Views of Mr. Ritesh Kumar Sahu (Fundamental Analyst - Agri Commodities, Angel Commodities Broking):
"The edible oil- Ref Soy oil and Crude Palm oil (CPO) - futures prices have been trading at 7-8 month lows currently mainly due to reports of record oilseed production keeping higher available stocks of edible oil in the country coupled with cheap edible oil imports due to declining tariff values by the government.
Ref Soy oil futures hit a eight-month low today and headed for a fourth weekly declines, weighed down by higher supplies in the domestic market due to higher domestic crushing and cheap imports which is supported by stronger rupee in the current calendar year. The rupee has hit twenty month high at 64.31 per dollar in April 2017 and also down about 5.6% in current calendar year. A stronger rupee makes the import cheaper for the domestic importers.
Ref soy oil on National Commodities and Derivative Exchange (NCDEX) fell more than 13% to Rs 631 per 10 kg So far this calendar year, as market participants and stockists continue to sell their positions and stocks throughout the season on forecasts of rising output. Oilseed production in the country soaring about 33% this year to 34 million tonnes as the lakhs of farmers switch to oilseed crop after government increase the minimum support prices (MSP) of major oilseeds.
While CPO prices on Multi Commodity Exchange (MCX) have fell about 12.3% since January due to lower base import prices for the country and weighed down by forecasts of rising output in Malaysia and Indonesia coupled with weaker performing rival oils like soy oil in the US and China.
India has been a major importer of edible oils with almost 65-70% of its requirements being imported. The palm oil is the major form of edible oil imported in the country during 2016/17 followed by soybean oil and sunflower oil.
The imports of edible oil during the current oil season which started in November last year will be lower. This is mainly due to higher availability of soybean, mustard and groundnut seeds for crushing.
As per Solvent Extractors Association of India (SEA) country's edible oil imports fell a little over 7% on year to 11 lakh tonnes in March. Edible oil imports in Nov-Mar were at 21.2 lakh tonnes, down from 26.7 lakh tonnes a year ago. Meanwhile, soy oil imports during same period down more than 44% to 10.44 lakh tonnes while CPO imports were down only 1.4 % to 35.5 lakh tonnes.
In another development, government has cut customs duty on import of sunflower seed to 10% for Apr-Sep from 30% which may result into imports of around 1 million tonnes of sunflower seed during next two quarters i.e from Apr-Sep.
A slowdown in consumption growth and domestic availability has kept imports under check. As per latest USDA report, the soybean crush figures forecast to increase by 55.2% to 90 lakh tonnes in 2016/17 compared to last year data of 58 lt thus the production of soy oil in country will be increasing by 55% to 16.20 lt from 10.44 lt in 2015/16.
Meanwhile, the government has cut the base import price of all edible oils as per the Central Board of Excise and Customs notification on 13th April 2017. The steepest cut was done for crude palm oil (CPO) by $22 to $725 per tonnes while base import price of crude soyoil by $14 to $770 per tonnes for second half of April. This is the fifth consecutive cut in base import price of both CPO and Soy oil which is fixed every fortnight."