However, the prices fell to Rs 500 per ten kg on Thursday after the government slashed the import duty to 15 per cent. ``The production drop is not severe as to cause a sharp rise in groundnut oil prices,'' a leading trader in Gujarat, said. Gujarat, as is known, is the leading producer of groundnut oil in the country.

Groundnut oil prices appreciated by 76.5 per cent from January levels as a result of speculations, the trader said. The popular cooking medium shot up to a record high of Rs 503 per 10 kilogram on July 8 from a low of Rs 350 on January 12.

A section of edible oil traders feel that the prices might steady at thecurrent level instead of rising as the central goverment has now reduced the import duty on edible oils. Moreover the recent declaration to allow 10 lakh tonnes of soyabean imports from the US may also curb the spiralling prices.

Though the decision to allow soyabean imports may not have the desired impact as there is no price parity as in case of ricebran and sunflower, opined BV Mehta, executive director of the Solvent extractors Association (SEA) of India. The overall demand supply gap is said to be widening in the domestic as well as international markets and the consumers may find it difficult to cope with the spiralling prices.

There has been a supply shortfall following lower world production. The output of the three major producers--India, USA and China--is estimated to have fallen by 1.4 million tonnes this year at 12.4 million tonnes. A bumper crop in Argentina which was to ease the tightness from April 1998 onwards has not made a major impact. The total world production is estimated to havedeclined by 1.2 million tonnes, or about six per cent, at 19 million tonnes.

Since opening stocks in the major producing countries were relatively low, this season's total supplies have been reduced considerably to 19.9 million tonnes (21.3 million million tonnes in the last season) after continuous growth during the last five seasons. According to a study conducted by Oil World, despite lower supplies prospective demand has channelled more groundnut into exports, resulting in reduced crushing in the countries of origin.

Reduced crushings have had adverse effects on groundnut oil and meal production. Groundnut oil production is estimated to have fallen at 3.9-4.0 million tonnes as against 4.3 million tonnes in the last two years. This has lowered the availability of this popular cooking medium in India and China, and has led to demand increase in other vegetable oils resulting in increase in their prices as well.

India and China produced a combined 75 per cent of the world groundnut meal output inOctober 1996-September 1997 period. Meal production in India is estimated to be down by around 140,000 tonnes to around two million tonnes and in China by 440,000 tonnes to two million tonnes.

India being by far the largest supplier to the world market, a 40,000-tonne reduction of exports to an estimated 265,000 tonnes will have the strongest impact on the world market. As a result, world exports in 1997-98 are expected to be only around 560,000 tonnes, the lowest level in more than 10 years. During October 1997-September 1998, world groundnut exports are likely to increase moderately to 1.30 million tonnes from last season's 1.25 million tonnes.

The countries in the northern hemisphere, where the bulk of this season's crop has been harvested, have an incentive to market a large share of their crops during the six months ending March 1998, thereby taking advantage of the current attractive prices. This has been more so in the case of India and to the US. Low domestic supplies has increased the importdemand for groundnut mainly from Asia. The current estimated world imports are at 1.30 million tonnes against the previous season's 1.25 million tonnes.