Vegetable oil import may fall by 5% due to bumper oilseed output, note ban

Published on : March 24, 2017 Topic : Business

Vegetable oil import is likely to decline during the current oil year (November '16 to October '17), the first such in six years.

This is likely due to an estimated increase in domestic output and a decline in consumer demand after a demonetisation-driven liquidity crisis in the three months since November. Since consumption of edible oil is a daily affair and cannot be deferred, the fall in demand could not be made up.

Trade sources estimate import to decline by five per cent or 700,000 tonnes this year. This would cut the import bill proportionately. About 55 per cent of India's 23.5 million tonnes (mt) of annual edible oil consumption is met through import, primarily from Indonesia, Malaysia and Argentina.

"We are estimating import at 14 mt this year or even lower, due to bumper oilseed output in both kharif and rabi seasons," said Atul Chaturvedi, chief executive at Adani Wilmar, producer of the Fortune brand of edible oil. Demand, he added was normalising after the demonetisation impact.

After normal monsoon rain during the 2016 season, the Union ministry of agriculture had forecast oilseed output to surpass its previous record of 32.75 mt in 2013-14 to 33.59 mt this year, according to its Second Advanced Estimate, published on February 15. The latter figure would be a third higher than the previous year.

Dorab Mistry, Director, Godrej International, estimates the additional edible oil output at 1.5 mt for the current oil year. The ministry reported total domestic oil output at 9.54 mt for 2015-16. Put together, that means 11.04 mt of edible oil output for 2016-17.

"Import might go up if demand of oilmeal (a derivative) is suitably backed up. Growth in per capita consumption has slowed, a bearish factor for import. And, the import industry has become more efficient, responding quickly to price movement," said Mistry.

Edible oil consumption has been growing at three to four per cent every year, with the growing income of the middle class. Increasing population has added to this. All this translates to incremental demand of 700,000-800,000 tonnes annually. "This would be met (entirely) through increase in domestic supply (this year)," said B V Mehta, executive director, the Solvent Extractors' Association, representing the 850-odd entities in the edible oil trade.

Source: Business Standard
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