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COVID-19 lockdowns, global rally lift India’s soybean oil prices but curb imports: sources

Soybean oil prices in India have attained new highs on a month-on-month basis while imports dwindled over the last year, influenced by factors ranging from coronavirus-led lockdowns to a tight demand-supply balance, market sources said.

According to the National Commodity and Derivatives Exchange, or NCDEX, refined soybean oil futures for July loading closed at Rupees 1,240.60 per 10 kg on June 16, up 11.1% since January.

Soy oil prices in India, which is the largest importer of vegetable oils, mainly reacted to the volatility in prices across the CBOT and South America, as well as sudden coronavirus-led lockdowns across many states, analysts said.

“The spread between Argentina FOB and CME futures has been highly volatile and has gone much deeper,” Aditya Jeripotula, head of Global Commodity Research at TransGraph Consulting, told S&P Global Platts. “This has shaken up the buyers who usually book basis and hedge in CME.”

On June 15, the Soybean Oil Argentina FOB Up River Basis was assessed at minus 1400 points to the July (N) futures at CBOT, compared with 90 points a year ago.

Amid tight inventories and global prices, retail prices of packed edible oils in India also hit an 11-year high in May, according to data from the Department of Consumer Affairs.

As of June 16, soy oil prices were up 53.4% year over year to Rupees 154.48 per kg, the department data showed.

Rising vegetable oil prices also severely hurt household consumption, despite an increase in home cooking during lockdowns. But vaccination rollout and easing of restrictions is expected to support consumption.

“The success of vaccination programs across the world and especially in India will be a determining factor behind the recovery in vegetable oil consumption,” said Ajay Kedia, founder and director of Mumbai-based commodity advisory company Kedia Commodity.

Soy oil imports dwindle amid restrictions

The deadly second wave of COVID-19 that hit India in early April, coupled with skyrocketing global soy oil prices, resulted in falling imports in the Asian country.

Restrictions on bulk veg oil users like hotels, restaurants and cafés, along with limited social gatherings amid surging prices hurt demand, according to Kedia.

In April, crude soy oil imports plummeted 21.7% from year ago to 144,020 mt, according to the national trade body Solvent Extractors’ Association of India, or SEA.

As the Indian government begins lifting restrictions, demand is expected to bounce back in the next two quarters, which is the key demand period for India as festivals and marriage season approaches, Kedia added.

According to the SEA, crude soy oil imports for May jumped 86% month on month to 267,781 mt, data released June 14 showed.

The figure was also in line with analysts’ estimates for May imports to be in the range of 250,000-300,000 mt.

According to the United States Department of Agriculture’s June 10 World Agricultural Supply and Demand Estimates, or WASDE, report, India’s soy oil imports in 2021-22 marketing year are expected to be 3.73 million mt, up from 3.70 million mt in the previous year.

Ending stocks are expected at 21,000 mt, up 5% from a year ago, the WASDE report said.

Soybean production set to rise

India’s soybean production is set to increase in 2021-22 as the prices of the crop and its derivatives track the global price rise, making the oilseed more lucrative for farmers.

A better-than-expected monsoon this year is also expected to boost crop yields.

According to data from the Ministry of Agriculture, soybean acreage is forecast in the range of 12.7 million-14.5 million ha for 2021-22, compared with 12.1 million ha in the previous marketing year.

Madhya Pradesh, Maharashtra and Rajasthan are the major growers of the oilseed in India.

For 2020-21, India’s soybean production is estimated to increase 19.4% on the year to 13.41 million mt, according to the agriculture ministry’s third advance estimates published May 25.

Soybean is a crucial kharif oilseed and accounts for over 30% of the total oilseed production in the country.

However, according to Kedia, the increased output may not be sufficient to match the growth in demand.

“A 10-12% jump in sowing area can create pressure on prices, but oil demand will be severely high so we do not expect easy relief in prices soon,” Kedia said.

India currently meets 60% of its cooking oil demand through imports.
Source: Platts

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