*We may see that happening in terms of acreage increase in Kharif
*Create a buffer of edible oil to stabilize the price situation
In last few days, in edible oils particularly palm oil and soybean complex as well as agricultural commodities we are seeing signs of fatigue and Bulls seem to be retreating. Whether this is going to be a short-lived phenomenon or more permanent only time will tell. The icing on the cake is that IMD is predicting third consecutive normal Monsoon for India.
According to the president, solvent extractors’ association of India (SEA) Atul Chaturvedi, high prices of oilseeds in our country have after an exceptionally long time put smile back on our oilseed farmers and has been a blessing in disguise. Mustard and Soya farmers have received prices much above MSP and NAFED had to do nothing to defend the MSP.
Higher returns from oilseed are likely to have supply side response from farmers and we may see that happening in terms of acreage increase in Kharif, said Atul Chaturvedi. In a letter to Sudhanshu Pandey Secretary, Ministry of Consumer Affairs, Chaturvedi said finally kick starting the National Mission on Oilseeds by Agriculture Ministry. We hope this project is adequately funded to ensure meaningful impact in our country.
With massive increase in customs revenue due to price rise it would be prudent to divert some funds towards working for Atmanirbharta in edible oils. Chinese buying, stimulus money, la Nina weather problems in Palm and soya producing areas. Labour problems in Malaysia due to COVID, aggressive Bio diesel thrust in Indonesia and Renewable fuel from Soybean oil in USA /Brazil etc. are some of the major reasons.
Atul Chaturvedi sagest that in essential commodities like Edible oils and oilseeds we can insist on compulsory delivery contracts in futures treads. This will result in only serious players remaining active. Once markets become normal, we can revisit this as speculators are also an integral part of the commodity exchanges. We need to be clear in our minds and policy making till what level we want prices of edible oils to fall and basis that standardize our responses.
Freeze tariff at lower level. Subsidize Oil by Rs.30 to Rs.40 per kg in PDS for vulnerable section of society. Our port-based refineries have adequate spare capacity across the coastline of India. With international values coming down recently, it may not be a bad idea to revisit duty reduction measures only after Kharif oil seed planting is over to ensure no negative signals go to our oilseed farmers.
Long term suggestion is to increase oilseed cultivation and give required thrust to Soya, Groundnut, Mustard, and oil Palm. This needs to be done on mission mode. And create a buffer of edible oil to stabilize the price situation.
(Disclaimer: This analysis is only for educational purpose and is not and must not be construed as investment advice. It is analysis based purely on economic theory and empirical evidence. Readers are requested to kindly consider their own view first, before taking any position.) Date: 27-5-2021