Futures prices between soya, palm oil may narrow soon

MUMBAI: The futures markets are indicating some good news for households. The price difference between soya oil and its more humble cousin palm oil could narrow in the next one month, allowing those who consume the latter to shift to soya, which is a higher quality cooking medium.

The spread could narrow because palm production this year is lower than that of soya. If oil prices fall, soya will decline more sharply than palm, or if they rise palm will outstrip soya’s rise. India is a major importer of vegetable oils, one of the top five imports after items like crude oil and gold. Almost 74% of the 21 million tonnes of vegetable oil supply is imported. The chief imports are palm (9.5 million tonnes), soya (4.2 million tonnes), sunflower (1.5 million tonnes) and canola (0.3 million tonnes). Consumption is around 20.8 million tonnes.

“The spread, which was narrowing over the past month, will compress more,” said Sandeep Bajoria, CEO, Sunvin group, one of the world’s largest brokers of oils and oilseeds. Bajoria says traders could sell the spread by going long CPO on commodity bourse MCX and selling soya on NCDEX.