Biodiesel to fuel Indian, global edible oil prices

Biodiesel to fuel Indian, global edible oil prices
Reuters India - Mumbai,India
... There are 10 to 12 biodiesel plants coming up next year," said Sandeep Bajoria, former president of the Central Organisation for Oil Industry and Trade. ...

MUMBAI - Indian edible oil prices will be largely steady in the coming months but will rise in the new year as they track bullish global markets spurred on by greater use of biofuels and a smaller Brazilian soybean crop, analysts said.

Tight supplies until the harvest of the winter domestic crop in November-December will support prices of soy and other oils, and while they may ease during the harvest they are likely to go up again in 2007, they said.

"Indian prices are not likely to go down too much. There are 10 to 12 biodiesel plants coming up next year," said Sandeep Bajoria, former president of the Central Organisation for Oil Industry and Trade.

"What seems to be the consensus is that markets will be sideways for the next 60 to 90 days and will start rising from 2007," Bajoria said at the end of an edible oils conference at the weekend.

Domestic soyoil prices are likely to be around 435 rupees per 10 kg in the next one or two months against the current 422 rupees, industry officials said.

A.R.Sharma, president of the Solvent Extractors' Association of India, told the meeting that surging global biodiesel demand would put upward pressure on edible oil prices, both in domestic and international markets.

India's consumpion of edible oils in the year ending October 2007 was expected to rise to 11.8 million tonnes from 11.4 million a year ago.

IMPORTS EDIBLE OILS

The country is the third-largest importer of edible oils in the world and imports during the year ending October 2007 were estimated at 5 million tonnes, up from about 4.4 million tonnes in the previous year.

Traders estimate oilseeds production for the crop year ending October 2006 at 22 million tonnes, slightly less than 22.3 million tonnes in the year earlier.

Analysts and traders agreed that growing demand for biodiesel would keep global prices of palm and soy oils firm, with a distinct possibility of a further increase in 2007.

Dorab Mistry, director of London-based Godrej International Ltd., said a fall in international edible oil prices before March 2007 was very unlikely despite an easing in crude oil rates and upcoming harvests in the U.S., China and India.

Exports of biodiesel were likely to grow in the coming months from leading palm oil producers Malaysia and Indonesia, Mistry added.

Palm oil can be added to gasoline to make bio-diesel at a cost of $60-65 a barrel. Crude oil has fallen to about $60 a barrel after hitting a high of $78.40 in July.

Mistry said the soybean acreage was likely to shrink in Brazil and global rapeseed oil production was likely to stagnate for the next six months.

There was also the possibility of El Nino weather events hitting crop production, he said.

"These two factors shorten the odds for a bull market in the next 12 months ... prices are likely to be higher than in 2006," Mistry said.

Another analyst cautioned against being too optimistic on biofuels in the short-term.

Thomas Mielke, a Hamburg-based international edible oil analyst, said world biodiesel production capacity was expected to reach 20 million tonnes by Dec. 2007, up steeply from 6.3 million tonnes in Dec. 2005.

"It will be difficult to utilise all this capacity partly because of difficulties in marketing and partly because of feedstock supplies," he said.


Click Here to Make $20-$75/Hour for Your Opinion