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Palm oil prices likely to rise in next 3 months

Indonesia and Malaysia may increase bio-diesel content in automotive fuels.

, ET Bureau|
Last Updated: Nov 25, 2019, 08.12 AM IST|Original: Nov 25, 2019, 08.12 AM IST
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Kolkata: Prices of palm oil, which is the most consumed edible oil in India, could climb in the next three months with the biggest global producers Indonesia and Malaysia likely increasing bio-diesel content in automotive fuels, constraining supplies of the commodity to the food industry.

Already, prices have increased more than a quarter in the past 45 days. “Also, oilseed crop damage due to heavy rains across the country has pushed up prices of edible oils in the past few weeks,” said BV Mehta, executive director of Solvent Extractors’ Association of India (SEA). “In addition, China has bought significant volumes of palm oil ahead of the Chinese New Year. This, too, has firmed up prices.”

The Southeast Asian countries, from which India imports palm oil, are likely to increase the biodiesel content in motor fuels to 30 per cent from 20 per cent and from 10 per cent to 20 per cent , respectively, from January. Traders expect prices to move northward in the New Year.

Sandeep Bajoria, CEO of the Mumbai-based Sunvin Group, said: “Palm oil price is expected to firm up by another $50 per tonne from the current level within the next three months. This means that palm oil will become dearer by almost 8 per cent.”

The supply side will come under pressure with both Indonesia and Malaysia — the two countries that account for most palm oil production globally — deciding to increase their biodiesel content substantially from next year. “This means that palm oil supplies for the purpose of foods will come down,” explained Mehta.

Indonesia annually produces 40 million tonnes of palm oil, while Malaysia produces 19 million tonnes. With the decision to increase bio-diesel content, Indonesia will use around 3-4 million tonnes of palm oil for auto fuel blending purposes. Similarly, Malaysia, too, will take out 1 million tonnes of palm oil.

India imports 9 million tonnes of palm oil from these two countries, with imports accounting for 70 per cent of the country’s annual edible-oil consumption. Besides palm oil, India imports 3.5 million tonnes of soyabean oil and 2.5 million tonnes of sunflower oil.

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