The import duty may or may not be cut in the 1998-99 budget, but edible oil prices have fallen by Rs 25-27 per 10 kg in the domestic markets over the last few weeks. Traders say they expect a further fall of Rs 30-35 per 10 kg.

This would work out to a total decline of Rs 5,500-6,000 a tonne in just about a month's time.

Speculators in both the international and domestic markets are currently busy offloading their high-cost deals done over the past few months. With China also abstaining from palm oil imports, prices could face a further decline internationally.

The new oilseed season begins from June in most of the south-east Asian economies. Therefore, all eyes are now set on the monsoon gods and the El Nino effect, which may decide the fate ofthe edible oils economy over the next four to eight months.

"Currently, there is enough availability of edible oils both domestically and internationally," says Chaitanya Bansal, a leading commodity broker. However, this may not hold good in the long run. OilWorld, a US weekly on edible oil and its by products, says that stocks are already on the decline. Says the weekly in its April 24, 1998, issue: "The ongoing declines of world stocks will accelerate markedly this season (April/September 1998), especially during the second half. The total deficit for the two seasons is placed at two million tonnes, much larger than the 0.8 million tonnes registered during the two seasons ending 1993-94."

The recent fall in edible prices may, therefore, be short-lived, industry sources maintain. While short-term availability is not a problem, the overall demand-supply gap is said to be widening in the international as well as in the domestic markets and consumers are unlikely to see the low price levels witnessedsome two years ago.

In view of this, edible oil industry sources are saying that the current weakness in prices should not "lull the government into deferring its proposed plan to lower the import duty."

Countering this stand, a section of the oilseed crushing industry has been clamouring for oilseeds imports -- which the government has not acceded to. To support their arguments against reducing oil import duty, they maintain that this will only encourage Malaysian exporters to raise prices.

More neutral observers say that while Malaysian oil prices may go up by $10-20 per tonne, the actual impact of a reduction in import duty will be around $70 per tonne. The reduction will improve availability of edible oils, and some benefits will be passed on to consumers.

The civil supplies ministry's threat to reduce import duties from 25 per cent to 15 per cent has already sent shivers down the spines of the edible oil importing community.

From early 1998 till mid-May, speculators were busy cornering stocksand pushing up prices, due to a sharp fall in rabi oilseeds crop this year. However, the rabi season's oilseeds shortfall was not as steep as was made out by the trading circles.

Despite this, edible oil prices rose by around 17-30 per cent during the four-month period from February to mid-May. Among others, the maximum jump of around 32 per cent was recorded by soya oil from mid-February to mid-May.

This was followed by palm oil (30.33 per cent), sunflower oil (23.88 per cent) and groundnut oil (17.5 per cent). Against this, the international edible oils market has been firm since mid-December on all-round reports of an impending shortage of edible oils in the world markets. Among others, the highest jump of over 40 per cent has been recorded by RBD palmolein crude, followed by sunflower oil (30 per cent), cotton oil (18.5 per cent), soyabean oil (12.19 per cent) and rapeseed oil (11.36 percent).

But even these high-priced vegetable oils began slipping in international markets since mid-May for variousreasons. Domestically, the gap between prices of groundnut oil and other soft oils has reduced sharply to around Rs 2,000 per tonne from the traditional Rs 8,000-10,000. This, sources say, was possible only because of the increasing trend towards adulterating groundnut oil with cheap imported oil. Without mixing, the price for groundnut oil would have shot up beyond Rs 50 per 10 kg, or Rs 50,000 per tonne.

According to OilWorld, world stocks as of October 1, 1997, were down 0.5 million tonnes from a year before; the increase in total 1997-98 supplies is only one million tonnes. It expects oilstocks to decline by 200,000 tonnes in April/September. The dearth of supplies and slow demand (because of the south-east Asian crisis) will result in a sharp decline in exports by a million tonnes, or 6 per cent in April September 1998. Exports of palm oil alone will probably fall over 400,000 tonnes while those of soyabean oil will rise only by 100,000 tonnes. Combined exports of the other 15 oils and fats are seenfalling almost 700,000 tonnes, or 1/10th." World production growth in vegoils is expected to be only 1.5 million tonnes, the smallest growth in five years. The main culprits for this are said to be palm, sunflower, groundnut, olive and fishoil. Their combined production is feared to fall 1.2 million tonnes.

All these simultaneous developments have thus sent confusing signals in the markets. Little wonder, therefore, traders are currently staying away from making any commitments on the edible oil front. Not at least till the budget is announced today and its aftereffects are thoroughly analysed.