Weak rupee won't make edible oil more expensive.

KOLKATA: A weak rupee has not hit Indian edible oil consumers hard because global prices of soyabean and palm oil have softened in the last 10 days when the rupee fell sharply against the dollar. Prices of imported soybean oil declined to $960 per tonne from $1,045 per tonne during the period. Similarly, crude palm oil has dropped by $30 per tonne in the same period to $810 per tonne.

Interestingly, Indian consumers were paying more for edible oil this time last year although the rupee was much stronger because international prices were at a high. Traders say the softening in international prices will continue till the festival season for reasons such as better crop prospects in India, an increase in soyabean acreage in the US and a high palm oil production in Malaysia and Indonesia.

In July last year, soybean oil price was hovering around $1,190 per tonne and crude palm oil price was at around $965 per tonne. The dollar-rupee exchange rate in July 2012 was at around 55- 55.50. "Consumers were paying more last year for edible oil as the international prices were higher. In the Indian market too, prices shot up as the monsoon was late. But now the situation is completely different. Prospects of edible oil are much better this year and we do not see a hike in prices till the festival season," said Sandeep Bajoria, CEO of oil consultancy firm, Sunvin Group.

Leading edible oil players like Adani Wilmar that markets oil under the brand name Fortune have passed the benefit of low prices to consumers. Angshu Mallick, chief operating officer, Adani Wilmar, said: "Edible oil prices have come down by at least Rs 6 per kg but a weak rupee made imports costlier by Rs 4.50 per kg in the past few weeks. There is still a cushion of Rs 1.50 per kg. And from today the rupee has just dropped below the 60 level. Therefore, we do not see edible oil prices to shoot up in the near future. We reduced prices by Rs 1.50 per kg a fortnight ago." Soyabean sowing is almost complete in Madhya Pradesh, the largest producer. Sowing has also picked up in Maharashtra and Rajasthan. Soyabean prices in the Indian market are now hovering around Rs 3,600 -Rs 3,650 per quintal.

"Now that the prospect for the crop looks good, it is expected that traders will offload their stock in the market which will further push down prices," said BV Mehta, executive director, Solvent Extractors Association of India (SEA). Soybean farmers in the US, the world's biggest producers, are seen planting a record-high soybean crop, the US Department of Agriculture said. It is expected that the US will have soybean crop acreage of around 77.728 million acres.

"Harvesting has also begun in South America which will impact the prices. And Indonesia and Malaysia are all geared up to increase palm oil production," added Bajoria. India imports nearly 10 million tonne of edible oil, which is about 60% of the domestic demand. At present, the import duty on crude edible oil is 2.5% and 7.5% on refined edible oil. Domestic demand is increasing at a rate of 4%-5% annually. "In the current oil year (November 2012 - October 2013), we are expecting imports to go up to 10.8 -11 million tonne," said Mehta.

Source : economictimes.indiatimes.com