MUMBAI, MARCH 13: Soybean oil is all set to capture a larger share of theIndian import market this season at the expense of palm oil.

On March 1, 2004, the Indian government lowered the reference price forcrude degummed soybean oil from $565 per MT to $485, which effectivelylowered the duty by $36 a ton and improved the competitiveness of soybeanoil against palm oil, says United States Department of Agriculture (USDA).

Moreover, on February 15, 2004, India raised the import duty on crude palmoil from 65% to 80% and on all refined and further processed palm oils,from 75% to 90%, while also lowering the reference price for crude palmoil from $454 to $400.

In this case, the combination of a lower reference price and higher dutyrate leads to an effective tax increase of about $25 per ton. Thisincrease in tax plus decrease in soybean oil tax of $36 a ton narrows themarket price by $61 a ton, making soybean oil much more competitive.

The government’s decision to reduce the reference price for soybean oil isbeing disputed in India. The Solvent Extractors’ Association argues thatthis reduction deviates from the current market price of soybean oil (onCIF basis) of around $546 per ton and that it would adversely affectIndian farmers.

India imported 7,59,000 tons of soybean oil in marketing year (MY)2003/04, and is forecast to import 1.5 million tons (MT) of soybean oil in2004/05. In contrast, imports of palm oil declined to 3.55 mt in MY2003/04, compared to 3.95 mt in MY 2002/03, and are expected to furtherdecline to 3.4 mt in MY 2004/05.

It is worth mentioning that the US is the largest soybean producer,followed by Brazil, Argentina, China and India. According to latestforecast by USDA, world soybean production for 2004-05 is pegged at 224.14mt, of which US will account for 85.48 mt, Brazil for 59 mt, Argentina for39 mt, China for 18 mt, India for 6.50 mt, Paraguay for 4.50 mt and therest of the word for 11.66 mt.

On the exports front, the US will emerge as the largest exporter at 28.44mt, followed by Brazil at 21.10 mt, Argentina at 7.67 mt, Paraguay at 2.60mt and others at 2.61 mt.

According to USDA’s forecast, peanuts or groundnut will be the highestproduced oilseed at 7.5 mt in India for 2004-05, followed by cottonseed at6.9 mt, soybean at 6.5 mt, rape/mustard seed at 6.4 mt and sunflower seedat 1.75 mt.

India’s oil consumption during the year 2004-05 is expected to be a total11.81 mt, of which palm oil will account for 3.40 mt, followed by soybeanoil at 2.45 mt, rapeseed oil at 2.14 mt, groundnut oil at 1.80 mt,cottonseed oil at 0.731 mmt and others at 1.29 mt.