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Friday, November 8, 2024

Cooking oil prices rise 15% in a month

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Cooking oil prices have surged by up to 15% in the last month, potentially causing worry for the Modi government to rein in food inflation as it starts its third term.

Adani Wilmar, Emami Agrotech, and Sunvin Group have stated that the surge in soybean oil prices is attributed to supply disruptions from Argentina and Brazil. Additionally, mustard oil prices have risen due to significant purchases of mustard seeds by the National Agricultural Cooperative Marketing Federation of India (NAFED) and the Haryana State Co-operative Supply and Marketing Federation Ltd (HAFED).

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Farmers’ Response to Rising Mustard Oil Prices

Given the present situation, mustard farmers are opting to postpone the sale of their harvest, anticipating a potential further increase in prices, despite mustard seed prices reaching the Minimum Support Price (MSP) of INR 5,650 per quintal.

“I wouldn’t rule out the possibility of another significant rally, but we anticipate the market to remain stable,” stated Sudhakar Desai, the president of the Indian Vegetable Oil Producers’ Association and CEO of Emami Agrotech.

Labor Protests in Argentina and Flooding in Brazil: Supply Chain Disruptions

According to trade sources, soybean oil supplies have been affected by labor protests in Argentina, leading to reduced soybean crushing this season. The Argentine Oilseed Crushers Union called for a strike to protest proposed economic law reforms, particularly changes to wage taxes that would impact crushers.

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Recent floods in Brazil have exacerbated the decline in soybean oil production. The crop agency Emater reported estimated soybean losses of 2.71 million metric tons in Rio Grande do Sul, the southernmost state of Brazil, as of June 5, according to international media sources.

“There’s a supply chain issue for soybean oil. In April, a shipment from Argentina via Brazil would have had about 40,000 tonnes of soybean. However, in May, it dropped to 30,000-32,000 tonnes. This led to a tightening of soybean oil supply in May, causing a retail price increase of INR 3-4 per litre,” explained Angshu Mallick, managing director of Adani Wilmar.

Sandeep Bajoria, CEO of Sunvin Group, a prominent oil trading company based in Mumbai, added, “China has also purchased significant volumes of soybean oil, further influencing the price of this commodity.”

To fulfill domestic demand, India imports approximately 3 million tonnes of soybean oil each year.

Price Trends and Outlook for Sunflower Oil

“Due to the off-season, there is a limited supply of sunflower oil from Ukraine and Russia. However, the high temperatures in these regions have affected both the end-season crop and are expected to impact the upcoming crop as well. This has influenced the sentiment surrounding sunflower oil, leading to price increases. Currently, sunflower oil prices have risen by 6.5%,” remarked Bajoria. India annually imports 2.5-3 million tonnes of sunflower oil.

Desai noted that the most significant surge has been witnessed in mustard oil prices, with a 15% increase. “Prices are expected to remain strong in the short term, without a doubt,” he added. Additionally, he mentioned that the palm oil supply is also under pressure.

“This year, the domestic industry anticipates a bumper Rabi mustard crop, with acreage expanding from 7.30 million hectares to 10.04 million hectares,” stated Mallick of Adani Wilmar. “Due to extensive procurement of mustard seeds by NAFED and HAFED, prices of mustard oil have surged in the domestic market.”

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