“Rupee has depreciated by nearly 13 per cent during the last few months which has increased import cost. Also, the government raised the minimum support price of oilseeds resulting in higher cost of production. Since the demand is also going to rise during the ongoing festival season, edible oil producers are all set to raise their product prices marginally by around Rs 5 a kg,” said a senior industry official on the sideline of Globoil India, an industry event being held in Mumbai.
Interestingly, CPO prices in the spot Malaysian markets
remained flat to trade with nearly 1 per cent premium to the near-month future prices. The current price of $500 a tonne in the spot Indonesian market, however, stands at $450 a tonne for traders (due to $50 a tonne of export tariff), translating thereby $400 a tonne of actual realization for farmers there. This multi-year low of farmers’ actual realisation stands at their cost of production.
Sathia Varqa, Co-founder of Singapore – based Palm Oil Analytics, forecasts crude palm oil prices to range between MYR 2159-2250 a tonne for October – December 2018 and further between MYR2250-2350 a tonne for the quarter ending March 2019 quarter.
“There were a lot of edible oil and vanaspati import happening under the South Asian Free Trade Agreement (SAFTA) from the countries like Bangladesh, Sri Lanka and Nepal resulting into the domestic industry being hit badly,” said Atul Chaturvedi, President, Solvent Extractors Association (SEA).
Interestingly, the Directorate of Revenue Intelligence (DRI) has restricted edible oil import from Bangladesh. In a notification dated September 25, DRI said that its ‘no objection certificate’ is necessary before importing edible oil from Bangladesh. DRI is also considering similar action against edible oil import from Nepal and Sri Lanka.
Sandeep Bajoria, Chief Executive Officer of Sunvin Group, however, believes that the introduction of Insolvency and Bankruptcy Code (IBC) has brought consolidation in the Indian edible oil refining business. “Nearly 5 million tonnes of nearly 30 million tonnes Indian installed refining capacity has been referred to the National Company Law Tribunal (NCLT) over the last few months. Thus, the Indian edible oil refining industry is passing through a consolidation phase now,” he added.
Meanwhile, the ongoing trade war between China and the United States has lowered exports of edible oil from producing countries, resulting in a threat of inflation in import-reliant countries.
Chaturvedi, however, believes India’s vegetable oil import will remain lower by 0.5 million tonnes to around 15 million tonnes this oil year ending November 2018. The government of India has also set an ambitious target to raise edible oilseed production by nearly 20 per cent to 45 million tonnes to reduce India’s reliance by 15 per cent of its increased import of 32 million tonnes by 2022.