China is interested in buying groundnut and its oil from India but reports of a “record booking” of export volume of the commodity are being questioned by the solvent extraction industry.

Media reports said exporters had confirmed the booking of 90,000 tonnes of groundnut oil by China and some of the contracts have been booked at

$2,000 (approximately Rs 1,47,500) a tonne.

“These purchases by China seem to be mere claims. China is a good export market for India. It has bought in the past and will buy in the future but the quantity of 90,000 tonnes is not convincing,” said BV Mehta, Executive Director, Solvent Extractors Association of India (SEAI).

Mehta’s views are significant as India’s biggest export of groundnut oil to China was 50,000 tonnes a few years ago.

SEAI’s concerns arise from the fact that cooking oil prices have surged in the last two months.

“The edible oil market is bullish more due to global factors such as lower crop in major exporting countries,” Mehta said.

Palm group of oils such as crude palm oil and refined, bleached and deodorised palm oil and palmolein have all gained over four percent in the last one month.

Global edible oil prices have spiked due to problems in US soybean crop and Brazil facing a drought. Argentine growers have shown a lack of interest in selling and  Ukraine has reported a lower sunflower crop.

“China is showing hunger for edible oil, oil meals and almost all commodities. We are not sure if there is really a shortage in that country or whether Bejing is stocking up, in preparation for something,” said an oil industry source without wishing to be identified.

Trade sources said China was buying groundnut oil at $2,100 (Rs 1,55,000) a tonne against $1,600 a few weeks ago.

Groundnut and groundnut oil prices in the domestic market were not indicative of the demand, as being portrayed by Chinese buying, trade sources said.

According to SEAI, groundnut oil is ruling at Rs 1,45,000 a tonne, up from Rs 98,975 during the same period last year. Compared with last week, prices have increased by Rs 12,000 a tonne.

Groundnut for crushing was quoting at Rs 57,000 a tonne against Rs 55,000 last week and Rs 58,000 a month ago.

In Gujarat’s Rajkot district, key groundnut growing area, most of the trades were taking place at Rs 4,900 a quintal against Rs 4,555 last week. Prices are lower than the minimum support price of Rs 5,275 a quintal fixed by the Centre.

Details of export on groundnuts are hard to come by but sources say China was seeking hand-picked and selected (HPS) groundnut.

“No doubt, exports will help farmers fetch better prices. Either way, they will benefit. If domestic prices are higher, then they will opt for it. On the other hand, higher prices in the export market will also ensure better returns,” Mehta said.

Though the procurement in Gujarat, under the price support system (PSP), was expected to begin from Diwali, local reports say it begun at 79 centres on October 26.

Under the PSP, the state government buys groundnut at the MSP fixed by the Centre. Last year, the Centre bought 4.70 lakh tonnes of groundnut from Gujarat under PSP.

This year, a similar quantity is expected to be procured as 4.7 lakh farmers have registered for PSP.

Over 20 lakh hectares were brought under groundnut cultivation in the western states this year while nationwide the figure is 50.96 lakh hectares.

Initial estimates pegged crop at 54.64 lakh tonnes but industry bodies such as SEAI expect an output of around 37 lakh tonnes only.

Last year, Gujarat produced 15.95 lakh tonnes of groundnut during the kharif (summer) season. This year, the area under groundnut in Gujarat is higher as some farmers had switched over from cotton.

(Subramani Ra Mancombu is a journalist based in Chennai who writes on commodities and agriculture)

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