TREND: Firm exports, low stocks may lift groundnut prices 10% mid-May

Informist, Tuesday, Mar 23, 2021


By Kaushal Verma and Rahul Dhuri


NEW DELHI – Before the fresh crop begins to arrive in full swing in the next 5-6 weeks, groundnut prices are seen rising by 10% because of overseas demand for its derivatives and inventories with oil millers and stockists drying up, market participants said.


Currently, the oilseed trades at 1,175-1,200 rupees per 20 kg in the key markets of Gujarat. The prices are likely to rise to 1,250-1,320 rupees by May, traders said.


"The new rabi crop will begin to arrive in full swing in one-and-a-half months. Prices are likely to remain bullish during this period. Lower carryover stocks this year are expected to support prices," said Gujarat-based oil miller Sumit Kulkarni.


As of today, carryover stocks were estimated at 700,000-800,000 tn, lower than 1.2-1.5 mln tn from a year ago, said Saurashtra Oil Mills Association President Sameer Shah.


"Daily average arrivals have halved from a year ago. Lower supply in domestic markets is also seen lifting groundnut prices in the near future," Shah said.


In Gujarat, the leading producer of groundnut, daily average arrivals are around 40,000 bags against 80,000 bags a year ago, traders said.


On other hand, demand, especially from offshore markets, is looking robust, with traders estimating groundnut oil exports at around 225,000 tn in 2020-21 (Apr-Mar) against just 45,000 tn a year ago.


"Robust demand for groundnut oil from exporters may further lift the oilseed prices. China is emerging as the top importer of Indian groundnut oil. Around 95% groundnut oil is being shipped to China alone," said Govindbhai Patel, an industry veteran and Managing Director of G.G. Patel and Nikhil Research Co.


A significant portion of groundnut crop has been damaged in China, prompting it to buy huge quantity of groundnut oil from India this year, dealers said.


"Prices will also rise because of a likely rise in export demand for groundnut seed. Indian origin groundnuts are of good quality and their demand is growing in world markets," said Jamnagar-based Ambica Mills Proprietor Mukesh Kumar.


During Apr-Dec, 470,705 tn groundnut seeds were exported against nearly 456,580 tn in the year-ago period, according to the data by The Agricultural and Processed Food Products Export Development Authority.


Besides exports, strong demand from domestic oil millers and crushers will also push up groundnut seed prices, says Jayesh Thakkar, the owner of Dala Brothers based in Junagadh, Gujarat.


Higher prices of other edible oils are also pushing groundnut prices higher, Patel said.


"Soyoil and crude palm oil prices hit record highs early this month on global cues and paucity of stocks in wholesale markets. Prices may rise further in line with likely gains in international markets," Intellitrade and Monetary Advisors head Suresh Mantri said.


On the National Commodity and Derivatives Exchange, the April contract of soyoil hit a record high of 1,330.8 rupees per 10 kg. The same month contract of crude palm oil on the Multi Commodity Exchange of India hit an all-time high of 1,180.0 rupees per 10 kg today.


US President Joe Biden's push for green fuel using edible oils is also helping drive up vegetable oil prices in the global markets, said Ajay Kedia, the head of Kedia Commodity Comtrade. This has led prices of key domestic edible oils–soyoil and crude palm oil–rise to all-time highs.


However, the rise in groundnut seed prices would be capped by tepid demand for groundnut meal in world markets and a bigger crop this year, traders said.


There were no groundnut meal exports in February and exports during Apr-Feb were just 6,596 tn, according to the Solvent Extractors' Association of India data.


Production of groundnut in 2020-21 (Jul-Jun) is seen at 10.1 mln tn, 194,000 tn higher than last year, according to the farm ministry data.


The oilseed crop is seen higher this year due to rise in area under the crop and supportive weather conditions, traders said.


Groundnut, a crucial rabi and kharif oilseed, accounts for nearly 27% of India's total oilseed production.  End


Edited by Akul Nishant Akhoury


Cogencis news is now Informist. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.


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