Informist, Friday, Apr 26, 2024

--GGN Research Patel: India '23-24 edible oil import seen 16.05 mln tn

--CONTEXT: GGN Research Managing Partner Patel's comments in interview

--GGN Research Patel: India imported 16.45 mln tn edible oil in 2022-23

--GGN Research: Low duty edible oil import extended on inflation worry

--GGN Research:Need 15-16 mln tn edible oil import, whatever the duty

--GGN Research Patel: See crude sunflower oil import up 5% in 2023-24

--GGN Research Patel: See crude soyoil import down 6% in 2023-24

--GGN Research Patel: See crude palm oil import down 4% in 2023-24

--GGN Research: Mar Sunflower oil import rose on discounted prices

--GGN Research: Apr sunflower oil import seen 325,000 tn; Mar 445,723 tn

--GGN Research: May, Jun sunflower oil imports seen 300,000 tn each

--GGN Research Patel: See sunflower, palm oil prices at par soon

--GGN Research Patel:India palm oil import seen picking up this month

--GGN Research: Apr palm oil import seen 700,000 tn vs 485,000 tn Mar

--GGN Research Patel: May palm oil import seen at 800,000-825,000 tn

--GGN Research Patel: Edible oil prices on a downtrend globally

--GGN Research Patel: See CBOT soyoil prices under pressure May, June

--GGN Research: Record mustard crop not to affect edible oil imports

--GGN Research: Need palm oil, soyoil futures to hedge volatility

--CONTEXT: India has banned palm oil, soyoil futures trade till Dec

By Anjali Lavania, Sandeep Sinha, and Afra Abubacker

MUMBAI/NEW DELHI - India's edible oil imports for 2023-24 (Nov-Oct) are likely to decline about 2.5% to 16.05 mln tn after the all-time high volumes shipped in last year, said Rajesh Patel, managing partner of Rajkot-based GGN Research. Citing India's high consumption demand--estimated at 26 mln tn a year, of which 65% needs to be imported--Patel said the country cannot substantially lower its imports in the coming years.

"Last year, edible oils saw record imports till date; also it was excessive import. So, in the current year, we are estimating it to be down by 400,000 tn," Patel said in an interview to Informist on Wednesday. GGN Research is a prominent provider of grassroot surveys and statistics on the oilseeds complex.

"By hook or crook, we have to import around 155-160 lakh metric tn (15-16 mln tn) to meet our demands, no matter what the duty is," Patel said.

Patel said the government has permitted edible oil imports at a lower duty for another year due to worries over any inflaton spikes, but there could be tweaks in the policy. "The concessional duty, which the government has declared for one year, it's not fixed," he said. "The new government can continue or may be make some changes."

In January, to keep a lid on prices in an election year, India announced extension of edible oil imports at lowered duty rates by another year till next March.

For the current oil year, Patel said he sees India's sunflower oil import rising 5%, while that of palm oil and soyoil are likely to lower by 4% and 6%, respectively. He said crude sunflower oil imports had risen to the second-highest ever level at 445,723 tn in March, with the record high being 461,458 tn in January.

On the other hand, imports of palm oil and soyoil had declined significantly. The imports of crude palm oil in March fell 31% on year to 381,056 tn due to high prices, and those of crude soyoil fell 16% on year to 218,604 tn. The Solvent Extractors Association of India will detail edible oil import data for April in the third week of May.

Patel attributed this divergent trend in imports to sunflower oil fetching a discount as against palm oil and soyoil. "Palm oil margins were in the negative territory in January as well as in February and parts of March also," he said. Due to its lower prices, consumers shifted to sunflower oil from palm and soyoil.

Though India is set to reap a record mustard production of 12 mln tn this season, Patel said it would have a negligible effect on India's import dependency. "Mustard cannot compensate for every oil. Each oil has its own advantages as well as disadvantages," he said. Last year, mustard seed production was 11.3 mln tn.

In India's edible oil basket, mustard oil constitutes about 14% of the total consumed in the country, and it accounts for 40% of the domestic edible oil production.

Below are the edited excerpts of the interview:

Q. India depends on imports to meet around 65% of its edible oil demand. The government has permitted its import at lower duty for another year. How do you see this policy at a time when India is trying to boost its oilseed production?

A. It's a government decision. I don't know what it will do after the election. But, as of today, the government is more concerned about inflation, which is one of the reasons why it has kept the duty at a lower rate, so that people can get edible oils at a reasonable price.

The concessional duty that the government has declared for one year is not fixed. It can change the duty at any moment. The new government can continue or maybe make some changes. So if any change comes up, we should not be surprised.

Q. India is set to reap a record mustard crop of 12 mln tn this year. To what extent will this reduce our dependency on imports?

A. Mustard cannot compensate for every oil. Each oil has its own advantages as well as disadvantages. Mustard cannot be replaced with palm oil or palm oil cannot be replaced by mustard oil. Having a 12-mln-tn crop doesn't mean that we are self-sufficient. (India harvested 11.3 mln tn mustard seed in 2022-23)

Q. Are you saying that the rise in mustard output will not have any impact on edible oil imports?

A. Not much. If the government increases the duty on imported oils, we may see a consumption growth in mustard oil. But that will only be to some extent. Mustard oil or canola oil is not imported because the duty is very high, so there's no competition from the same kind of imported oils. Whereas, soya has to compete with the local oils as well as the imported oils.

Q. Will increasing import duty help bring imports down?

A. Imports cannot be brought down because we are 65?pendent on imports. Our total edible oil consumption is 26 mln tn, of which 65% is imported and 35% is domestic production. "By hook or crook, we have to import around 155-160 lakh metric tn (15-16 mln tn) to meet our demand, no matter what the duty is.”

Q. While palm oil and soyoil imports fell in March, India’s crude sunflower oil imports surged 200% on year. What is driving up the demand for sunflower oil in India?

A. Sunflower oil has been at a discount compared with palm oil and soyoil. Sunflower was much cheaper starting from January-end, so consumers shifted from palm oil and soya oil to sunflower oil. Palm oil margins were in the negative territory in Jan-Mar and imports decreased. But, starting this month and in the upcoming months, we'll see a jump in palm oil imports as the margins are now a little bit in the positive territory.

Q. Given that crude sunflower oil is majorly sourced from the Black Sea region and shipped through the Red Sea, how long do you think will sunflower oil continue to be in discount against rival palm and soyoil?

A. The discount on sunflower oil has decreased, and palm oil prices are decreasing day by day. At one point in the coming days maybe both oils will come at par, and sunflower oil may become a premium compared with palm oil.

Q. What is your near-term outlook for sunflower oil imports and demand?

A. The import of sunflower will decrease slightly April onwards compared to March. We are estimating around 325,000 tn in April. For May and June, we will see around 275,000 tn to 300,000 tn import of sunflower oil - that quantity should be good enough for India.

Looking at the demand perspective, we have seen a change in consumer behaviour. Consumers of cottonseed oil have shifted from cotton to sunflower because sunflower is a cheaper oil as of today, and it is a healthier oil. And that shifting of demand from other oils to sunflower oil has increased the core demand for sunflower oil by a good amount across India.

Q. Palm oil prices on BMD have fallen over 10.5% to 3,944 ringgits per tn after hitting a 20-month high of 4,407 ringgits on Apr 3. Do you think a correction in palm oil prices and seasonally-strong production in the coming months will lead to an increase in palm oil imports?

A. We will see palm oil imports increasing in the country. For the current month, in April, the imports will be around 700,000 tn compared with 485,000 tn in March. Our estimate for May is around 800,000-825,000 tn of palm products.

Q. There seems to be record net selling in CBOT soybean oil futures. Why is the market bearish on soyoil? What is the general sentiment in the edible oil market?

A. During Apr-Jun, CBOT will fluctuate as the maximum pressure comes in from South America (Argentina as well as Brazil). Plus, during this period, the weather in the US plays a bigger part. If the weather is good, we'll see a downfall (in prices), and if the weather is not good, for the next coming 10 days, we'll see CBOT recovering.

Q. What is your outlook on India’s edible oil imports for the rest of the year?

A. In the 2022-23 oil year, we imported 16.45 mln tn of all oils. And in 2023-24, we are estimating imports at around 16.05 mln tn, down by around 400,000 tn. Percentage-wise, we can say around 2% down compared to the previous year. That's what our estimates are as of now.

Q. In December, you had said that India's palm oil imports would rise 2% in 2023-24. Do you hold the same view now?

A. No. For palm oil, imports won't rise on year. I am talking about the full year. Not monthly. Palm oil imports will be down by 4%, soya will be down by 6%, and sunflower will be up 5% compared to the previous year.

Q. The Solvent Extractors' Association of India and Netherlands-headquartered Solidaridad Network Asia have set a target of 20 mln tn mustard output by 2029-30. Is it a viable target, and what challenges do you foresee in achieving the same?

A. Yes, they are doing a good job, I would say. And it is quite viable. If the target is achieved, it should be a big congratulation to SEA and the Solidaridad team. It's not impossible to meet the target, provided they get good support from the government and farmers.

Q. Experts consider mustard and groundnut as game-changers for India to achieve self-sufficiency in edible oils. However, groundnut faces competition from direct consumption through snacks and ‘chikki’. Do you think groundnut can be pivotal in attaining self-sufficiency?

A. Not much, because groundnut oil is a premium oil. The segment or the market for groundnut oil is quite different. Consumers from groundnut may shift to other oils, but shifting from other oil to groundnut oil is quite difficult, as it is costly.

Q. A declining trend has been observed in domestic oilseed prices. Mustard prices have fallen below the minimum support price. Do you think such price trends will discourage farmers from taking up oilseed cultivation that could derail India’s journey towards self-sufficiency in edible oils?

A. Domestic prices are going down because international edible oil prices are on a downtrend. And we have to follow the world market. So it's not in my hand, the processor’s, or the farmer's hand to do anything about it.

Q. In a situation where we heavily depend on imports, how do you view the minimum support price system for edible oils? Is it efficient in boosting domestic edible oil production? Is it time the government recalibrated its MSP policy?

A. The government always recalibrates the minimum support price. Every year they change and adjust the MSP as per the norms and inflation. I think the government policy is right, but it is quite difficult to judge.

Q. In the edible oils complex, sunflower oil is the only item trading in the Indian derivatives market. Do you think the government will permit futures trading in other edible oils too in the near future?

A. Can't say. It's quite a tricky question. I don't have an answer to that. Maybe we have to wait for the new government to come in power and thereafter, we could see windows opening for palm oil and soyoil futures trading on the NCDEX. Also, futures trading can help to hedge volatile prices...

If a processor has a hedging facility on the Multi Commodity Exchange for crude palm oil or on the NCDEX for refined soyoil, then a refiner or processor will be in a good position to hedge his product.

Q. The India Meteorological Department and Skymet have both predicted a normal monsoon this year. But there is a chance of the monsoon onset getting delayed. Will this impact our kharif oilseed sowing?

A. Quite difficult to say right now because kharif sowing will take place only in the second half of May or maybe in the first half of June. It will also depend on state to state and the amount received during the first rainfall. So, as of today, it's quite difficult to predict what farmers will do. End

Edited by Ranjana Chauhan

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