Recommendation:
ANALYSIS
Keeping in the upcoming days with festive season, consumption of refined soy oil may rise. Improved buying ahead of these month
s, may perk up soya refined prices in the physical market as well as on the national bourse. Moreover, positive crush margin may add strength to the counter. It is normally seen that vegetable oil usage soars during the festive season in the post-monsoon phase, as millions of people consume sweets, fried delicacies and other stuff during the September-December.
s, may perk up soya refined prices in the physical market as well as on the national bourse. Moreover, positive crush margin may add strength to the counter. It is normally seen that vegetable oil usage soars during the festive season in the post-monsoon phase, as millions of people consume sweets, fried delicacies and other stuff during the September-December.
Recently, ICRA Rating Services has come out with its report on Indian Edible Oils Industry. This report indicates:
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The demand for edible oils in India has shown a steady growth at a CAGR of 4.43% over the period from 2001 to 2011. ·
The growth has been driven by improvement in per capita consumption, which in turn is attributable to rising income levels and living standards. ·
In terms of volumes, palm oil, soyabean oil and mustard oil are the three largest consumed edible oils in India, with respective shares of 46%, 16% and 14% in total oil consumption in 2010. ·
Refined and crude palm oil (CPO) have accounted for the major portion of edible oil imports in India (74% in OY2009-10) mainly due to their relatively low prices and ample availability. ·
The prices of major edible oils rose in H2FY11 on account of anticipated higher demand for bio-fuels, given the high crude oil prices as well as expected production shortfalls in palm oil production. ·
Consumption Pattern:
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Soyabean oil is mainly used in northern and central regions of India due to the local availability of soyabeans.Mustard oil is largely consumed in north-eastern, northern and eastern regions of India, as its pungency is a desired and inherent part of the local cuisine. ·Palm oil has increasingly become the oil of choice in southern India due to the warmer climate (palm oil gets a cloudy appearance in colder climates) and easy availability from South-east Asia.
The increased health awareness also determines the consumption pattern with mustard and soya considered healthier than palm oil, which has higher levels of saturated fats.
The increased health awareness also determines the consumption pattern with mustard and soya considered healthier than palm oil, which has higher levels of saturated fats.
In terms of volume, palm, soyabean and mustard/rapeseed oil are the three major edible oils consumed in India and together account for 75% of the total edible oil demand, as indicated in chart.
Summary
Therefore, analyzing the broader picture of the whole edible oil market, prices may continue to remain firm.The current duty differential between crude and refined oils stands at 7.5%, which provides protection to domestic refiners against competition from imported refined oils.According to ICRA, the medium-to-long term demand outlook for edible oils in India is favourable (with expected growth in the vicinity of 4-5% p.a.), catalysed by the growing population and expected increase in per capita consumption which in turn would be driven by changing lifestyles; growing urbanization; increasing proportion of middle class population and steadily rising affluence levels. FACTS
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