The most favoured edible oil crashed by Rs 208 or 34 per cent in a span of 14 days from the October 17 high of Rs 635. The downward trend was also aided by lack of speculative interest, traders said.

Groundnut oil started showing signs of easing during the moorat trading last week (October 21) with new crop arrivals from producing centres. After the three-day closure for Diwali festival, prices plunged sharply by Rs 114 per 10 kgs at Rs 521 due to large arrivals of new crop in market where demand faded out after the festive season of lights. Consumers now await a further decline in the prices and traders too echo the same view.

``Prices could drop further by at least ten per cent,'' said a leading wholesale merchant based in Rajkot, the leading producing centre for groundnut oil.

The prices continued its downwardtrend during the week with price crashing to Rs 423 on Friday. Groundnut mill delivery oil prices as well as groundnut oil solvent refined declined sharply on the oils and oilseeds market at New Delhi following the increased arrivals. Offtake in Delhi too was dismal, traders said.

Groundnut mill delivery oil posted sharply lower at Rs 4,350 per quintal against Rs 6,150, two weeks ago. Groundnut solvent refined (per tin) also crashed to Rs 880-980 largely on increased arrivals.

The week ending October 17 witnessed all-time high prices due to festival demand and restricted supply from producing centres, especially in southern states, as heavy rains hampered transportation to other centres.

The rains also depressed market sentiments as traders expected a lower arrival of new crops which fuelled the bull run. The prices of the popular cooking medium have been witnessing steady upward spiralling since January this year.

In July when the price touched Rs 522 the government reduced import duty on edible oilsto contain the price rise. The prices had flared up due to poor supply of 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 when groundnut oil had high shot up to a high of Rs 503 per 10 kilogram on July 8 from a low of Rs 350 on January 12.

According to traders at Rajkot, the heavy buying was due to the festivals in August fuelled the rise. Moreover, non-availability of groundnut bold for crushing purpose had 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 those levels as the government had slashed import duty on edible oils by 10 per cent at 15. But the duty reduction failed to curb the spiralling trend.

Moreover, the permission to allow 10 lakh tonnes of soyabean imports from the US was also expected to curb the rising prices. Butthis measure failed.

All measures taken by the central and state governments failed to arrest the price rise and its only after the encouraging arrivals of new crop last week, groundnut oil prices are easing and seeking realistic levels, traders said.

Another reason cited for the crash is the unrealistic high levels groundut oil topped. The buyers abstained and even at the existing levels, they are reluctant, they added.

The overall demand-supply gap widened in the domestic as well as international markets and the consumers had found it difficult to cope with the inflated cost of groundnut oil. Though there were supply shortfalls due to lower production in other countries, market experts felt that there was no reason for domestic prices to touch these high levels.The output of the three major producers-India, USA and China- had 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 fromApril 1998 onwards also had no 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 last year. Since opening stocks in the major producing countries were relatively low, last season's total supplies had been reduced considerably to 19.9 million tonnes (21.3 million million tonnes in the previous season) after continuous growth during the previous five seasons. Moreover, despite lower supplies prospective demand had 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 Chinaproduced a combined 75 per cent of the world groundnut meal output in October 1996-September 1997 period.