Even though the price of crude palm oil is likely to go down in February, edible oil companies like Adani Wilmar, KS Oils and Ruchi Soya are not ready to reduce prices right now. Nor are these companies planning any hike in price during the current financial year. However, a price rise post-March is on the anvil.
With landed price of palm oil increasing by 53% and soyabean increasing by 31% during the one year period from December 2009 to a year earlier, edible oil companies have hiked prices in phases throughout the year. However, there could be hike in prices once again after March when the consumption of palm oil increases in India.
While the landing price of crude palm oil in December 2008 was $488, in a year’s time it went up by 53% to $745. The price of soyabean went up by 31% during the same period. Edible oil companies like Adani Wilmar, KS Oils and Ruchi Soya normally absorb price hike of commodity is below 5%. Beyond this point the price hike is passed on to the consumer.
“The price of palm oil and soyabean has risen steadily throughout the year. So, we have had a chance of raising the prices of our products gradually. We have increased the price of oil around four times during the year,” Angshu Mallick, vice-president, sales & marketing, Adani Wilmar said.
However, Adani has no plans of raising the prices anymore during the current financial year. The prices of these two commodities are likely to come down during February because South America has had a good crop and India imports from there. However, Mallick is anticipating an increase in price after March as palm oil consumption goes up during this period.
“Hedging plays a key role in the pricing of edible oils. No matter how high the global price of palm oil or soyabean is, if a company is hedged well it does not affect them. It also helps to offset prices in case price of commodities spiral up substantially. So, whether there will be a price hike will depend on individual companies and how well they are hedged,” Pinaki Ranjan Misra, partner and national leader, Retail, Ernst & Young said.
Suresh Kumar, VP, finance, Ruchi Soya said, “We will take a decision after evaluating the situation.” However, industry analysts point out that any fluctuation in prices, whether high or low is eventually passed on to the consumers over a period of time. The hike depends on various factors like demand and supply, kind of product, location of the industry and so on.