MARKET DEVELOPMENT
Cooking oil prices likely to sink only on a May day
Cooking oil prices likely to sink only on a May day
25/4/07 (The Economic Times) - NEW DELHI: Cooking oils are refusing to cool despite a duty cut because tardy imports have sucked the pipeline dry. As palm oil prices rocket due to a rise in global demand, Indian consumers will continue to pay Rs 50 for one litre of vegetable oil. The only consolation is that if the rupee had not become stronger and duties had remained high, we would have been paying Rs 60 per litre by now.
Indian traders began striking deals with South American soya oil companies only a couple of weeks ago. So the first ships carrying the oil are not expected to touch Indian shores before mid-May.
Fortunately, brands have decided not to raise MRPs just yet because they know soya oil will become abundant by end-May. Even so, most have marginally increased the price they are charging from retailers to factor in the rise in wholesale prices.
“Importers didn’t plan well and there were no contracts in January-February. So the pipeline is under tremendous pressure. We are anticipating a shortage in the first 10 days of May. After that, things will quieten. That’s why we are not planning to change our MRP just yet,” said a senior official at Adani, which sells Fortune, India’s biggest edible oil brand.
Prices did soften by Re 1/kg after the duty cut because of profit-booking by traders. But it climbed back again.According to trade sources, importers were wary of signing deals two months ago because they wanted to be sure there would be no price risk in a volatile market made worse by demand for biodiesel.
“The market was waiting for a correction. But there has been an unprecedented spurt in the price of palm oil which has taken everyone by surprise. No one takes a huge position anyway because the risk is too high. Importers book for a maximum one month at a time,” said the managing director of a Chennai-based refinery.
The price graph of crude palm oil in the past four months has beaten the pundits. Crude palm oil was ruling at $525/t c&f in January and rose by $50 to reach $585/t in March. However, between March 20 and April 20, it shot up by $140/t.
However, there is still a little likelihood of a long-term bull run. The market is in backwardation, with the July-August futures ruling up to $40 lower.
“The degummed soya oil being contracted now from South America is at Rs 42/kg, which is cheaper than the current prices of Rs 44/kg. So the market will cool eventually,” said a trader.
Indian traders began striking deals with South American soya oil companies only a couple of weeks ago. So the first ships carrying the oil are not expected to touch Indian shores before mid-May.
Fortunately, brands have decided not to raise MRPs just yet because they know soya oil will become abundant by end-May. Even so, most have marginally increased the price they are charging from retailers to factor in the rise in wholesale prices.
“Importers didn’t plan well and there were no contracts in January-February. So the pipeline is under tremendous pressure. We are anticipating a shortage in the first 10 days of May. After that, things will quieten. That’s why we are not planning to change our MRP just yet,” said a senior official at Adani, which sells Fortune, India’s biggest edible oil brand.
Prices did soften by Re 1/kg after the duty cut because of profit-booking by traders. But it climbed back again.According to trade sources, importers were wary of signing deals two months ago because they wanted to be sure there would be no price risk in a volatile market made worse by demand for biodiesel.
“The market was waiting for a correction. But there has been an unprecedented spurt in the price of palm oil which has taken everyone by surprise. No one takes a huge position anyway because the risk is too high. Importers book for a maximum one month at a time,” said the managing director of a Chennai-based refinery.
The price graph of crude palm oil in the past four months has beaten the pundits. Crude palm oil was ruling at $525/t c&f in January and rose by $50 to reach $585/t in March. However, between March 20 and April 20, it shot up by $140/t.
However, there is still a little likelihood of a long-term bull run. The market is in backwardation, with the July-August futures ruling up to $40 lower.
“The degummed soya oil being contracted now from South America is at Rs 42/kg, which is cheaper than the current prices of Rs 44/kg. So the market will cool eventually,” said a trader.