According to Nagaraj Meda of the Hyderabad-based TransGraph Consulting Ltd, the increase in vegetable oil prices was triggered by the uptrend in wheat prices following drought-led supply reduction in Australia and diversion of soybean crop area in US to corn.
Studying the market fundamentals, Meda has projected that CBOT futures in March, 2007 for soyoil would rise in the range of 27.80 to 31.50 cents per pound, that of soybean in the range of 680 to 780 cents per bushel and that of soymeal in the range of $197-$240 per 976 kg (short tonne). The prices of Argentina soyoil (one month forward) will range between $590-$670 a tonne and that of Argentina soymeal in the range of $290 to $230 a tonne.
The spot prices of Argentina sunflower will range between $600- $665 a tonne in the next two months.
Sharp increase in demand for bio-fuels, apprehension that the rising El Nino phenomena may spoil crop prospects in Malaysia, Indonesia and Latin American countries
According to Meda, in India, oilseeds output may decline by one million tonne over the previous year and production of vegetable oils from domestic oilseeds output will be 6.5 million tonne against 6.83 million tonne in the previous year. Indias import of vegetable oils may rise to 5 million tonne in 2006-07 from 4.4 million tonne in 2005-06.