 a kg.

Demand for palm oil, which has risen about 17 per cent this year already, along with other vegetable oils is likely to remain firm in the coming weeks given a steady stream of buying from China and India in the global markets.

Global benchmark markets, however, have indicated a decline as the appreciating ringgit has prompted traders to book profit. In Malaysia's spot market, crude palm oil for April shipment was quoted at 3,570-3,600 ringgit a tonne.

In Chicago, soybean oil futures for July delivery gained as much as 1.7 per cent to 62.65 cents a pound on Friday.