The rains also depressed the sentiments and the new crop of groundnut is expected to be damaged. The stocks of new arrivals are full of humidity and this may lead to poor crushing.

The prices have been witnessing steady upward spiralling since January this year. The popular cooking medium in the country witnessed a substantial 83 per cent increase since January 1998 due to mainly poor supply of the seeds on account of lower production.

The government had reduced the duty believing that the prices would be curtailed if there was larger inflow of edible oils but the oil rose to a record high of Rs. 503 per 10 kilogram on July 8 from a low of Rs 350 on January 12.

Saurashtra, the major groundnut oil supplier, worked out a price fixation formula underwhich Rs.440 was the decided price for selling groundnut oil but the oil almost disappeared from the market and there had been several cases of hoarding groundnut in anticipation of profit-booking.The measures by the central and state governments failed to curb the spiralling prices.

According to traders in Rajkot, heavy buying due to oncoming festivals fuelled the rise. Moreover, non-availability of groundnut bold for crushing purpose has led to closure of several oil mills in Saurashtra which in turn created severe scarcity of groundnut oil in the open market.

A section of edible oil traders at that time felt that the prices might stagnate at the current level instead of rising as the central government reduced the import duty on edible oils by 10 per cent to 15 per cent. But the reduction in duty failed to curb the spiralling market.

Moreover, the declaration to allow 10 lakh tonnes of soyabean imports from the US have also not had the desired impact as the actual imports are yet to take place andmight have an effect on the market in the next season only.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 -- has fallen by 1.4 million tonnes from last year to an estimated 12.4 million tonnes. A prospective bumper crop in Argentina, which was expected to alleviate the supply tightness from April 1998 onwards, has not made a major impact. The total world production is expected to have declined by 1.2 million tonnes, or about six per cent, to 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 conductedby 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 in October 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 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 aresult, 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 the US.

Low domestic supplies have increased the import demand 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.