Crude palm oil price: Expert gives outlook, movement on NCDEX; long-term, short-term impact of National Mission on Edible Oils on rates DECODED

Cabinet has approved implementation of National Mission on Edible Oils and a financial outlay of Rs.11,040 crore has been set aside, out of which Rs 8,844 crore is the share of Government of India. 

Amid this development, the August Crude Palm Oil (CPO) Futures ended at Rs 1175 per quintal on NCDEX on Wednesday, down by almost Rs 37 or over 3 per cent. Meanwhile, the spot price of Crude Palm Oil was at Rs 1201.40 at 4:16 pm on Wednesday. The first half session (9-5 pm) of the NCDEX is closed today on account of Muharram. The markets will reopen in the second session – 5-9 pm. 

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Expert Anuj Gupta, who is Vice President (VP), Commodity and Currency Research at IIFL Securities, said that the prices are expected to remain muted for this commodity. He expects some more correction in the price putting a target price between Rs 1000-Rs 1050 over a fortnight to month period. He said that the prices are expected to soften as the Sunflower and Soyabean crops come into the market. They are expected to arrive soon, he added. By February, mustard will also come into the markets, he further said.  

Commenting on ‘National Mission on Edible Oils – Oil Palm (NMEO-OP)’, the technical analyst said that the benefits of this step will be seen over a long-term period. The move will ensure that the reliance on imported edible oil is reduced. On the immediate impact on the price of CPO, he responded in the negative.  

Union Cabinet chaired by Prime Minister Narendra Modi has given its approval to launch ‘National Mission on Edible Oils – Oil Palm (NMEO-OP)’. The new centrally sponsored scheme will be launched with a special focus on the northeast region and the Andaman and Nicobar Islands, a government release said. 

A financial outlay of Rs 11,040 cr has been made for the scheme, out of which the share of Centre is Rs 8,844 cr while that of state is Rs 2,196 cr and this includes the viability gap funding also. 

The move is in the wake of “heavy dependence” on imports for edible oils and to increase the domestic production of edible oils in which increasing area and productivity of oil palm plays an important part. 

Under this scheme, it is proposed to cover an additional area of 6.5 lakh hectare for oil palm till the year 2025-26 taking the overall area under cultivation to 10 lakh hectares for oil palm, the government release said. 

The production of Crude Palm Oil (CPO) is expected to go up to 11.20 lakh tn by 2025-26 and up to 28 lakh tn by 2029-30, the release claimed. 

To give impetus to the North-East and Andaman, the Government will additionally bear a cost of 2 per cent of the CPO price to ensure that the farmers are paid at par with the rest of India.   

The oilseeds production has increased from 275 lakh tons in 2014-15 to 365.65 lakh tons in 2020-21.   

The Government of India will give a price assurance to the oil palm farmers for the FFBs, the government release said. This will be known as the Viability Price (VP). 

There is also a sunset clause for the scheme which is 1 November 2037.   

The states who adopt the mechanism proposed by the Government of India would benefit from the viability gap payment proposed in the scheme and for this they will enter into MoUs with the Central Government.