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Fall in groundnut oil prices dampens export optimism

G. Chandrashekhar

Mumbai , Sept. 23

AS the time for harvest of kharif oilseed crops approaches, a question bigger than the size of the groundnut crop that is engaging the attention of the players is whether groundnut oil exports would be feasible.

There is optimism that exports would indeed take place for the second year in a row. World groundnut oil prices have fallen over the last several months in response to improved production prospects; yet, at the current level of around $1,100 a tonne, there is parity and shipments are expected to take place.

There are reports that 20,000-30,000 tonne have already been committed for shipment during November and December at prices ranging between the low of $930 and the high of $980 a tonne free-on-board.

While currently raw groundnut oil ready is traded at over Rs 50,000 a tonne (Mumbai wholesale market Rs 515 per 10 kg trading lot), shippers expect prices to move down by at least 10 per cent to around Rs 45,000 a tonne when peak marketing of harvested crop and crushing starts by mid-October.

To what extent the oil market will soften in response to the new crop arrivals remains to be seen. Global vegetable oil market is currently delicately poised with a small downside potential in the wake of record oilseeds crops forecast for 2004-05.

But, because crops in the northern hemisphere are yet to be harvested while those in the southern hemisphere are yet to be planted, the forecast is subject to normal weather.

However, kharif season oilseed crop conditions are nothing much to talk about. The Ministry of Agriculture has admitted to a decline in oilseeds output during the kharif 2004 season. It has estimated the output at 154.5 lakh tonne (lt) compared with 170.1 lt of kharif 2003.

In particular, the Government has said groundnut output will be 63 lt, down 9 lt from last year. Many, however, see the official estimate (albeit preliminary) as too optimistic or clearly overstated. Numbers emanating from trade representatives point to a crop of anything between 37 lt and 44 lt. The crop size cannot be as big as estimated by the Government primarily because of the negative impact of the long dry spell in July and inadequate precipitation in the current month, the crucial period of pod maturation.

Global groundnut output in 2004-05 is forecast at 34.6 million tonne, up from 32.2 mt the previous year, mainly because of a major boost to output in China — 15.8 mt versus 13.4 mt.

Whether Hurricane Ivan has actually damaged any part of the US peanut crop remains to be assessed. Expressing some optimism about the country's export prospects, Mr Kishore Tanna, Chairman of Indian Oil and Produce Exporters Association, said: "Notwithstanding uncertainties, groundnut oil exports will take place this year, but not as much as it was last year."

Since November 2003, groundnut oil exports from the country totalled more than one lakh tonne valued at approximately Rs 450 crore.

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