With the last week's spurt in ground nut oil prices, demand has tapered off. Also the slight decline in palmolein prices has helped to shift demand away from ground nut oil.

There is little doubt now on the seriousness of the shortage in supplies, especially of the two main edible oils. Palmolein imports continue to be restricted despite the lifting of the Indonesian ban. Market sources feel that the production shortfall in Malaysia, which has triggered a price rise, is a major factor in lower imports.

Between November 1997 and March 1998 India has seen total palmolein imports of 3.30 lakh tonnes, the sources said and added that of this only 93,000 tonnes had come through Chennai. A comparison with the 5.40 lakh tonnes in the previous year's correspondingperiod highlights the gravity of the situation, they added.

The shortages in rapeseed and soya are quite well known, they pointed out while the Argentine sunflower oil supplies are yet to reach Indian shores. The shortfalls in ground nut oil have also neared alarming proportions. Arrivals of ground nut kernels are around 40 per cent of the expected 1000 tonnes per day (tpd), which in turn means an oil production of 200 tpd for the whole of Tamil Nadu.

With Chennai alone needing around 35 tpd, the shortages are all set to grow acute in the coming months. Quite a few factors have combined to aggravate the situation further.

Most importantly, stockists continue to withold supplies in the hope of better prices. Also the fact that purchases of ground nuts for export and seeding purposes are seing far better rates has diverted supplies to that end. Nuts, in shells, fetch around Rs 570-580 per 40 kg bag. This translates into a far higher profit margin than is available by selling de-husked kernels for Rs 1500for an 80 kg bag, market sources said. The former's comparative price works out to around Rs 1700 for 80 kgs.

The market does not expect the price to stay above Rs 1500 levels, for very long, as this looks to be the optimal rate. Above this ground nut oil becomes uneconomical or rather palmolein becomes more attractive at current rates.

Quite a bit of sales has gone to Hyderabad too, weakening local supplies further. Though higher freight charges have kept the north Indian dealers out enquiries did come from Delhi. At least one order of 50 tpd has been turned down purely due to the inability to fulfill the order.

Thus with each passing day, the market here is now becoming more and more import dependent. Unless the import level picks up it is going to be very difficult to meet demand, sources warned. In fact, said one industry leader, we will be in trouble from the very first week of June, when the true picture of the shortage is realised.

But as far prices go there are little chances of an immediaterise on the one hand and nil chances of them dropping also on the other. While the rise may have been arrested, short supplies will ensure a firm price trend for the next couple of months at least.