Monthly Prices Movement

  • Edible Oil complex witnessed a mixed trend throughout the month amid sluggish global cues, volatility in Indian currency and expectation of higher Edible Oil imports.

  • During June and July, Palm Oil prices have decreased from Rs 533 to Rs 500 per 10 kg and Soy Oil prices have fallen to Rs 625 from Rs 640 per 10 kg.

  • Mustard Oil demand was steady to positive this month with emphasis on North-East states local consumers whereby prices rallied 7.5% in July. Mustard Oil prices got big support from instability in Palm and Soy Oil prices, which shifted demand to Mustard Oil. Mustard Oil prices rose to 9-month high during July due to regular demand from consuming states.

  • Groundnut, Sunflower and Cottonseed Oil prices were mostly sideways to positive in the absence of any strong demand.

Ground Report

  • India's supports in terms of duty hikes in Edible Oil have not served the desired purpose. Increase in oil imports coupled with the decline in the Soybean crop would prove counter-productive for the indigenous processing industry.

  • India’s Edible Oil imports more than doubled in 2015 mainly due to a sharp rise in use of oil as a medium for cooking in rural areas and the falling production of Oilseed.

  • Indian use of Edible Oil varied based on prices and availability, but demand appears uninterrupted, a likely consequence or rising population and growing prosperity.

  • Imports now account for two-thirds of the India’s Edible Oil demand, which is unlikely to reduce as the population grows and incomes continue to increase. The consumer is likely to pay for taxes imposed on imports.

  • Big upside for Refined Soy Oil seen limited as import has doubled to 0.39 million tonnes in June against 0.18 million tonnes in May. Soy Oil imports expected to rise and reach 3.7 million tonnes in 2016, which was at 3 million tonnes in 2015. Also the cost of imports has fallen from the earlier $1,280 per tonne to around $750 in 2016.

  • India's import of Vegetable Oils increased by 15% to 1.17 million tonnes in June on rising shipments of Refined Palm Oil. Current stock of Edible Oils as on 1st July, 2016 at various ports is estimated at 0.88 million tons.

  • During November 2015 to June 2016, India had imported about 9.76 million tonnes Edible Oil, higher by 10% from 8.84 million tonnes in corresponding period of 2014-15. Out of total import, India imports Palm and Soy Oil maximum about 85%.

  • India's Edible Oil import growth likely to hover around 10% during the current oil year (November 2015 - October 2016), as against 24% in previous year, despite a sharp rise in consumption.

  • Import of RBD Palmolein during November 2015 to June 2016 rose by 95.60% replacing import of CPO and expected to increase further in the coming months.

  • Though Kharif Oil Seed sowing is up so far in India, Vegetable Oil imports likely to touch a record high in the current oil year ending October on rising consumption and a bearish trend in global prices.

  • India last year had imported 14.4 million tonnes of Edible Oil and it is likely to touch 16 million tonnes this year.

  • India’s per capita consumption of Edible Oils stands at around 14.4 kg per year. However, this consumption has been steadily increasing in the past few years on the increase in population and rising income levels.

  • The demand supply gap is becoming wider mainly due to limited availability of Oil Seeds, shifting of acreage to other crops and increase in demand of Edible Oil. The domestic refining industry is facing severe crisis of under utilization of capacity due to higher Edible Oil imports.

  • Soybean sowing this Kharif season is expected to decrease by about 3-5% over the previous year. Lower Soybean acreage will result into lower Oilseed production and India will be forced to import higher Edible Oils.

  • Government should re-think of increasing duty difference between Crude and Refined Vegetable Oils from 7.5% to 15. That will reduce import dependency.

Policies

  • Indian government has planned to reduce country's dependence on Edible Oil imports by implementing 'National Oilseed and Oil Taad project, a plan to boost Oilseed and Edible Oil availability in India, informed Agriculture Ministry.

  • India has revised down the import tariff value for Crude Soy Oil to $752 per ton for second half of July against $765 a ton earlier.

Global

  • Global Oilseed production for 2016/17 is projected at 533.8 million tons, up 2.1% from 2015/16.

  • Soybean harvest in Argentina is 96.4% completed and the yield is recorded at 30.7q/ha.

  • A Bloom-berg survey stated that India Soy Oil imports probably more than doubled to 315,000 tons in June from 154,090 a year earlier, while Sunflower Oil purchases climbed 33%.

  • China's Palm Oil imports from Malaysia during the first six months of this year, down sharply by 52.3%. Growth in China's Palm Oil imports, under pressure due to a slowing economy.

  • Ukrainian Sunflower Oil production probably rose sharply by 19% while export likely to up by 14% year-on-year to 4.8 million.

Outlook

  • Edible Oil sector is likely to pickup demand by August-September after months of sagging sales. Soy Oil market should remain steady on the price front as sowing has picked up for Oilseed. Soy Oil prices currently are tracking low Palm Oil prices, as the counterpart is cheapest in oil complex and directs other Vegetable Oil market. Edible Oil prices over the last few months have protected consumers from inflation.

  • If the Rupee strengthens against the Dollar, then we can see a correction up to Rs.1 a litre in Edible Oil prices. Historically, May and June are months when Edible Oil sales dip and a recovery only happens by July-August.

  • Groundnut and Cottonseed Oil prices have rallied by more than 10% in the first half of July and we expect prices to be firm over the next few months owing to poor rains in Gujarat and lower supplies. Demand for groundnut Oil likely to improve ahead of Janmashtami festival, which is likely to support prices.

  • Cooking Oil prices may witness downward trend after mid of September due to higher production of Palm Oil expected in Malaysia and Indonesia following the waning of the El Nino effect. Edible Oils such as Soy and Sunflower Oil may witness correction in prices by 5-10% from September onwards.

  • It is expected that Oilseed production in India will be better this year as monsoon will be above normal. All these factors will definitely bring down prices of Edible Oils. Correction in Edible Oil prices is depending on Rupee-Dollar movements.

  • Demand for Edible Oil mainly driven by increase in per capita consumption of the commodity, rising income levels and improvement of living standards. The growth in production of domestic Edible Oil has not been able to keep pace with the growth of consumption and this gap is being met by the imports.

  • Price gap with other Vegetable Oil is narrowing, due to which buyers are in wait and watch mode and making fresh commitments according to demand and by choice.

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