February 4, 2008

India edible oils up on global cues; low rapeseed output

Indian edible oil prices were firm on the week to Friday due to strength in global edible oil markets and fears of a drop in rapeseed, because of cold weather, traders said.

However, gains in edible oils might be capped in the near term as surging local stocks due to larger imports could adversely affect trade sentiment, they added.

Rajini Panicker, head of research at MF Global (India), explained that edible oil prices were firm this week, but the bullishness might not persist for long as rising local stocks due to higher imports could put pressure on prices.

She said as per trade estimates, India imported around 420,000 tonnes of edible oils in January, up 35 percent from a year earlier.

Though palm and soy oil prices are steadily rising in international markets, imports have also gone up as they are still cheaper than locally produced oils, Panicker added.

India's edible oil prices are directly affected by global markets as the country imports more than half its annual demand of about 12 million tonnes.

It imports palm oil from Malaysia and Indonesia and soy oil from Brazil and Argentina.

Meanwhile, some traders said fears of lower-than-expected rapeseed crop in 2008 because of prolonged cold weather in northern India also pushed prices up as rapeseed has one of the highest oil content.

According to the latest government data, rapeseed has been sown in around 5.89 million hectares, down from 6.66 million a year earlier.