Informist, Monday, May 27, 2024
--Sunvin Bajoria: Apr sunflower oil price up on low Russian supply
--Sunvin's Bajoria: Sunflower oil was costliest edible oil in April
--CONTEXT: Sunvin Group CEO Sandeep Bajoria's comments in interview
--Sunvin: May sunflower oil import seen 350,000 tn
--CONTEXT: India imported 234,801 tn sunflower oil in Apr
--Sunvin Bajoria: To seek lifting of ban on CPO, soyoil futures
--CONTEXT: India banned palm oil, soyoil futures trade till Dec
--Sunvin: Brazil output concern boosts India soymeal export prospects
--Sunvin: Argentina output worry lifts India soymeal export prospects
--Sunvin: Efforts should be made to increase Indian soybean yield
--Sunvin: Oilseed farmers should not depend on govt MSP alone
--Sunvin: Govt procured only 20% of rabi mustard arrivals so far
--Sunvin: Do not see rice bran oil export ban extending beyond Jul 31
--CONTEXT: Govt banned exports of rice bran oil on Jul 28 last year
By Anjali Lavania and Romeo M. Raj
MUMBAI – India stepped up its import of soyoil and palm oil at the cost of sunflower in April as it turned expensive due to lower export by Russia, Sandeep Bajoria, chief executive officer of Sunvin Group said. Sunflower oil was the cheapest in the edible oil basket from December to March, he said. However, imports of sunflower are likely to be be higher again in May, as the cargoes contracted earlier when prices were low are arriving during the month.
The sunflower oil import in May is likely to rise to around 350,000 tn, from 234,801 tn imported in April. According to the Solvent Extractor's Association of India data, sunflower oil imports in March were 445,723 tn, the highest since November. "For sunflower, the main season is from Sep 15 to May 15, and from May 16 to Sep 14 is the off-season," Bajoria said in an interview with Informist.
For the oil year 2023-24 (Nov-Oct), Bajoria estimates a slight dip in edible oil imports to 16.0 mln tn from 16.5 mln tn last year.
On the issue of the ban on derivatives trading of soyoil and palm oil on the National Commodity and Derivatives Exchange, Bajoria said that the Solvent Extractor's Association will seek a revocation of the ban from the new government. The new government should focus on two things--to restart the derivatives trading in soyoil and palm oil and increase the import duty for edible oils as it has been too low for too long.
Below are the edited excerpts of the interview:
Q. India's crude palm oil and crude soyoil imports have increased in April, while India’s crude sunflower oil imports have fallen around 6% on year. What led to the fall in sunflower oil imports?
A. Sunflower oil was the cheapest edible oil from December to March. So that's why sunflower imports were very high in those months. Palm oil was the costliest oil, then soyoil and sunflower were the cheapest. But then in March-end, the situation changed. Now, the sunflower became the costliest and palm oil became very cheap. Even soyoil became very cheap. So, India stepped up the import of soyoil and palm oil and reduced the import of sunflower oil. This happened in April.
The prices are also in a very reasonable band. The overall fluctuation in the oil year has been in the range of $150. In palm, it has gone down to $860-$870 per tn, and on upper side, it has gone to $1,000-$1,020 per tn. In soyoil, again it has gone to $860-$870 per tn and on upper side, it has gone to $1,000-$1,030. Sunflower oil has come down to around $890–$900 per tn in this oil year and upper side, it has gone to $1,000-$1,010.
In May, we will have a good amount of palm oil coming together about 800,000-850,000 tn. Soyoil imports in May would be nearly 370,000 tn. In May, sunflower is going to be little high. The reason is earlier contracted cargos coming in May which were of lower prices. So, that is why, May sunflower imports are in the range of about 350,000 tn. So overall May import is pretty significant. Going forward, the palm imports will definitely be 750,000 tn to 800,000 tn each month.
At the end of the current oil year ending in October, the veg oil imports will be something around 16 mln tn, valued at about 15.5 bln dollars. Last year, we imported about 16.5 mln tn.
Palm oil will come about 8.8 mln tn which is lower than previous year by 1.2 mln tn. Soyoil import will be roughly around 3.8 mln tn which will be slightly higher than the previous year. Sunflower oil import will come around 3.4 mln tn which will be higher than the previous year.
Q. In March, crude sunflower oil imports, majorly sourced from the Black Sea region and shipped through the Red Sea, were in a discount against crude palm oil and soyoil, while in April it was the opposite. What factors led to the sudden surge in the prices of sunflower oil?
A. Sunflower oil prices had decreased but again they have gone up. Again now in the last 10-15 days, sunflower oil prices have really shot up. Now today it is about $1,000 per tn because the supply has reduced drastically from Russia and Argentina. The major source of supply in India was Russia and now offers from Russia have reduced because they are also facing off-season.
Sunflower season is from Sep 15 to May 15, and now during off-season, availability of sunflower is going to be affected. We import 350,000 tn of sunflower oil per month. It is going to come down to 200,000 tn per month.
Q. In the edible oil complex, sunflower oil is the only oil traded on the Indian derivatives market. What is your outlook for June crude sunflower oil futures on NCDEX?
A. The June contract of sunflower on NCDEX is trading around 870-875 rupee per 10 kg level. May contract of sunflower oil is trading at 865-870 rupees per 10 kg. I think June contract is not going to go down now and 870 rupees looks like a bottom. In Jul-Aug contract, I believe the prices of sunflower oil can go up to 890-900 rupees.
Q. With respect to the trading ban on soyoil and palm oil on NCDEX, has Sunvin as a group approached the government regarding revocation of the ban?
A. It is unfortunate that the government has banned the soyoil and palm oil. See, we as our own self, we don't write to the government. On behalf of the associations, we are continuously taking up issues with the government. We will be writing immediately after the new government is formed for two things. One is to start the future trading and another we are going to write that import duty needs to be revised upwards because it is too low for too long.
Q. The strikes in Argentina last month by workers in soy-processing plants threatened to paralyse the output in the country. Also, the heavy rains in South American countries like Brazil and Argentina have delayed harvesting. Does it mean an opportunity for India to increase exports of soymeal globally in the coming months?
A. You are right. In Brazil, floods occurred and that's why there is a 3-mln-tn loss of soybean production in the country. Also, in Argentina, the frequent strikes by port workers, factory workers, stevedores are disrupting the logistics of supply, production, and exports. So, this is delaying the whole situation of exports, production and supply there and definitely gives some kind of advantage to India. But still they have a very big crop and they have a large book to sell on the meal. So, it's not a drastic advantage to India.
Q. India has been dependent on imported oil for several years. The government is also talking about the Atmanirbhar policies to increase oil production. But at the same time, the government's policy is to keep the import tariffs very low for edible oil. Don't they contrast with each other?
A. I fully agree with you. This is a contradiction by itself that on one hand, you want farmers to increase oilseed production, they should get a better price, and on other hand, you want consumers to get very cheap oil. You are not able to strike a proper balance between them. Right now, it is skewed towards consumers than farmers. So, our objective of increasing oilseed production is somehow getting compromised.
So, I believe after the elections, the government will let the import duty go high so that farmers get a better price.
Most important is that yields should be increased. We have 1,000 kg per ha yield for soybean in India, while Argentina, Brazil, and the US are having 2,600-3,300 kg per hectare yield. For India, effort needs to be made very strongly to increase the productivity to 1,500-1,800 kg per hectare.
Q. Do you think India’s minimum support price system is effective in boosting oilseed production? Should the government recalibrate its MSP policy?
A. MSP policy is good. It has been there for many years. But, you do not depend only on the government agencies to buy at MSP. You create economy and the ecosystem in such a manner with your policies that market forces themselves pay the MSP.
If market forces are unable to pay, then the government has to ensure that they procure big chunk of a crop at MSP. The government has procured only 20% of the crop at MSP.
I can understand the government's predicament also. That is how to procure full crop at MSP? Where to store it? Where to keep it? How to get money for all this? So, this becomes a massive exercise which is like nearly impossible.
So, the best way is, nowadays, there are so many financial, trade and commerce instruments available. You utilise those and create a proper economic environment. Then, market forces can pay the MSP to the farmer. You have to be realistic while putting the MSP at the same time. We cannot just dictate our own prices in commodities which are fully global.
Another thing what the government can do is, to not procure the crop directly. In the US, this system is there. So, you take an average mandi declared price on that particular day, say 5,700 rupees (per 100 kg). Average price traded in several mandis is 5,000 rupees. So, 700 rupees you just credit in the farmer's account and let private trade buy that at 5,000 rupees and process it and move ahead.
So, the government doesn't need to procure, store and resell all the assets. So, you can do this way because we have now such a good banking and direct benefit transfer schemes.
Q. What happens to the government's finances in that case?
A. It will save lot of money. Because if you procure, store, and if it rots, and then you sell, instead of 700 rupees, you will lose 1,500-2,000 rupees. By this you will get lot of credibility and farmers will be happy. Also, private trade will get a globally competitive price.
Now what happens is whatever the government is procuring, whole stocks go to the government godowns. The industry doesn't get enough seed. It doesn't go to the market. So, all these problems can be avoided by just paying the price difference.
Q. Mustard farmers are having difficulty getting the MSP due to slow procurement by the government agencies. Do you think this will discourage farmers to take up the oilseed cultivation next year?
A. Yes, absolutely, you are right on the point. They were struggling to get MSP and government agencies purchased only 20% of the crop which was coming to the market. So, we are reducing their motivation to plant mustard seed next year. We saw good increase in the crop in the mustard seed from 7.5-8.0 mln tn, we jumped to 12.0 mln tn. If the proper price was given, this could have been 15 mln tn in next 2 years. But with these kinds of prices, the incentive to farmers to grow more is gone.
Q. India has extended the export ban on de-oiled rice bran. The government prohibited the export of de-oiled rice bran on Jul 28 last year, attributing it to high fodder prices. Initially set to last until Mar 31, the prohibition was later extended to Jul 31. How do you view the extension of the policy?
A. See now there is some justice in what the government has done, but not fully. The reason is if you don't pay the proper price for the bran, if you don't allow export, you lose the export market. Traditional buyers will shun you. Then at the same time you are not able to get the proper price for the rice bran. So, there are a lot of issues involved.
But now the government’s full focus is on consumers and the end buyers. So, the government was so inclined to see inflation remaining in a controllable level. That's why they took all these steps which were pretty drastic.
So, although we have not agreed fully with these steps, we have understood the compulsion of the government. That's why we said let the elections get over. So, I don't think it will be extended beyond July. Next government will understand that this need not be extended.
Q. Palm oil futures in Malaysia have been trading at a low level for the week, and may fall further on the back of reduced exports. Malaysia's exports of palm oil in April fell 6.97% on month to 1.23 mln tn, according to data from the Malaysian Palm Oil Board. At what levels do you see the palm oil prices will trade on BMD in the upcoming month?
A. Now palm oil production is rising. So, I don't think there is a cause of concern there. Palm supply is going to be higher. We are importing higher quantity. So, whatever was the problem from January to April, now it's no more there. But one thing we have to realise. We think palm oil is going to be a very cheap oil all the time, that's not the case anymore. This is because palm oil production in Malaysia and Indonesia is not rising. Every year Malaysian production used to rise by 500,000 tn and Indonesian production used to rise by 2 or 3 mln tn. But this year, there is no growth in both.
Then there is a growth in food demand, fuel demand, and biodegradable demand. So, there is always higher demand in palm oil. Earlier, we saw palm oil used to sell at $150-$200 cheaper than soyoil. Those days are gone now. End
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