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Industry Comment
Edible/Vegetable Oils
ICRA Management Consulting Services Limited
IMaCS Research & Analytics
THE INDIAN EDIBLE OILS INDUSTRY
Industry Comment
January 2012
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Industry Comment
Contacts:
Vineet Nigam
+91 120 4515831
Programme Leader (Research & Analytics)
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TABLE OF CONTENTS
ENVIRONMENT ANALYSIS: PORTERS MODEL..........................................................................4
INTRODUCTION .....................................................................................................................5
SCOPE ............................................................................................................................................ 5
PROCESSING .................................................................................................................................... 6
KEY ISSUES FACING THE PLAYERS ...........................................................................................8
DECLINE OF TRADITIONAL GHANI PROCESSING ...................................................................................... 8
LOW GROWTH IN OILSEEDS PRODUCTION ............................................................................................ 9
RESERVATION FOR SMALL-SCALE INDUSTRY ........................................................................................ 10
LOW CAPACITY UTILISATION IN PROCESSING....................................................................................... 10
SUPPLY CHARACTERISTICS.................................................................................................... 11
OILSEEDS PRODUCTION ................................................................................................................... 11
EDIBLE OIL PRODUCTION ................................................................................................................. 38
DEMAND CHARACTERISTICS ................................................................................................. 42
OVERVIEW .................................................................................................................................... 42
PATTERN OF CONSUMPTION ............................................................................................................ 45
MONTHLY CONSUMPTION PATTERNS ................................................................................................ 47
DEMAND-SUPPLY POSITION AND IMPORTS .......................................................................... 51
LONG-TERM INCREASE IN IMPORTS ................................................................................................... 51
CUSTOMS DUTIES AND TARIFFS ........................................................................................................ 56
EXPECTED DEMAND-SUPPLY GAP ..................................................................................................... 57
WORLD DEMAND-SUPPLY TRENDS AND PROSPECTS ............................................................. 58
OILSEEDS PRODUCTION TRENDS ....................................................................................................... 58
OILSEEDS PRODUCTION PROSPECTS FOR 2011-12 .............................................................................. 64
VEGETABLE OILS ............................................................................................................................ 73
PRICE TRENDS AND PROSPECTS ............................................................................................ 84
TRENDS ........................................................................................................................................ 84
PROSPECTS ................................................................................................................................... 94
REVIEW OF FINANCIAL PERFORMANCE ................................................................................. 95
MARGINS ..................................................................................................................................... 95
RETURNS ...................................................................................................................................... 96
RECENT FINANCIAL PERFORMANCE ................................................................................................... 98
CONCLUSION ....................................................................................................................... 99
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ENVIRONMENT ANALYSIS : PORTERS MODEL

Threat of Substitutes-Low
Edible oils are an important product
category in the Indian food basket.
Therefore, at the industry level, the
threat of substitutes is low.
However, there is a threat of
switching between various edible
oils, and between branded oil and
oil sold loose.
Bargaining
Power
of
SuppliersLow
As oilseeds production is widely
dispersed, supplier power per se
is weak.
Inter-Firm RivalryHigh
Continued growth in edible oil
demand
is
attracting
new
players/capacity addition in the
sector. Refining capacity is being
added near ports to refine imported
crude oil. Trader-importers are also
making efforts to build brands to
differentiate the product, secure
higher realisation and build sales
resiliency.
Bargaining Power of
BuyersLow to
Medium
As edible oil is a consumer
product, buyers are widely
dispersed because of which
bargaining power of an
average consumer is low.
Barriers to EntryLow
Select States still offer fiscal
incentives to set up new
capacity. As approximately 60%
of edible oil is sold loose, brand
identity may not pose as a
barrier.
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INTRODUCTION
Scope
Oils and fats are produced from vegetable and animal sources, with the former group declining in
market share though not in production tonnage. Tallow, lard and butter still occupy the fifth,
sixth and seventh positions after the four dominant vegetable oils (palm, soyabean, rapeseed and
sunflower seed). During the last century, the contribution of animal fats to total oils and fats
production has declined from 50% to 16% in 2010, indicating that vegetable fats have become
increasingly dominant in world edible oils and fats production and consumption.
Most vegetable oils are obtained from beans or seeds, which generally furnish two valuable
commoditiesa fatty oil and a protein-rich meal. Seed extraction is achieved by pressing and/or
by extraction with hexane. On the other hand, oils such as palm and olive, on the other hand, are
pressed out of the soft fruit (endosperm). Seeds give oils in differing proportions, with world
average oil yields for 2010-11 as follows: soyabean (19%), coconut (63%), rapeseed (39%),
sunflower (41%), groundnut/peanut (32%), cottonseed (15%), and palm kernel (43%). Some oils,
such as virgin olive oil, are used without further treatment other than filtering, but most are
refined in some measure before use. The refining processes remove undesirable materials
(phospholipids, monoacylglycerols, diacylglycerols, free acids, colour and pigments, oxidised
materials, flavour components, trace metals, sulphur compounds and pollutants), but may also
remove valuable minor components, including antioxidants and vitamins such as carotenes and
tocopherols. The refining processes must therefore be designed to maximise the removal of
undesirable components and minimise the removal of the valuable minor components. Some of
the latter are recovered from side streams of the refining process to give commercial products
such as phospholipids, free acids, tocopherols, carotenes, sterols and squalene.
The scope of this report shall be primarily nine vegetable oils. These vegetable oils can be
classified in several ways. One categorisation recognises four major oils (palm, soyabean,
rapeseed and sunflower), two lauric oils (coconut and palmkernel), and remaining oils
(cottonseed, groundnut and olive). The vegetable oils can also be distinguished as those obtained
from tree crops (coconut, palm and olive) and the remaining from annual seed/bean crops. Trees
have to be planted and mature, usually for many years, before they produce an economic crop.
Although tree crops will continue for many years (2535 years for palm, around 100 years for
olive), yields are influenced by climatic changes from season to season and by inputs such as
fertiliser, pesticides, herbicides and irrigation, Annual crops (soyabean, rapeseed, sunflower,
groundnut, etc.), on the other hand, depend on planting decisions that farmers make each year
based on agricultural and economic factors, and weather conditions. For vegetable oils that are
by-products, decisions on annual production depend on factors other than oil production. For
example, cotton is grown according to the demand for fibre and not for cottonseed oil. Corn is
not grown primarily for its oil and peanuts are grown as much for consumption as nuts as for oil
production. It is also important to note that crushing soybeans produces two components
soyabean oil (18%) and soyabean meal (79%)both of which are valuable commercial products.
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Annual crops are produced at harvest time, which comes late in the calendar year in the northern
hemisphere and early in the calendar year in the southern hemisphere. However, equatorial tree
crops such as palm and coconut are harvested throughout the year, though there is some
seasonal variation in quantity. Production data are often reported in harvest years such as 200809. These relate to 2008 harvests in the northern hemisphere and 2009 harvests in the southern
hemisphere.
World Vegetable Oil Production and Shar e
Mt
(average)
Oil
198119912001200890
2000
10
12
Coconut
2,735
3,148
3,400
3,605
Cottonseed
3,265
3,651
4,513
4,993
Palm Kernel
943
2,000
4,155
5,383
Peanut
2,906
3,931
4,853
4,971
Rapeseed
5,919
10,443
16,437
21,582
Soyabean
13,905
19,976
33,301
39,263
Sunflowerseed
6,230
8,348
9,760
12,040
Olive
1,658
2,017
2,791
2,928
Palm
7,385
15,585
34,490
45,887
Total
44,946
69,097
113,699 140,652
Source: US Department of Agriculture (USDA), IMaCS Analysis
Share
198190
6.1%
7.3%
2.1%
6.5%
13.2%
30.9%
13.9%
3.7%
16.4%
100%
19912000
4.6%
5.3%
2.9%
5.7%
15.1%
28.9%
12.1%
2.9%
22.6%
100%
200110
3.0%
4.0%
3.7%
4.3%
14.5%
29.3%
8.6%
2.5%
30.3%
100%
200812
2.6%
3.5%
3.8%
3.5%
15.3%
27.9%
8.6%
2.1%
32.6%
100%
P r o c e s s in g
Edible oil processing consists of three operations: crushing and expelling (separating oil from the
solids), solvent extraction (to chemically remove residual oil from the oilcake solids), and oil
refining. In many countries, these three separate processing operations are conducted by one
vertically integrated plant. In India, however, oilseeds processing sector is made up of the three
groups separately engaged:
Ghanis and small-scale expellers are oilseed crushers (around 150,000). Ghanis are
very small traditional crushers, usually located in villages and have an average output of
around 50-60 kilograms per day. Small-scale expellers have relatively modern facilities with a
daily production of up to the 10 tonnes per day.
Solvent extractors fall outside of the capacity ceiling for small-scale industry (SSI) and
crush and process hard oilseeds with low oil content such as soyabean and cottonseed as
well as chemically extract residual oil from the oilcake processed by SSI crushers. The
segment has around 800 plants and represents a growing share of the domestic supply of
edible oils and is becoming more concentrated. The ghanis and small scale expellers are not
able to remove all of the oil from a material. In most small scale rural situations this is of little
or no importance as the cake, that remains after the oil has been removed, finds uses in local
dishes, in the manufacture of secondary products or for animal feed. Some raw materials
however do not release oil by simple expelling; the most notable being rice bran. In order to
remove oil from commodities that do not respond to expelling or to extract the final traces of
oil after expelling, it is necessary to use solvent extraction. Solvent extraction is a high
technology process that has to be carried out at comparatively large scale. The process is one
of continuous countercurrent extraction with the raw material flowing in one direction
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Industry Comment
against a solvent; usually hexane. After oil extraction the solvent passes to a recovery plant
where the solvent is stripped off under vacuum. The crude oil then passes on for refining.
Due to the large scale involved it would seem unlikely that solvent extraction would find
much application in minor oil product processing.
Oil Refiners (around 943) refine solvent-extracted oil, which must be refined before
consumption, but oil refiners are usually not integrated with solvent extraction and expeller
plants. Refining is the last stage in processing of an oil which includes some or all of the
following treatmentsfiltering, neutralisation, winterising, bleaching, deodorisation and
degumming and filtering. Refined oil is usually bland and pale, and has negligible flavour and
aroma. In many cases refining is not a necessary stage in traditional processing systems as
local palates are accustomed to the flavour of unrefined oils and in many parts of world these
flavours are in fact preferred to the blandness of a fully refined oil. However, the strong
flavours of unrefined oils can dominate whatever dish is made with them. Many crude oils
contain free fatty acids (FFA) which impart unpleasant odours and flavours. The FFAs are
neutralised by treating the oil with a carefully controlled quantity of caustic soda solution. In
larger oil refineries the caustic soda washes are sold on for soap manufacture and are known
as soap stock. Winterising involves allowing the oil to stand at low temperatures, during
which time higher melting glycerides crystallise and are separated by filtration. Some oils are
dark in colour and are bleached by the addition of a small amount of bleaching earth or
activated carbon prior to filtration. Many commercial plants in fact bleach crude oil as routine
and then add a controlled amount of colour in order to produce a standard final product. Deodourising involves sparging steam through the oil, usually under vacuum. The steam
removes volatile odours, for example the coconut smell of coconut oil. In some cases it is also
necessary to treat oils with small amounts of water in order to remove gums and mucilages
that are released along with oil as the plant cells rupture during extraction. These gums
mainly consist of phospholipids. The above treatment, with heat, causes the gums to
flocculate after which they may be removed by centrifugation or settling.
The capacity utilisation generally ranges from an average of 10% for the ghanis to around 35-40%
in case of the expellers in the organised sector.
Indias Edible Oil Industry
As of August 2011
Type
No. of units
Annual Installed Capacity

(million tonnes)
Capacity
Utilisation
Oilseed crushing units
150,000
(estimated)
795
42.5 (in terms of seeds)
10-30%
34%
127
41.9 (in terms of oil bearing

material)
5.1 (in terms of oil)
226
29%
590
943
268

5.8 (in terms of Vanaspati,
Bakery Shortening & Margarine)
36%
37%
19%
Solvent extraction
units
Refineries attached with
vanaspati units
Refineries attached with
solvent extraction units
Independent Refineries
Refineries
Vanaspati Units
45%
Source: Directorate of Vanaspati, Vegetable Oils & Fats
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KEY ISSUES FACING TH E PLAYERS

D e c l in e o f Tr a d it io n a l G h a n i P r o c e s s in g
In ghani processing, juices were extracted from vegetable materials as early as 1500 BC using
either a mortar and pestle or a grinding stone working on a flat stone. It is from these two
crushing systems that presses for both oilseeds and sugar cane developed in the form of a
mortar-and-pestle arrangement powered by animals. This system is commonly called the ghani,
or the kolhu or chekku. Ghanis are powered by animals or motors (power-ghanis) although
sometimes human power is also used. The mortar is firmly fixed in the ground and as the pestle
rotates, oil is released by friction and pressure and runs out of a small aperture at the base of the
mortar. A typical one bullock ghani can process 40 kg of material per day. In the case of powerghanis either the pestle or mortar is fixed, the other rotating. Power ghanis usually are operated
in pairs and have a typical capacity of 100 kg per day.
An oil-rich seed such as sesame seed or groundnut yields about 5% less oil in a ghani than in a
modern expeller, mainly because of insufficient pressure. Ghani oilcake carries about 15%
residual fat, about twice that of screw-press oilcake. In fact, in modern commercial Indian
practice, oilcake produced by crushing rape and mustard seeds in the ghani is put through screwpresses to obtain about 2% oil; this is added to the pungent ghani oil already obtained, to raise
total yield.
At the beginning of the 20th century, there were an estimated 500,000 ghanis in India which
crushed around 97% of all oilseeds. The remaining 3%mostly rapeseeds/mustard, coconut and
groundnutswere processed in rotary units which were mechanised ghanis installed in factories.
However, the number of ghanis declined as power-driven screw-presses, hydraulic presses and
solvent-extraction units came into operation. A further switch to rotaries for rape- and mustard
seeds and coconut, and to expellers for groundnuts and castor beans, rapidly brought down ghani
usage for all oilseeds to 40% in the 1930s, and 28% in the 1940s. At present, just 4% of all
oilseeds are pressed in ghanis. The proportions of individual oilseeds crushed in ghanis have been
estimated as follows: safflower (40%), sesame (24%), rapeseed/mustard (6%), groundnuts (2.5%),
and copra (1%). The major drawback is the low production capacity of ghanis. Even modern ghani
units can press a maximum of around 100 kg of oilseeds per day.
When ghani crushing was widespread, fresh oil was in greater demand than at present. Flavour,
which was traditionally an important attribute of all oils, was best in oils produced from mild
ghani crushing. However, consumer preference has now shifted away towards refined packaged
oils.
The ghani has disadvantages which are mainly economic in nature. Traditional ghanis have a
maximum capacity of about 50 kg per day, and modern powered units only about 100 kg per day.
As a result, running costs are high. If animals are used, they need to be trained, and fed. Artisan
training is also essential. Ghani oilcake as prised out of the unit after crushing is extremely hard
and is not accepted by the trade for further solvent extraction, as are expeller oilcakes.
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Use of ghani crushing in India has probably stabilised at the current level of 3-4%. In the future,
power-driven devices are certain to displace traditional ghanis worked by animal traction. There
may still be room for powered ghanis in India and perhaps even in other developing countries
with limited local supplies of raw materials for oilseed extraction, and there may be a place for
batteries of power ghanis to multiply oil output from a common shaft in factory operations.
L o w G r o w t h in O i ls e e d s P r o d u c t io n
Oilseeds are sown in two seasons in India: rabi which lasts from November to April and kharif
which lasts from June to October. Thus, annual oilseed and edible oil aggregates are generally
compared for the November-October period, which is referred to as oil year.
The production of edible oils in India is dependent on the production and availability of oilseeds.
Because of stagnant acreage, unremunerative prices, and low growth in demand, Indias oilseeds
production had stagnated at around 9-12 million tonnes (mt) per annum during the 1970s and
early-1980s. At the same time, consumption growth of edible oil accelerated from the mid-1980s,
following rise in per capita income, and the availability of inexpensive palm oil1 from East Asian
countries. Because of the consequent increase in imports, the Government of India (GoI) felt the
need for special measures to enhance the productivity of Indian oilseeds complex. As a result, a
Technology Mission on Oilseeds and Pulses (TMOP) was established in 1986, with the launch of
special initiatives on several critical fronts like the improvement of oilseeds production and
processing technology, additional support to oilseed farmers and processors along with enhanced
customs duty of 65% on the import of edible oils. Consequently, oilseeds area, production, and
yields increased significantly till the late-1990s. During 1981-82 to 1993-94, oilseed crops
registered the fastest annual growth rate (5.8%) of all major crops in India, contributing to 22% of
all India growth during the same period. This contrasted with the stagnation (growth of 1% per
annum) during the initial post-green revolution period (1968-1981). This rapid growth in oilseeds
production gave rise to more balanced agricultural growth across states, particularly favourable
to the rain fed area. Considering that only 28% of oilseeds acreage is presently under irrigation,
this implies that oilseeds are raised prominently in rain fed areas. The adoption of new
technology during the mid-1980s also played a crucial role in increasing oilseeds output. In the
initial period between 1979-80 and 1986-87, new oilseeds crop technologies were introduced
and its uptake by early adopters yield improvements outpaced area expansion in explaining
overall increase in oilseeds output. However, during the following period from 1986-87 until
1993-94, the situation reversed when improvements in yields played a more modest role in
explaining total output growth of oilseeds. The area expansion was more rapid as new technology
spread much faster in new areas.
Palm oil is produced from the fruits of the oil palm. These fruits contain a kernel which is also processed into an oil
and a protein-rich meal.
.
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Industry Comment
Trends in Are a and Production of Nine Major Oilseeds

OY
30
28
35
Area (million hectares)-LS

Production (mt)-RS
30
26
24
25
22
20
20
18
15
16
10
14
12
5
1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011
R e s e r v a t io n f o r S ma l l - S c a le In d u s t r y
The SSI reservation policy since 1977 confined processing of traditional oilseeds, such as
groundnut, rapeseed-mustard, sesame and safflower (but not soyabean and sunflower) to small
scale units with a capacity of less than 10 tonnes per day, thus allocating a large share of edible
oil production to relatively inefficient processors. By comparison, in developed countries, high oil
content bearing seeds such as groundnut, rapeseed/mustard and sunflower are typically crushed
in medium to large scale factories with an expeller and then for the expeller cake to undergo
through the solvent extraction plant, integrated in the same factory. As cost reduction in the
oilseed crushing/processing industry depends largely on the scale of operations, confining
production to small mills leads to inefficiencies. In addition, even processors not covered by SSI
policies such as soyabean processors and solvent extractors are small by international standards.
L o w C a p a c it y U t i l is a t io n in P r o c e s s in g
India's oilseed processing industry is one of the largest and most complex in the world, reflecting
the special conditions in India, including the large geographical spread, seasonality and diversity
of oilseeds, consumer preference for unrefined oils, and the price relationships between oilcakes
and vegetable oils. A variety of technologies are being used by the industrymechanical
crushing/expelling and solvent extraction. The crushing of groundnut and mustard seed is
reserved for small-scale industries sector. This has led to widespread inefficiency in the industry
with low rates of capacity utilisation, low oil recoveries, and high unit costs. There is lack of
integration between expelling and solvent extraction industries. As a result, only 30% of the
oilcakes recovered in the expelling units are subjected to solvent extraction for further recovery
of oil, resulting in an expected annual production loss of around 0.5 mt.
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Industry Comment
Processors not covered under SSI Reservation policy such as soyabean processors and solvent
extraction plants are small by international standards. Capacity utilisation in the edible oil
industry is also very low. According to official estimates, ghanis operate at 30% capacity
utilisation and solvent extractors at 31%.
According to estimates by the World Bank, low capacity utilisation has resulted in soyabean
processing costs in India that are 40% higher than in China, and 90% higher than in the US. Low
capacity utilisation is primarily caused by difficulty in obtaining regular supplies of raw materials
throughout the season due to low yields and significant yield variability. Poor roads and limited
freight options also result in higher procurement costs. In addition, poor storage facilities, and
high interest costs, also contribute to supply difficulties. Stagnant oilseeds production and
restrictive tariff and phytosanitary import barriers prevent the use of oilseed imports to stabilise
supplies for processors. Excess oilseed processing capacity is also related to tax and other
incentives that have resulted in overinvestment in many rural areas.
Indias solvent extraction plants are about one-sixth the size of those in the US and the EU and
use significantly more power, steam, and hexane solvent per unit of oilseeds processed. The
efficiency of the Indian crushing/processing sector is further reduced by the under-utilisation of
capacity. For example, although some Indian soyabean crushers/processors have a capacity of
about 1,500 tonnes per day, most plants have a capacity of just 125-150 tonnes per day. Low
capacity utilisation is also due to difficulty in obtaining regular supplies of raw materials
throughout the year or season due to low yields and significant variations in yields. In addition,
poor storage facilities, high interest costs, and lack of risk/supply management tools such as
future markets or contract farming also contribute to problems in obtaining supplies. Excess
capacity is also related to tax and other incentives that stimulated over investment in many rural
areas. The continued expansion of the processing industry has in part been supported by
incentives from State Governments for the establishment of units in industrially backward areas.
State governments typically offer incentives to new units exempting them from State sales tax for
a block of say 5 years, which renders manufacturing by old units (which have outlived the period
of exemption) and competing units in other States (that may not offer such exemption) unviable.
SUPPLY CHARACTERISTI CS
O i ls e e d s P r o d u c t io n
The production of edible oils in India is dependent on the production and availability of oilseeds,
either domestic or imported. The extraction or recovery rate of oil and meals from oilseeds varies
from 11% for cottonseed to 65% for copra/coconut.
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Industry Comment
Conversion Ratios between Raw Material and Processed Products

percent
Kernels/Seeds to
Oil
40
45
33
43
42
11
65
30
18
Groundnut
Sesamum
Rapeseed/Mustard
Linseed
Castorseed
Cottonseed
Copra
Nigerseed
Soyabean
Kernels/Seeds to
Cake
60
55
67
57
58
89
35
70
73
Edible oilseeds grown in India can be classified in two main ways. The first classification divides
them into traditional and non-traditional types. Traditional oilseeds include groundnut, rapeseed
mustard, sesame, safflower, linseed, and castor. The non-traditional and recent adoptions
include soyabean, sunflower, and oil palm. The second classification refers to the edibility of
resultant oils from oilseeds. All the above oilseeds produce common edible oil except three:
linseed (also called flaxseed oil), sesamum, and niger. Cottonseed is another rich source of edible
oil, which has remained relatively unexploited so far. Cottonseed oil is extracted from the seeds
of cotton plant of various species. Because of its flavour stability, cottonseed oil is used for salad
oil, mayonnaise, salad dressing, and similar products. Linseed oil is commonly sold as a nutritional
supplement than as edible oil, because of its strong flavour and odour. Sesame (or til) oil is used
primarily as a flavour enhancer in Southern India, but also for religious worship. Niger seeds are
also primarily used in Southern India to make dry chutney.
IndiaShar e of Production of Nine Oilseeds
Crop/OY
2009
2010
2011
2012
Groundnut
Castorseed
Sesamum
Nigerseed
Rapeseed & Mustard
Linseed
Safflower
Sunflower
Soyabean
Total
25.9%
4.2%
0.4%
2.3%
26.0%
0.6%
0.7%
4.2%
35.7%
100%
21.8%
4.1%
0.4%
2.4%
26.6%
0.6%
0.7%
3.4%
40.0%
100%
25.4%
4.2%
0.3%
2.7%
25.2%
0.5%
0.5%
2.0%
39.2%
100%
22.7%
7.7%
0.3%
2.5%
24.6%
0.5%
0.3%
1.8%
39.6%
100%
197180
62.6%
2.0%
5.0%
1.4%
19.1%
5.3%
2.1%
1.4%
1.2%
100%
198190
51.8%
2.7%
4.4%
1.3%
23.5%
3.1%
3.3%
2.8%
7.1%
100%
19912000
36.0%
3.5%
2.9%
0.8%
26.1%
1.4%
1.5%
5.1%
22.6%
100%
200110
28.2%
3.6%
2.2%
0.9%
26.1%
0.7%
0.8%
4.4%
33.0%
100%
Over the last decade, soyabean accounted for an average of 33% of Indias oilseeds production2,
followed by groundnut (28%), rapeseed/mustard (26%), and sunflower (4%). Over the last three
decades, soyabean has gained importance even as the share of groundnut has declined, mainly
because of a decline in acreage and production. Soyabean has 18-20% oil content, and 40-46%
2
Oilseeds are sown in two seasons in India: rabi which lasts from November to April and kharif which lasts from June to
October. Thus, annual oilseed and edible oil aggregates are generally compared for the November-October period,
which is referred to as oil year.
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Industry Comment
protein content. Thus, 1 tonne (t) of soyabean is equal to 0.6 t of groundnut for oil purposes, plus
2 t of ordinary pulses in terms of protein. Soyabean is also valuable as a protein crop for humans
and for livestock, than as an oilseed. Soyabean is the dominant oilseed produced in the world,
because of its favourable agronomic characteristics, its high-quality protein, and its valuable
edible oil. During OY2008-12, it contributed about 57% of all oilseeds produced worldwide, 28%
of world vegetable oil production, and 31% of world food oil consumption. Soymeal accounts for
over 60% of world output of vegetable and animal meals (primarily for poultry, swine, and cattle)
and occupies a prominent position among protein feedstuffs used in the production of feed
concentrates. For human consumption, soyabean oil is the single most important vegetable oil,
accounting for 28% of global vegetable oil production and 31% of human vegetable oil
consumption. Its dominance over other vegetable oils has diminished somewhat following the
advent of palm oil, which now accounts for at 33% of world vegetable oil production, and 31% of
human consumption. The widespread use of soyabean oil in particular as edible oil is mainly due
to its plentiful and dependable supplies, competitive price, and its neutral flavour and its stability
in both unhydrogenated and partially hydrogenated form.
India produces a broad range of oilseeds, and ranks amongst the worlds largest producers of
rapeseed, soyabean, cottonseed, peanut, and a number of minor oilseeds. India is the fifth
largest producer of oilseeds in the world; behind US, Brazil, China, and Argentina. During 200812, Indias share in world production of oilseeds has been 8% (compared with 7.6% during 200307), with its share of world production for OY2011 as high as 26.4% for cottonseed, 15.1% for
groundnut, 12.5% for coconut, and 11.6% for rapeseed. However, India accounts for only 3.7% of
world soyabean seed production, 1.9% for sunflower seed, and only 0.01% of world palm oil
production. Indias consumption patterns indicate a gradual increase in share of palm oil and
soyabean. India produces only a small quantity of palm oil estimated at 106 kilotonnes (kt) in
FY2011. Indias soyabean oil production also satisfies only 50-60% of Indias soyabean oil
consumption.
Major Producers of Oilseeds
mt
OY
United
States
Brazil
China
Argentina
India
EU-27
Canada
Ukraine
Russia
Indonesia
Other
Total
Source: USDA
2008
2009
OY
2010
2011
2012
82.45
64.25
52.75
51.89
33.95
24.45
12.42
5.97
6.93
8.23
47.93
391.22
89.20
60.31
58.12
35.51
33.40
27.22
16.09
10.69
8.85
9.13
48.04
396.54
98.90
71.42
57.84
57.94
32.37
29.65
16.51
10.52
8.03
9.44
51.34
443.96
100.38
79.28
57.69
53.85
34.67
29.07
17.23
11.55
7.24
9.75
54.03
454.74
91.22
75.80
57.83
52.68
36.23
28.96
18.53
13.20
12.43
10.18
55.44
452.48
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Average Share
19881998200897
2007
12
28.3%
10.2%
15.7%
7.0%
9.6%
0.0%
2.8%
1.1%
1.7%
2.0%
21.6%
100%
25.9%
14.0%
15.2%
10.9%
7.7%
5.0%
3.0%
1.1%
1.5%
1.9%
13.7%
100%
21.6%
16.4%
13.3%
11.8%
8.0%
6.5%
3.8%
2.4%
2.0%
2.2%
12.0%
100%
13
Industry Comment
A large number of oilseed crops are grown in different regions under different agro-climatic
conditions. Oilseeds are produced practically in all the States of India. Madhya Pradesh (MP) has
the largest area under oilseeds: 26.1% of the national total of 26 mha in OY2010, followed by
Rajasthan (15.9%), Maharashtra (15%), and Gujarat. MP leads the states in terms of oilseeds
output (30.7% of national output in OY2010), followed by Rajasthan, Gujarat, Maharashtra, and
Andhra Pradesh (AP). These five states cumulatively accounted for around 78% of Indias oilseed
production during OY2010-11.
Area, Production and Yields of Nine Major Oilseeds
OY2010
Madhya Pradesh (MP)

Rajasthan
Gujarat
Andhra Pradesh (AP)
Maharashtra
Karnataka
Tamil Nadu (TN)
West Bengal (WB)
Uttar Pradesh (UP)
Others
All India
Area
(mha)
6.77
3.88
2.79
2.07
4.13
2.00
0.50
0.68
1.08
2.05
25.96
Production
(mt)
7.64
2.81
3.10
1.50
4.41
1.01
0.94
0.73
0.82
1.94
24.88
Yield
Kg/ha
1,129
725
1,109
724
1,066
502
1,898
1,065
753
947
959
Share of
Area
26.1%
15.0%
10.8%
8.0%
15.9%
7.7%
1.9%
2.6%
4.2%
7.9%
100%
Share of
Production
30.7%
11.3%
12.4%
6.0%
17.7%
4.0%
3.8%
2.9%
3.3%
7.8%
100%
In India, consequent to the setting of TMOP in 1986; area, production, and yields of oilseeds
increased significantly till the late-1990s. While oilseeds production increased from 10.83 mt in
OY1986 to 24.75 mt in OY1999, yields per hectare (ha) increased from 570 kg to 944 kg. However,
during OY1999 to OY2003, oilseed output in India stagnated and declined to 14.84 mt in OY2003,
primarily because of a decline in acreage and yields. While acreage declined from 26.2 mha in
OY1999 to 21.5 mha in OY2003, yields declined from 944 kg/ha to 691 kg/ha. Drought conditions
in the major oilseeds producing states such as Chattisgarh, Madhya Pradesh (MP), and Rajasthan
during the period adversely affected oilseeds production and yields.
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14
Industry Comment
Season- wise Yield of Oilseeds in Major States

Yield: kg/ha
2007
2008
Yield
(kg/ha)
2009
Kharif
965
836
MP
1,020
962
Maharashtra
981
1,031
Gujarat
1,543
779
AP
570
397
Rajasthan
972
1,050
Karnataka
569
439
TN
1,340
1,251
WB
837
922
Chhattisgarh
521
623
UP
555
349
Haryana
804
844
Rabi
1,068
1,055
MP
955
912
Maharashtra
677
662
Gujarat
1,552
1,544
AP
1,193
1,235
Rajasthan
1,205
1,185
Karnataka
655
543
TN
2,073
3,466
WB
988
916
Chhattisgarh
284
319
UP
1,105
1,024
Haryana
1,128
1,351
Total
1,004
916
MP
1,009
955
Maharashtra
925
963
Gujarat
1,544
908
AP
698
609
Rajasthan
1,134
1,146
Karnataka
600
478
TN
1,624
1,829
WB
952
918
Chhattisgarh
419
503
UP
993
837
Haryana
1,124
1,344
Source: Ministry of Agriculture
1,154
1,037
1,368
1,610
1,204
1,224
682
1,263
908
615
284
1,079
1,034
833
739
1,662
1,508
946
677
2,835
1,035
350
1,064
1,216
1,115
1,015
1,274
1,618
1,276
1,051
681
1,739
997
532
856
1,214
961
1,096
878
1,351
705
925
548
1,454
661
572
321
762
1,097
936
691
1,314
1,286
1,234
571
2,539
899
326
1,076
1,735
1,006
1,075
857
1,345
842
1,114
556
1,782
828
507
865
1,723
OY
2006
Growth
2010
2011
2010
2011
200711
875
1,150
730
1,049
425
798
469
1,482
821
710
240
648
1,146
990
683
1,617
1,517
1,277
565
2,993
1,161
371
1,090
1,655
959
1,129
725
1,109
724
1,066
502
1,898
1,065
607
753
1,645
1,146
1,159
1,496
1,334
698
1,235
730
1,548
837
824
410
727
1,188
1,031
789
1,654
1,468
1,188
731
3,218
1,194
345
1,153
1,868
1,159
1,143
1,417
1,371
858
1,205
730
2,109
1,092
686
849
1,856
-8.9%
4.9%
-16.9%
-22.4%
-39.7%
-13.7%
-14.5%
1.9%
24.2%
24.2%
-25.4%
-14.9%
4.5%
5.8%
-1.1%
23.1%
17.9%
3.5%
-1.0%
17.9%
29.1%
13.8%
1.3%
-4.6%
-4.7%
5.0%
-15.5%
-17.6%
-14.0%
-4.3%
-9.7%
6.5%
28.6%
19.7%
-13.0%
-4.5%
30.9%
0.7%
105.0%
27.2%
64.2%
54.7%
55.7%
4.5%
2.0%
16.0%
71.2%
12.2%
3.7%
4.1%
15.4%
2.3%
-3.2%
-7.0%
29.4%
7.5%
2.8%
-7.1%
5.8%
12.8%
21.0%
1.3%
95.6%
23.7%
18.5%
13.0%
45.4%
11.1%
2.5%
13.0%
12.8%
12.8%
3.5%
2.6%
8.8%
-2.9%
4.1%
4.9%
5.1%
2.9%
0.0%
9.6%
-5.9%
-2.0%
2.1%
1.6%
3.1%
1.3%
4.2%
-0.3%
2.2%
9.2%
3.8%
3.9%
0.9%
10.6%
2.9%
2.5%
8.9%
-2.3%
4.2%
1.2%
4.0%
5.4%
2.8%
10.4%
-3.1%
10.5%
The downward trend in oilseeds production was reversed during OY2004-08, with oilseeds
production increasing from 14.84 mt in OY2003 to 29.76 mt in OY2008, primarily because of
increased acreage, and higher yields. However, production has declined during OY2009-10 to
24.93 mt in OY2010 because of lower acreage, deficient monsoons, and lower yields.
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15
Industry Comment
Oilseeds Acreage, Pr oduction and Yields Major States

2006
2007
Values
2008
Area (mha)
27.86
MP
5.67
Maharashtra
3.65
Gujarat
3.03
AP
2.92
Rajasthan
5.26
Karnataka
2.86
TN
0.71
WB
0.64
UP
1.07
Others
1.75
Production (mt)
27.98
MP
5.72
Maharashtra
3.37
Gujarat
4.68
AP
2.04
Rajasthan
5.96
Karnataka
1.72
TN
1.15
WB
0.61
UP
1.07
Others
1.52
Yield (kg/ha)
1,004
MP
1,009
Maharashtra
925
Gujarat
1,544
AP
698
Rajasthan
1,134
Karnataka
600
TN
1,624
WB
952
UP
993
Others
870
26.51
6.09
3.86
2.83
2.24
4.51
2.35
0.59
0.70
1.23
1.79
24.29
5.81
3.72
2.57
1.36
5.17
1.13
1.08
0.65
1.03
1.61
916
955
963
908
609
1,146
478
1,829
918
837
900
26.69
6.26
3.83
2.92
2.66
4.00
2.28
0.66
0.71
1.34
1.69
29.76
6.35
4.87
4.73
3.39
4.20
1.55
1.15
0.71
1.15
1.48
1,115
1,015
1,274
1,618
1,276
1,051
681
1,739
997
856
872
OY
2009
2010
CAGR
199120012000
10
27.56
6.49
3.98
2.98
2.60
4.65
2.18
0.59
0.70
1.35
2.04
27.72
6.98
3.41
4.02
2.19
5.18
1.21
1.04
0.58
1.16
1.95
1,006
1,075
857
1,345
842
1,114
556
1,782
828
865
953
25.96
6.77
3.88
2.79
2.07
4.13
2.00
0.50
0.68
1.08
2.05
24.88
7.64
2.81
3.10
1.50
4.41
1.01
0.94
0.73
0.82
1.94
959
1,129
725
1,109
724
1,066
502
1,898
1,065
753
947
0.6%
5.0%
0.3%
-0.1%
-1.3%
3.7%
-1.3%
-2.4%
0.3%
-1.7%
-3.9%
2.0%
9.4%
3.8%
-3.5%
-4.9%
6.3%
-1.6%
1.3%
-0.3%
1.2%
-3.1%
1.4%
4.2%
3.5%
-3.5%
-3.7%
2.5%
-0.3%
3.7%
-0.6%
3.0%
0.9%
0.7%
1.3%
3.6%
0.0%
-2.1%
1.3%
0.1%
-6.8%
3.1%
-3.1%
2.1%
1.8%
2.8%
0.5%
6.0%
0.9%
2.6%
-1.7%
-4.5%
6.0%
-4.5%
3.7%
1.2%
1.4%
-2.9%
6.0%
3.1%
1.3%
-1.8%
2.5%
2.8%
-1.4%
1.5%
During OY2008, acreage under oilseeds during the Kharif season was 17.95 mha, representing an
increase of 7% over the corresponding previous. There was some shift in acreage to cotton over
the previous two years, but higher prices during the OY2008 season (due to lesser production in
OY2007), caused an increase in acreage during Kharif 2007-08. The sowing of kharif crops also
improved on account of satisfactory rainfall during the South-West monsoon and remunerative
market prices. Kharif oilseeds production increased 48% in OY2008 to 20.71 mt, compared with a
decline of 16.4% in OY2007. Amongst the major crops, an increase in overall acreage coupled
with good weather conditions favoured production and yields of groundnut and soyabean. By
comparison, area sown under rabi oilseeds crops declined during OY2008. Rabi sowing was lower
in case of rapeseed/mustard and sunflower. As a result, rapeseed production declined for a
second consecutive year. Rabi crops in general were adversely affected by inadequate soil
moisture in major parts of northern India. Rapeseed is primarily grown in the rabi season in
Rajasthan, UP, MP, and Haryana. For OY2008, the Ministry of Agriculture had set oilseeds
www.imacs.in
16
Industry Comment
production target of 30 mt, comprising kharif production of 18.5 mt, and rabi production of 11.5
mt. However, oilseeds production increased 22.5% in OY2008 to 29.76 mt. While kharif
production was higher than targets, rabi production declined 12% in OY2008 (and below targets)
because of decline in production of rapeseed.
Area, Production, and Yields of Oilseeds
Area: mha; Production: mt; Yield: kg/ha
OY
2006
2007
Area
27.86
26.51
Production
27.98
24.29
Yield
1,004
916
Value
2008
2009
26.69
27.56
29.76
27.72
1,115
1,006
2010
25.96
24.88
959
2011
26.82
32.48
1,211
2009
3.3%
-6.9%
-9.8%
Growth
2010
-5.8%
-10.2%
-4.7%
2011
3.3%
30.5%
26.3%
For OY2009, the Ministry of Agriculture had set oilseeds production target of 31.75 mt,
comprising kharif production of 19.95 mt, and rabi production of 11.8 mt. During Kharif 2008-09,
acreage under kharif oilseeds increased 3.2% to 18.53 mha. The increase in acreage was primarily
because of a 7.1% increase in soyabean acreage. Soyabean acreage increased significantly in the
major producing states of MP, Maharashtra, and Rajasthan. However, acreage under groundnuts
declined 2% because of declines in AP and Karnataka. Early planted groundnuts in Gujarat also
became vulnerable due to lack of supporting rains in the early part of the season. Overall kharif
oilseeds production declined 14% in OY2009 to 17.81 mt, mainly because of a sharp decline in
production of groundnuts. During Rabi 2008-09, acreage under rabi oilseeds increased 3.3% to
9.03 mha. The increase in acreage was primarily because of an 8.1% increase in rapeseed
acreage. Rapeseed acreage increased significantly in the major producing statesRajasthan, MP,
and UP.
Season- wise Oilseeds Production
OY
2006
2007
Kharif
16.77
14.01
Rabi
11.21
10.28
Total
27.98 24.29
2008
20.71
9.04
29.76
mt
2009
17.81
9.91
27.72
2010
15.73
9.15
24.88
2011
21.92
10.56
32.48
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2012
20.80
9.73
30.53
2010
-11.7%
-7.6%
-10.2%
Growth
2011
39.4%
15.3%
30.5%
17
2012
-5.1%
-7.8%
-6.0%
Industry Comment
Season- wise Oilseeds Production

Season
OY
Groundnut
Castorseed
Sesamum
Nigerseed
Rapeseed
Linseed
Safflower
Sunflower
Soyabean
Total
Kharif
Rabi
Total
Kharif
Kharif
Kharif
Rabi
Rabi
Rabi
Kharif
Rabi
Total
Kharif
Kharif
Rabi
Total
Mt
2007
2008
2009
2010
2011
2012
3.29
1.57
4.86
0.76
0.62
0.12
7.44
0.17
0.24
0.37
0.86
1.23
8.85
14.01
10.28
24.29
7.36
1.82
9.18
1.05
0.76
0.11
5.83
0.16
0.23
0.46
1.00
1.46
10.97
20.71
9.04
29.76
5.62
1.55
7.17
1.17
0.64
0.12
7.20
0.17
0.19
0.36
0.80
1.16
9.91
17.81
9.91
27.72
3.85
1.58
5.43
1.01
0.59
0.10
6.61
0.15
0.18
0.21
0.64
0.85
9.97
15.73
9.15
24.88
6.64
1.62
8.27
1.35
0.89
0.11
8.18
0.15
0.15
0.19
0.46
0.65
12.74
21.92
10.56
32.48
5.35
1.59
6.94
2.34
0.77
0.09
7.50
0.15
0.10
0.17
0.39
0.56
12.08
20.80
9.73
30.53
Average
2001200605
12
5.15
5.49
1.34
1.63
6.49
7.12
0.71
1.24
0.11
0.70
0.62
0.11
5.41
7.27
0.19
0.16
0.18
0.19
0.28
0.32
0.58
0.73
0.86
1.05
6.12
10.40
12.99
18.25
7.70
9.98
20.70
28.23
For OY2010, oilseeds production target was set at 31.6 mt, comprising kharif production of 19.4
mt, and rabi production of 12.2 mt. During Kharif 2009-10, acreage under Kharif oilseeds declined
3% to 18 mha. The decline was primarily because of drought conditions. Some rains had arrived
by late June 2009 and early July 2009 and allowed sowing to begin for soyabean, which are
mainly grown in MP and Maharashtra. In August 2009, rainfall for the region was again well
below normal, although a revival of rains during September 2009 stabilised crop conditions.
While acreage under soyabean increased 2.4%, acreage under groundnut declined 12.6% to 4.62
mha due to sharply lower acreages in AP and Gujarat. Lower acreage and yields caused
groundnut output to decline from the second successive year in OY2010. The Government had
extended crop insurance deadlines from August 31 to September 15 in some southern districts,
which increased planted area slightly.
Khar if Oilseeds Production
mt
OY
Groundnut
Castorseed
Sesamum
Nigerseed
Sunflower
Soyabean
Total
2007
3.29
0.76
0.62
0.12
0.37
8.85
14.01
2008
7.36
1.05
0.76
0.11
0.46
10.97
20.71
2009
5.62
1.17
0.12
0.64
0.36
9.91
17.81
2010
3.85
1.01
0.10
0.59
0.21
9.97
15.73
2011
6.64
1.35
0.11
0.89
0.19
12.74
21.92
2012
5.35
2.34
0.09
0.77
0.17
12.08
20.80
2010
-31.4%
-13.8%
-14.5%
-8.1%
-40.1%
0.6%
-11.7%
Growth
2011
72.5%
33.8%
8.0%
51.9%
-10.3%
27.8%
39.4%
2012
-19.4%
73.3%
-14.8%
-13.9%
-12.0%
-5.2%
-5.1%
For Rabi 2009-10, acreage under rabi oilseeds declined 11.6% to 7.99 mha with rapeseed acreage
declining 11.3% to 5.59 mha. Poor soil moisture conditions and higher temperatures led to
declines in area planted to rapeseed-mustard in Rajasthan, Gujarat and Haryana, while higher
planting in Madhya Pradesh and Gujarat moderately compensated for the loss. Acreage under
sunflower also declined 21.1% in OY2010 to 0.91 mha mainly because of shift in acreage to
winter grown cereals, pulses and other remunerative crops. As a result, rabi oilseeds output
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18
Industry Comment
declined 7.6% to 9.15 mt. Overall oilseeds output declined 10.2% in OY2010 to 24.88 mt,
representing the second consecutive year of decline.
Rabi Oilseeds Pr oduction
mt
OY
Groundnut
Rapeseed &
Mustard
Linseed
Safflower
Sunflower
Total
2007
1.57
2008
1.82
2009
1.55
2010
1.58
2011
1.62
2012
1.59
2010
1.6%
Growth
2011
2.9%
2012
-2.2%
7.44
0.17
0.24
0.86
10.28
5.83
0.16
0.22
1.00
9.04
7.20
0.17
0.19
0.80
9.91
6.61
0.15
0.18
0.64
9.15
8.18
0.15
0.15
0.46
10.56
7.50
0.15
0.10
0.39
9.73
-8.2%
-8.9%
-5.3%
-20.6%
-7.6%
23.8%
-4.5%
-16.2%
-27.8%
15.3%
-8.3%
2.0%
-34.0%
-14.2%
-7.8%
For OY2011, oilseeds production target was set at 33.2 mt, comprising kharif production of 20.7
mt, and rabi production of 12.5 mt. During 2010, cumulative rainfall received for the country as a
whole during the South-West Monsoon season (June-September 2010) was 2% above the longperiod average (LPA). Acreage planted to kharif oilseeds increased 1.2% to 18.19 mha. Area
under groundnut increased 7.6% to 4.97 mha primarily because of excess rainfall received in all
the three major producing regionsAP, Gujarat, and Rajasthan. Early monsoon rains in Southern
India helped increase groundnut acreage; especially in AP, where acreage more than doubled
during kharif 2010-11. However, Gujarat reported only marginal increases in groundnut acreage.
Higher acreage caused kharif groundnut output to increase 72.5% during OY2011 to 6.64 mt,
reversing two successive years of declines. However, soyabean acreage declined 1.9% to 9.55
mha primarily because of deficit rainfall in large areas of MP. Although normal to excess rainfall
in Maharashtra augured well for overall sowing area, good monsoon rains in Maharashtra
prompted farmers to shift soyabean acreage to more profitable crops such as pulses, cotton and
sugarcane. However, a late revival of monsoon rains in MP marginally raised the area sown to
soyabean. Increased plantings and excellent crop conditions were also reported in Maharashtra
and Karnataka. Overall kharif oilseeds production increased 39.4% in OY2011 to record levels of
21.92 mt, mainly because of a 31% increase in yields. Prospects for rabi 2010-11 crop remained
promising on account of delayed withdrawal of South-West monsoon, and the various
Government policies supporting rural sector. Overall acreage under rabi oilseeds increased 8% to
8.63 mha primarily because of 16.4% growth in rapeseed acreage. Sowing of rabi oilseeds had
earlier lagged because of reduced coverage in MP and Uttar Pradesh (UP), where rains were
deficient. Rabi oilseeds output increased 15.3% to 10.56 mt. Overall oilseeds output increased
30.5% in OY2011 to record levels of 32.48 mt. In absolute terms, output increased by 7.8 mt with
higher output contributions from all three major oilseedsgroundnut (2.84 mt), rapeseed (1.57
mt), and soyabean (2.77 mt).
For OY2012, oilseeds production target has been set at 33.6 mt, comprising kharif production of
22.1 mt, and rabi production of 11.5 mt. During Kharif 2011-12, for the country as a whole, the
rainfall for the season (June-September) was 101% of LPA. Seasonal rainfall was 107%, 110%,
100% and 86% of their respective LPA over North-West India, Central India, South Peninsula and
North-East (NE) India. The two major kharif crops are groundnut and soyabean. For Kharif 201112, kharif area under groundnut is estimated to have declined 15.6% (yoy) to 4.19 mha primarily
because of lower acreage in Gujarat (14% decline to 1.43 mha). High cotton prices have caused a
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19
Industry Comment
switch in acreage from groundnut to cotton. Acreage has also declined because of delayed
rainfall in the main growing states of Gujarat, Karnataka and AP. However, acreage under
soyabean increased 4.1% to 9.95 mha because of higher plantings in MP. Favourable planting
conditions helped extend the window for planting, contributing to higher kharif season soyabean
acreage in MP, Maharashtra and Rajasthan. Lower acreage for groundnut is likely to be
accompanied by lower yields resulting in kharif groundnut production declining 19.4% to 5.35 mt
in 2011-12. Lower acreage and yields is also expected to result in a 5.2% decline in soyabean
output. Lower outputs are also expected for sesamum and nigerseed, with output expected to be
higher only for castorseed. As a result, Indias kharif oilseeds output is expected to decline 5.1%
during 2011-12 to 20.80 mt.
Rabi 2011-12 oilseeds acreage is also expected to decline primarily because of deficient rainfall
conditions. In the Post-Monsoon season, cumulative rainfall received for the country as a whole
during the period October 1, 2011 to December 31, 2011 was 65.7 mm which was 48% less than
the LPA. Out of 36 sub-divisions, only 7 sub-divisions received excess/normal rainfall; 28 received
deficient/scanty and one sub-division received no rainfall. Lower rainfall has resulted in acreage
declines for rapeseed and sunflower. As of January 27, 2012, rapeseed acreage declined 10.5% to
6.54 mha primarily because of declines in Rajasthan. Acreage in Rajasthanthe largest rapeseed
producing statedeclined because of dry weather conditions that prevailed during the start of
the planting season in October. Lower acreage and yields could result in Indias rapeseed output
declining 8.3% during 2011-12 to 7.5 mt. Since rapeseed accounts for 75-80% of rabi oilseeds
output, overall rabi oilseeds output could decline 7.8% to 9.73 mt in 2011-12. As per second
advance estimates released by the Ministry of Agriculture on February 3, 2012; lower output
during both kharif and rabi seasons could result in Indias oilseeds output declining 6% in OY2012
to 30.53 mt. Except for a 1 mt increase in castorseed output, output for all other crops is
expected to decline, with declines of 1.33 mt for groundnut, 0.68 mt for rapeseed, and 0.66 mt
for soyabean.
Area Sown under Rabi Oilseed Crops
Up to January 27
Rabi
Groundnut
Rapeseed
Safflower
Sunflower
Sesamum
Linseed
Others
Total
Acreage
(thousand hectares)
Normal Area
2010-11
910
660
6,356
7,306
329
238
1,187
503
252
60
418
486
0
60
9,452
9,313
Change
2011-12
700
6,542
191
412
69
418
103
8,435
6.1%
-10.5%
-19.7%
-18.1%
15.0%
-14.0%
71.7%
-9.4%
Soyab ean
Soyabean is the dominant oilseed produced in the world, because of its favourable agronomic
characteristics, its high-quality protein, and its valuable edible oil. It contributed about 56% of all
oilseeds produced worldwide in OY2012. The US ranks first in soyabean production (83.2 mt in
OY2012), followed by Brazil, Argentina, China, and India. The production of soyabean and
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20
Industry Comment
soyabean oil is driven by the need for soy protein meal, which is used extensively in commercial
feeds for poultry, swine, and cattle.
Mature soyabeans are oval shaped and their sizes are variety dependent. The seed consists of
three major parts: seed coat or hull, cotyledon, and germ or hypocotyls.
Chemical Composition of Soyabean and its components
dry weight basis
Components
Whole seed
Cotyledon
Hull
Hypocotyl
Yield
100.0
90.3
7.3
2.4
Protein
40.3
42.8
8.8
40.8
Oil
21.0
22.8
1.0
11.4
Ash
4.9
5.0
4.3
4.4
Carbohydrate
33.9
29.4
85.9
43.4
Crude oil recovered by solvent extraction or mechanical pressing contains various classes of
lipids. It consists primarily of neutral lipids, which include tri-, di-, and mono-acylglycerols, free
fatty acids, and polar lipids such as phospholipids. It also contains a minor amount of
unsaponifiable matter that includes phytosterols, tocopherols, and hydrocarbons such as
squalene. Trace metals are found in soybean oil in parts per million (ppm) concentration. When
the oil is refined, concentrations of minor constituents are reduced.
Average composition fo r Cr ude and Refined soyabean oil
Components
Triacylglycerols (%)
Phospholipids (%)
Unsaponifiable matter (%)
Phytosterols
Tocopherols
Hydrocarbons
Free fatty acids (%)
Trace metals (ppm)
Iron
Copper
Crude
9597
1.52.5
1.6
0.33
0.150.21
0.014
0.30.7
Refined
>99
0.0030.045
0.3
0.13
0.110.18
0.01
<0.05
13
0.030.05
0.10.3
0.020.06
In India, soyabean is predominantly grown in the states of MP, Maharashtra and Rajasthan. It is
grown as a kharif crop. The ideal sowing window is early to mid-June and typically commences
with the arrival of the monsoon. Some farmers are able to provide supplemental irrigation,
though this practice is limited by water reserves and equipment. During the period OY2002-11,
soyabean has accounted for 48% of kharif oilseeds acreage, and 54% of kharif oilseeds
production. Since soyabean is cultivated as a rain fed crop, yields are highly variable. Around 60
mm of rainfall during growing season is estimated to be enough for the crop. Water is often the
primary limiting factor in soyabean production. Except in critical periods such as germination,
flowering and pod formation, soyabean is generally considered to be tolerant to shortages of
moisture. However, moisture stress during vegetative growth may be highly detrimental to
yields. Higher and more stable yields are possible through assured minimum irrigation and
drought resistance brought about by genetic improvement. Weeds and pests also contribute to
yield losses. The crop has exhibited a vast potential as kharif crop mainly in Central India (MP and
Maharashtra), and is extending its coverage in the Southern parts of the country. However,
soyabean as a rain fed kharif crop has significant potential in all the agronomic zones of India.
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21
Industry Comment
Long Term Trends in Indias Soyabean Oilseed Production

OY
14
70%
Production-mt (LS)
Share of Kharif (RS)
12
60%
Share of Total (RS)

10
50%
40%
30%
20%
10%
0%
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
Soyabean production increased sharply from the mid-1980s in MP because of the development
of irrigation facilities, higher cash return from soyabean agriculture, concurrent establishment of
soyabean oil extraction plants in Central India and the availability of fallow land during the rainy
season. Since the 1990s, soyabean acreage and production also increased substantially in
Maharashtra replacing rainy season sorghum and pearl millet.
Recovery of oil from seed is about 18% and that of soya meal is about 82%. There has been a
rapid growth in soyabean cultivation over the last two decades, attributed to the concurrent
development of the soya-oil/meal industry, which provided remunerative market to the growers.
Since the domestic consumption of soya meal is limited most of it is exported in the form of
deoiled cake.
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22
Industry Comment
State-wise Are a, Production, and Yield of Soyabean

Area: thousand ha; Production: thousand tonnes; Yield: kg/ha
OY
2006
2007
2008
Area
7,708
8,329
8,882
AP
98
103
88
Karnataka
133
131
113
MP
4,255
4,757
5,024
Maharashtra
2,347
2,521
2,664
Rajasthan
744
641
798
UP
4
8
5
Others
126
168
190
Production
8,274
8,851
10,968
AP
191
156
173
Karnataka
71
94
97
MP
4,501
4,785
5,481
Maharashtra
2,527
2,892
3,976
Rajasthan
856
771
1,071
UP
3
7
3
Others
124
146
167
Yield
1,073
1,063
1,235
AP
1,949
1,515
1,966
Karnataka
534
718
858
MP
1,058
1,006
1,091
Maharashtra
1,077
1,147
1,492
Rajasthan
1,150
1,203
1,343
UP
769
875
667
Others
988
867
881
2009
9,511
142
134
5,124
3,063
830
0
218
9,905
194
91
5,850
2,757
806
2010
9,735
156
184
5,350
3,019
778
Growth
2010
2006-10
2.4%
5.2%
9.9%
15.2%
37.3%
3.0%
4.4%
3.6%
-1.4%
7.5%
-6.2%
4.6%
248
9,965
129
82
6,406
2,197
915
13.5%
0.6%
-33.5%
-9.9%
9.5%
-20.3%
13.5%
15.7%
7.7%
1.4%
-3.1%
11.3%
3.0%
0.6%
208
1,041
1,366
679
1,142
900
971
236
1,024
827
446
1,198
728
1,175
13.2%
-1.7%
-39.5%
-34.4%
4.9%
-19.1%
21.0%
12.4%
2.4%
-12.0%
-5.9%
7.5%
-4.2%
-3.8%
954
951
-0.3%
-2.9%
R apesee d/ Mustard
In the past three decades, production of rapeseed oil has become third only to palm and
soyabean as a source of vegetable oil. Rapeseed and canola oil is now held by some to be the
best nutritional edible oil available. Early rapeseed cultivars had high levels of erucic acid in the
oil and high levels of glucosinolates in the meal. The presence of these components was
considered to be a health concern. The high levels of erucic acid were blamed for producing fatty
deposits in the heart, skeletal muscles, and adrenals of rodents as well as impairing growth.
Plant-breeding programmes were initiated in Canada, and in 1959 a rapeseed line (Liho)
containing low levels of erucic acid was identified. The name `canola was registered by the
Western Canadian Oilseed Crushers in 1978 and subsequently transferred to the Canola Council
of Canada in 1980. The name included cultivars containing less than 5% erucic acid in the oil and
less than 3 mg/g aliphatic glucosinolates in the meal.
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23
Industry Comment
Average composition fo r Rapeseed and Canola Oil

Components
Triacylglycerols (%)
Phospholipids (%)
Crude oil
Water degummed
Acid degummed
Free fatty acids (%)
Unsaponifiables (%)
Tocopherols (ppm)
Chlorophylls (ppm)
Sulphur (ppm)
Rapeseed
91.899.0
Canola
94.499.1
Upto 3.5
Upto 0.8
0.51.8
0.51.2
7001,000
555
535
Upto 2.5
Upto 0.6
Upto 0.1
0.41.2
0.51.2
7001,200
550
325
India is the third largest rapeseed/mustard seed producer in the world, accounting for around
11.3% of world production during OY2008-12. Due to their similar genetic make-up, rapeseed and
mustard seed share the same growing areas throughout India. It accounts for around 66% of
Indias rabi oilseed acreage, and 69% of rabi oilseed crop. Rapeseed/mustard oil content typically
varies between 36 and 42%; of this oil recovery is approximately 34 to 35%. Once the oil is
extracted, the remaining part of the seed is used to produce rapeseed/mustard meal, an
important source of cattle and poultry feed. This represents a significant source of oil meal in the
country.
Long Term Trends in Indias Rapeseed Oilseed Production
OY
Production-mt (LS)
Share of Rabi (RS)
Share of Total (RS)
9
8
90%
80%
70%
60%
50%
40%
30%
20%
3
10%
0%
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
Rapeseed grown in the rabi season is primarily in Rajasthan, UP, MP, and Haryana. Yield
improvements have taken place in all the major states although Haryana shows the maximum
growth in yields in the last two decades. However, variability in yields is also higher for this state.
Indias rapeseed acreage, production, and yield experienced significant growth from 1986 to the
mid-1990s, primarily because of the increase in irrigated land and the availability of high yielding
seeds in the country. However, this trend was partly reversed till 2003-04 due to intermittent
famine conditions in some of the major production states, such as Rajasthan.
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24
Industry Comment
State-wise Area, Production, and Yield of Rapeseed

OY
2006
2007
2008
Area
7,277
6,790
5,826
Assam
213
238
235
Gujarat
338
361
337
Haryana
709
597
499
MP
809
694
579
Rajasthan
3,665
3,212
2,496
UP
790
827
862
WB
422
422
408
Others
331
439
410
Production
8,131
7,438
5,834
Assam
97
116
123
Gujarat
456
504
551
Haryana
792
802
598
MP
848
693
537
Rajasthan
4,417
3,806
2,362
UP
908
874
997
WB
383
339
362
Others
231
304
304
Yield
1,117
1,095
1,001
Assam
456
487
523
Gujarat
1,349
1,396
1,635
Haryana
1,117
1,343
1,198
MP
1,047
999
927
Rajasthan
1,205
1,185
946
UP
1,149
1,057
1,157
WB
909
803
887
Others
699
692
741
2009
6,298
226
294
515
713
2,838
884
413
416
7,201
123
334
895
737
3,503
992
315
303
1,143
543
1,136
1,738
1,034
1,234
1,123
764
726
2010
5,588
245
216
513
791
2,310
613
410
490
6,608
129
341
849
849
2,948
682
443
367
1,183
525
1,579
1,655
1,074
1,276
1,113
1,080
749
Growth
2010
2006-10
-11.3%
-5.2%
8.2%
0.0%
-26.5%
-5.8%
-0.4%
-6.1%
10.9%
3.0%
-18.6%
-8.9%
-30.6%
-5.6%
-0.5%
-2.1%
17.8%
2.2%
-8.2%
-2.7%
4.6%
-0.1%
2.1%
-3.4%
-5.1%
0.6%
15.2%
4.7%
-15.8%
-5.8%
-31.2%
-3.2%
40.5%
0.7%
21.5%
0.4%
3.4%
2.6%
-3.3%
-0.1%
39.0%
2.6%
-4.8%
7.1%
3.9%
1.7%
3.4%
3.4%
-0.9%
2.6%
41.3%
2.9%
3.1%
-1.8%
G roundnut/ Pe anu t
Groundnut oil is expressed from the seed of Arachis hypogaea L., commonly known as
groundnut, peanut, or earth nut because the seeds develop underground. Groundnuts are
produced on a significant basis in more than 30 countries, with worldwide production figures
estimated to be around 35.4 mt during 2010-11. The plant itself is a legume native to South
America and was probably cultivated as early as 20003000 BC.
World production of groundnuts is about 8% of the world production of oilseeds during OY200812. However, because of the limited extraction of groundnuts, the annual production of
groundnut oil is only about 3.5% of the world vegetable oil total. Uses in various countries differ
greatly, but overall more than 50% of all groundnuts produced are crushed for oil. While around
80-82% of the groundnut crop in India is crushed for oil due to high demand (followed by 12% as
seed and 6% for feed), the proportion is only 10-12% in the US. This low percentage is indicative
of the economic importance of the nuts themselves as a food crop in the US. Due to the high
content of digestible protein and unsaturated oil and the exceptional roasted nutty flavour,
groundnuts have substantial value as a nutritious and flavourful food commodity. More than one
www.imacs.in
25
Industry Comment
third of the groundnuts produced are used as food in the form of intact nuts on a worldwide
basis.
Throughout the world, frying and cooking constitute by far the greatest use of peanut oil. It is
especially suitable for deep-fat frying due to its high smoke point of 229C. This high temperature
allows food to cook quickly with a crisp coating and little oil absorption. Off flavour and odour
development are very limited during frying with groundnut oil. However, degradation of
triacylglycerols occurring during frying results in an increase of free fatty acids (FFA) and a
decrease in smoke point. Crude groundnut oil has a nut-like odour but after refining the oil
becomes odourless. This makes it useful in the preparation of shortenings, margarines, and
mayonnaise. Groundnut oil is the main ingredient in vanaspati, a hydrogenated product make in
India that resembles natural butter and ghee in appearance. It is used as a vegetable ghee
substitute.
Although a range of 3656% has been reported for oil content, groundnuts commonly contain
4050% oil. Oil content is commonly considered to be about 4850% and is generally
independent of market type or growth habit. The triacylglycerol content of the oil is generally
95%, with some differences among varieties. Maturation of the seed results in increases in total
oil, triacylglycerol, and ratio of oleic acid to linoleic acid (O/L), while free fatty acids, polar lipids,
monoacylglycerols, and diacylglycerols decrease.
Composition of Groundnut Oil
Maturity Stage
5
6
7
8
9
10
11
12
Oil
Triacylglycerol
(dry weight)
25.3
85.3
30.8
89.3
34.4
88.3
42.8
90.8
45.6
92.6
46.7
94.3
48.4
94.8
48.2
95.8
FFA
4.5
3.1
2.5
1.8
1.3
0.9
0.7
0.7
Diacylglycerol
4.7
3.5
3.6
3.0
2.2
2.0
1.9
1.7
Polarlipids
2.0
1.4
1.9
1.6
1.3
1.0
0.7
0.6
In India, around 85% of groundnut in the country is cultivated during the kharif season. The
production levels in India appear to have been influenced by the fluctuations in the yield level
rather than in area. Groundnut cultivation is highly concentrated in a few districts of the country.
Although the cultivation of the crop is spread across 273 districts in India, around 13 districts
contribute up to 50% of the total area. Another 43 districts contribute 35% of the area under the
crop.
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26
Industry Comment
Long Term Trends in Indias Groundnut Oilseed Production

OY
11
10
Production-mt (LS)
Share of Kharif (RS)
Share of Rabi (RS)
Share of Total (RS)
80%
70%
9
60%
8
50%
7
6
40%
30%
4
20%
3
10%
2
1
0%
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
In India, about 75% of the groundnut acreage lies in a low to moderate rainfall zone (parts of
peninsular region and western and central regions) with a short period of distribution (90-120
days). Groundnut is primarily grown in the three southern states of AP, TN, and Karnataka; and
the western state of Gujarat. About 75% of the crop during OY2006-10 was kharif (planted during
May-July and harvested in September-mid December). In the rabi (winter) season, planting is
during mid-September to November and harvesting takes place during March and April. Crop
failures occur periodically due to inadequate or excessive rain or unfavourable rainfall
distribution. Indias groundnut production has declined primarily because of a shift in acreage to
other non-oilseed crops in AP and Gujarat. Although India is a world leader in groundnut acreage,
productivity has remained low and declined. As groundnut is grown mainly as rainfed crop there
is high a level of fluctuation in the production depending on the rainfall. The productivity is
restrained by soil moisture deficit or drought stress, the use of low levels of inputs by
smallholders and marginal farmers in dryland areas, high incidence of foliar fungal diseases, and
attack by insect pests Groundnut has high oil recovery (40%). Around 40-50% of the output is
used in oil production with the rest being used as seed and feed.
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27
Industry Comment
State-wise Area, Production, and Yield of Groundnut

OY
2006
2007
2008
Area
6,736
5,615
6,290
AP
1,876
1,334
1,800
Gujarat
1,954
1,773
1,860
Karnataka
1,040
763
910
MP
208
204
200
Maharashtra
428
449
400
Rajasthan
317
302
280
TN
619
508
540
Others
294
282
300
Production
7,993
4,864
9,180
AP
1,366
743
2,600
Gujarat
3,389
1,435
3,300
Karnataka
671
379
730
MP
234
193
190
Maharashtra
410
399
470
Rajasthan
491
396
480
TN
1,098
1,007
1,050
Others
334
312
360
Yield
1,187
866
1,459
AP
728
557
1,444
Gujarat
1,734
809
1,774
Karnataka
645
497
802
MP
1,126
948
950
Maharashtra
958
889
1,175
Rajasthan
1,549
1,310
1,714
TN
1,775
1,981
1,944
Others
1,135
1,106
1,200
2009
6,165
1,766
1,907
850
200
318
322
490
312
7,168
1,554
2,661
501
228
355
537
975
358
1,163
880
1,395
589
1,140
1,116
1,670
1,989
1,147
2010
5,478
1,301
1,822
818
188
321
326
413
289
5,429
1,006
1,757
512
218
359
355
890
332
991
773
964
626
1,158
1,118
1,087
2,156
1,151
Growth
2010
2006-10
-11.2%
-3.8%
-26.3%
-6.7%
-4.5%
-1.9%
-3.8%
-3.3%
-5.8%
-2.1%
0.9%
-6.4%
1.4%
2.5%
-15.8%
-7.7%
-7.6%
1.4%
-24.3%
-4.3%
-35.3%
-9.3%
-34.0%
-1.4%
2.2%
-7.2%
-4.3%
-2.1%
1.1%
-6.5%
-34.0%
-4.5%
-8.7%
-2.4%
-7.2%
1.4%
-14.8%
-0.6%
-12.1%
-2.8%
-30.9%
0.4%
6.2%
-4.0%
1.6%
0.0%
0.2%
-0.1%
-34.9%
-6.9%
8.4%
5.7%
0.4%
0.0%
The value of output from oilseeds was estimated at Rs. 640 billion in FY2010, accounting for 7.5%
of aggregate value of agricultural output. The share of oilseeds increased substantially from the
mid-1980s to a 13% in FY1991. It thereafter declined marginally to around 11% during the mid1990s. Since then, the share of oilseeds has declined to around 7.5% during FY2010. The decline
has been primarily because of low growth in oilseeds production during the period from FY2006
to FY2010.
www.imacs.in
28
Industry Comment
Long Term Trends in Indias Oilseed Production

FY, Rs. Billion
Value (Rs. Billion, current prices)-LS
Share of Agriculture Output (current prices)-RS
Share of Agriculture Output (constant prices)-RS
800
14%
700
12%
600
10%
500
8%
400
6%
300
4%
200
2%
100
0
0%
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
The value of output from oilseeds had remained in a narrow range till FY2003 before increasing
significantly. Output declined in FY20009-10 primarily because of lower production accompanied
by higher level of prices.
Value of Output from Oilseeds
Rs. Billion
(current prices)
2007
2008
2009
FY
Linseed
2006
2.99
3.32
3.69
Sesamum
17.18
18.55
Groundnut
132.11
Rapeseed/Mustard
Castor
Coconut
Nigerseed
Safflower
Sunflower
Soyabean
Growth
2010
2001-05
2006-10
4.07
3.40
-2.8%
2.1%
26.23
26.58
38.36
14.7%
15.8%
132.41
213.70
174.53
137.56
10.8%
4.3%
131.84
130.74
136.26
163.22
140.16
11.9%
3.1%
13.83
16.74
25.12
26.95
23.86
0.9%
12.6%
68.83
65.39
63.60
74.69
63.81
6.8%
-2.3%
1.88
1.98
2.80
2.70
1.72
-1.5%
-2.9%
3.08
3.47
4.77
3.71
3.40
-0.3%
5.1%
22.63
21.95
34.15
24.99
18.51
17.1%
-0.5%
111.77
119.31
181.48
191.15
211.04
10.1%
17.1%
Others
1.35
1.82
1.78
2.06
1.91
19.0%
-5.2%
Total
507.47
515.68
693.58
694.65
643.74
10.0%
6.9%
9.7%
8.8%
10.2%
9.1%
7.5%
Share of
Agriculture Output
Source: National Accounts
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29
Industry Comment
Quarter ly ( Yoy) Growth in Prices for Major Oilseeds

50%
All Oilseeds
Groundnut Seed
Rape & Mustard Seed
Soyabean
40%
30%
20%
10%
0%
Q1FY06
Q4FY06
Q3FY07
Q2FY08
Q1FY09
Q4FY09
Q3FY10
Q2FY11
Q1FY12
-10%
-20%
-30%
Oilseed crops account for 15-16% of the gross cropped area in India. Their area, production and
productivity (yield) in India had registered steady increases since the inception of TMOP in April
1986 and reached a peak in FY1999, before declining sharply till FY2003, with sharp increase
thereafter. Nevertheless, area, production and yield of oilseeds in India have fluctuated because
of several biotic and abiotic stresses affecting the crops. Another important factor contributing to
insufficient domestic production/productivity of oilseeds has been the small proportion of area
under irrigation, which has declined from 26.3% in FY1997 to 24.5% in FY20043, but increased to
27% in FY2009.
The correlation coefficient between rainfall and production for major crops is estimated at: rice (0.26), wheat (0.27),
coarse cereals (0.37), pulses (0.61), oilseeds (0.34), sugarcane (0.21), and cotton (0.16).
www.imacs.in
30
Industry Comment
Trends in Indias Oilseeds Acreage under Irrigation

OY
80%
All Oilseeds
Groundnut
70%
Rapeseed
60%
50%
40%
30%
20%
10%
0%
1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008
Rain fed agriculture is practiced on 80% of the worlds agricultural land area, and generates about
70% of the worlds staple foods, including most of the food in poor communities in developing
and least-favoured areas. India ranks first among the countries that practice rain fed agriculture
both in terms of extent (86 mha) and value of production. In India, rain fed agriculture is
practiced under a variety of soil type, agro-climatic and rainfall conditions ranging from 400 mm
to 1,600 mm per annum. Rainfall is a random input and its variation and intensity are high in
areas of low rainfall. Estimates indicate that a decrease of one standard deviation from the mean
annual rainfall often leads to a complete loss of the crop. Dry spells (or monsoonal breaks), which
generally involve 24 weeks of no rainfall during critical crop growth stages, causing partial or
complete crop failures, often occur every cropping season. At present, an estimated 60% of the
142.2 mha net cultivated area is rain fed, which contributes to 44% of total food grain
production. Most of Indias coarse cereals (91%), pulses (91%), oilseeds (80%) and cotton (65%)
are produced in rain fed areas. Small areas of almost all rain fed crops are scattered in most of
the districts, except for a few crops such as soyabean and linseed that have specific agro-climatic
requirements. Recent detailed district and agro-ecoregional level studies comprising the 604
districts of India indicate that rain fed rapeseed is cultivated in 265 districts, compared with 316
for groundnut, 202 for soyabean, and 224 for sunflower. Supplementary irrigation techniques can
result in potential gains in rain fed crop yields. Production enhancement in the drought season in
case of soyabean and groundnut crop is especially high due to concentration of crop-growing
area in high rainfall zones.
Indias oilseed sector is also plagued by a number of structural and policy issues, which are
discussed below:
Favour abl e Su pp ort Pri ces for C ompeti ng C rops
Indias domestic price support programme, which has often favoured production of crops that
compete for area with oilseeds, had led to stagnation and even decline in the area sown under
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31
Industry Comment
oilseeds. Minimum Support Prices (MSP) levels for grains had been raised more for other crops
than for oilseeds since the mid-1990s. This differential has been corrected with sharp increases in
MSP for oilseeds during FY2009. However, MSP for paddy has also increased at a high (albeit
lower) rate during FY2009. For 2009-10, while MSP for oilseeds has remained unchanged, MSP
for paddy was increased by 11.8%. Because of the substantial decline in domestic oilseeds
production during OY2010, MSP for all oilseeds for OY2011 were increased in the range of 3.6%
(soyabean yellow) to 9.5% (groundnut). MSP for paddy has also been increased by 5.3% for the
2010-11 season. During 2011-12, although MSPs for oilseeds were increased in the range of
17.4% (groundnut and soyabean-yellow) to 35.1% (rapeseed), oilseeds production is expected to
decline. By comparison, MSP for paddy and wheat were increased 8% and 14.7%, respectively.
Increase in MSP for Select Cr ops
2000-01=100
Paddy Common
Groundnut(in shell)
RapeSeed / Mustard
250
Wheat
Soyabean Black
200
150
100
50
0
1990
1992
Compiled by IMaCS
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
Price intervention in agriculture in the form of MSP and Central Issue Prices (CIP) under the Public
Distribution System (PDS) has been made with the objective of providing remunerative prices to
producers and food security to the poor. Restrictions on movement of various agricultural
commodities under the Essential Commodities Act (ECA), 1955, have indirectly controlled the
prices of these commodities, forcing the farmers to depend on the procurement mechanism for
market clearance. These controls on agriculture seem to have biased the cropping patterns in
favour of certain crops like rice, wheat, and cotton.
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32
Industry Comment
Growth in Acreage
Percent per annum
5%
3.8%
4%
Rice
Wheat
Oilseeds
Cotton
3%
2.5%
1.7%
2%
1%
0.6%
0%
1985-90
1990-2000
2001-11
-1%
2000-05
2006-11
-0.4%
-2%
Compiled by IMaCS
The MSP mechanism has helped to maintain the prices of rice and wheat at a high level making
the cultivation of these two crops more remunerative than pulses, coarse cereals, and oilseeds.
MSPs announced for rice and wheat have been generally higher than the market prices and the
cost of cultivation. Between 1990-91 and 2003-04, real MSPs of paddy, wheat, coarse cereals,
pulses, oilseeds and cotton have on average increased by about 19, 28, 25, 27, 7 and 19 percent
respectively. Thus, barring oilseeds, all other crops have witnessed significant increases in their
real MSPs. It is noteworthy to compare this increase of real MSP with the increase during the
1990s (1990-91 to 1999-2000), the corresponding escalations were 26, 34, 21, 18, 1 and 27
percent. Thus, the price policy in the recent years has resulted into more harmonious increase in
real prices. Although the government had regularly supported wheat and rice MSPs mainly in
several important cereal-producing states, price support operations for oilseeds have usually not
been funded. As a result, increasingly favourable returns to wheat and rice had drawn area away
from oilseeds, lowering oilseed production from an average of 26 mt annually in 1994-95 to
1996-97 to 23.3 mt in the late-1990s.
In order to induce the farmers to change their cropping pattern in favour of oilseeds and pulses,
the MSP for oilseeds had been substantially increased in FY2004 and FY2005 season. Although
the increase in oilseeds prices was substantial, nevertheless the market prices ruled above the
MSP. The positive market scenario enabled the farmers to receive better prices, inspite of
bumper production. However, lower increase in MSP for oilseeds for FY2006-08 seasons has
resulted in stagnation in oilseeds acreage, with acreage increasing 1.2% in OY2006, declining
4.8% in OY2007, and increasing 0.1% in OY2008. As a result, MSP for oilseeds were increased
substantially for OY2009 season. The percentage increases announced were 1.7% for rapeseed,
32.4% for soyabean (yellow), 35.5% for groundnut (in shell), 46.7% for sunflower seed, 74.1% for
sesamum, and 94% for nigerseed. These compare with increase of 30-32% for paddy, 8% for
wheat, 39-48% for cotton, and 0% for sugarcane. This resulted in a 4.3% increase in acreage for
OY2009 season. However, as noted above, the MSP for oilseeds was not changed for the OY2010
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33
Industry Comment
season. For OY2011-12, MSPs for oilseeds were increased substantially primarily because of
deficient monsoons during the 2009 season, and low carryover stocks. However, MSP for pulses
have increased at a higher rate. Output of Pulses had declined 1.3% in 2008-09, and increased by
0.6% in 2009-10. Although output increased 24.4% in 2010-11, output is forecast to decline 5.3%
during 2011-12.
MSP for Some Oilseeds
Rs. Per quintal (100 kg)
3,400
Groundnut (in shell)
Soyabean (average)
Sunflower Seed
Rapeseed
2,900
2,400
1,900
1,400
900
400
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
Compiled by IMaCS
Low Y i el ds
Oilseed yields in India are well below the world average. For major oilseeds, Indias yields are
around 40-60% of the world average.
IndiaComparison of Yields
Kg/ha
OY
Rapeseed (World)
EU
Canada
China
India
Soyabean (World)
US
Brazil
Argentina
China
India
Groundnut (World)
China
India
US
Compiled by IMaCS
2011
1,813
2,964
1,965
1,777
1,000
2,571
2,922
3,120
2,678
1,772
1,054
1,659
3,453
975
3,711
2012
1,819
2,830
1,896
1,831
1,000
2,434
2,791
2,880
2,581
1,765
1,071
1,713
3,447
1,017
3,714
1988-97
1,352
1,278
1,261
884
1,978
2,332
2,011
2,160
1,525
857
1,219
2,294
970
2,657
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1998-2007
1,578
2,935
1,508
1,584
868
2,320
2,638
2,583
2,672
1,727
895
1,453
2,937
887
3,141
2008-12
1,832
2,993
1,877
1,837
994
2,441
2,832
2,898
2,614
1,677
1,032
1,639
3,388
989
3,712
34
Industry Comment
Long-Term Trends in Oilseed Yields

kg/ha
3,500
1981-90
1991-2000
2001-05
2008-12
Brazil
China
3,000
2,500
2,000
1,500
1,000
500
0
US
Argentina
India
Compiled by IMaCS
In soyabean cultivation, the adoption of genetically modified (GM)/biotech (Bt.) soyabean has
resulted in a sharp increase in yields in some early adopters, especially Argentina. In Argentina,
soyabean yields increased from 1,806 kg/ha in OY1997 to an average of 2,630 kg/ha in 1999-2003
and 2,614 kg/ha in 2008-12. Argentina commercialised GM soyabean in 1996, the first year of
global commercialisation. Biotech herbicide tolerant (HT) soyabeans have facilitated the adoption
of no tillage production systems, shortening the production cycle. This advantage enables many
farmers in South America to plant a crop of soyabeans immediately after a wheat crop in the
same growing season. This second crop, additional to traditional soyabean production, is
estimated to have added 82.8 mt to soyabean production in Argentina and Paraguay between
1996 and 2009. In 2011-12, Argentina planted 22 mha to GM soyabean, accounting for around
97% of total soyabean acreage, and nearly 50% of acreage under various crops. Brazil has also
witnessed a significant increase in acreage of GM soyabean. In 2010-11, GM soyabean is
expected to be planted on 18 mha, representing 82% of total acreage under soyabean. Brazil is
currently the second largest producer of soyabean in the world (after the US). In the US, the
share of hectares planted to GM for three main crops is already nearing saturation levels, with a
GM share of total acreage at 91% for soyabean, 88% for cotton, and 85% for maize. At present, in
Latin America, GM soyabean is planted in nine countries including Argentina, Brazil, Paraguay,
Uruguay, Bolivia, Mexico, Chile, Colombia, and Honduras. Biotech/GM soyabean continues to be
the principal biotech crop in 2011, occupying 75.4 mha or 47% of global biotech area, followed by
biotech maize (51 mha at 32%), biotech cotton (24.7 mha at 15%), and biotech canola (8.2 mha at
5%) of the global biotech crop area.
Canada was the first country to commercially use GM HT canola in 1996. The primary impact in
the early years of adoption was increased yields of almost 11% (e.g., in 2002 this yield increase
was equivalent to an increase in total Canadian canola production of nearly 7%). In addition, a
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35
Industry Comment
small additional price premia was achieved from crushers through supplying cleaner crops (lower
levels of weed impurities). With the development of hybrid varieties using conventional
technology, the yield advantage of GM HT canola relative to conventional alternatives has
however been eroded. At present, GM canola is primarily grown in Canada with smaller acreages
in US and Australia. In Canada, acreage under GM canola was at estimated at 7 mha during 2011,
representing 85% of total acreage under canola. Canola oil accounts for 70% of the vegetable oil
consumed in Canada. However, domestic consumption requires only 25% of Canadian canola
crop, with a substantial percentage exported to US, Japan, Mexico, and China.
In India, Bt. cotton is the only commercially approved biotech crop in India, where a total of six
events have been approved for commercial cultivation. Over the last seven years, use of Bt.
cotton has grown to 92% of the total cotton area under cultivation during 2011-12. Marketing of
biotech crops in India is currently confined to Bt. cotton. There are no restrictions in marketing
domestically produced biotech cottonseed oil and meal. Refined soyabean oil derived from
Round-up Ready soyabean (Monsantos Roundup Ready soya that has been genetically modified
to be resistant to the Roundup herbicide) is the only biotech food/agricultural product currently
approved for import.
Yields in India have tended to be stagnant and have also declined because of two reasons. First,
as the country has prioritised wheat and rice production, agricultural research and infrastructure
investment have been focused on these crops and on regions where land and water resources
have been most conducive to their production because of which there is a lack of high-yielding
oilseed varieties suited to local growing conditions. For example, groundnut was till recently the
leading oilseeds crop in India. However, the crop is facing low and stagnant yield. Although India
is the second largest producer of groundnut in the world, yields are significantly lower than world
average. There has been virtually no breakthrough in seed technology. Secondly, most oilseeds
are grown by small-scale, limited-resource farmers in areas that are dependent on erratic
monsoon rainfall. Irrigation is relatively uncommon in Indias oil seed producing regions because
of which production tends to be exposed to vagaries of nature. Faced with considerable weatherrelated risk, oilseed producers invest little in improved seeds, fertiliser, and pesticides. Oilseed
farmers also face considerable price risk because the MSP set for oilseeds are typically either too
low to influence market prices or are not adequately defended by Government purchases.
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36
Industry Comment
IndiaYields for Some Oilseeds

OY, kg per ha
1,600
Nine Major Oilseeds

Soyabean
Groundnut
Rapeseed Mustard
1,400
1,200
1,000
800
600
400
200
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 1986- 1999- 200595 2004 11
The wide differences in yields across regions indicate scope for further increasing their yield
levels. Available information indicates that 200 varieties/hybrids of various oilseeds suitable for
diverse agroclimatic situations and environment have been developed and could result in a 2050% improvement in yields. However, due to various production and marketing risks, farmers
appear to be reluctant or slow to adopting the improved technology because of the high
investment requirement in terms of fertilisers, pesticides, other inputs and more so because
oilseeds cultivation is concentrated in high risk regions where returns on investment are
uncertain. Furthermore, shortages of certified quality seeds due to constraints in large scale
multiplication, high cost of oilseeds due to high overheads and the low priority given to oilseeds
research and development in the country are some of the reasons for the low adoption rates of
improved technology.
Risks in production and marketing of oilseeds are relatively high as compared to other
commodities and have acted as a constraint for rapid expansion of oilseeds production in India.
Though irrigation is known for its yield enhancing effect, coverage of irrigation for oilseeds in
general and kharif oilseeds in particular is low compared with other crops like wheat, rice,
sugarcane etc. Yields of oilseeds under irrigated condition are 2-3 higher as compared with rain
fed conditions. Furthermore, oilseeds require less water than other crops like rice. In fact, water
required to irrigate one acre of area under paddy is sufficient for about four acres of area under
groundnut.
Markets-related risks are also quite high for oilseeds in India. Due to a short harvest period and
lack of storage facilities, farmers flood the markets with seeds just after harvesting. In addition,
farmers are frequently pressured into rushing their product to market by the need to repay
moneylenders for old debts. In addition, the heavy presence of speculators and stock hoarders in
the market and the presence of a large unorganised crushing sector drive price volatility and
cause uncertainties in price realisations. Dominance of private traders and intensive speculative
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37
Industry Comment
activities in trading of oilseeds is a conspicuous feature of Indias oilseeds economy. Though there
have been a secular rise in oilseed/oil prices, they are also subject to wide seasonal fluctuations.
The benefit of price rise goes more to the trader than the grower. Due to low retention
capability, growers are forced to scale their produce immediately after harvest causing prices to
depress and such situation is further aggravated by intensive speculative and trading activities by
a few players in the oil markets.
E d ib le O i l P r o d u c t io n
The fluctuating production of oilseeds has a direct impact on the edible oil sector, with imports
and prices increasing in periods of low domestic production of oilseeds and edible oils. India is
estimated to account for around 5% of the worlds production of edible oils, but 11.3% of
consumption. Edible oil production in India, as well as that world-over, fluctuates with oilseed
production and availability.
Indias Share of Wor ld Vegetable Oil Production, Consumption and Imports
OY
18%
1981-85
2001-05
1986-90
2003-07
1991-95
2008-12
1996-2000
16%
14%
12%
10%
8%
6%
4%
2%
0%
Production
Consumption
Imports
Because of a significant increase in oilseeds production during 1986-1999, Indias vegetable oils
production/availability from domestic sources increased significantly from 2.9 mt in 1985-86 to
8.13 mt in 1996-97. Subsequently, availability from domestic sources declined sharply to 5.49 mt
in 2002-03, with the demand gap being met by higher imports.
After a 21% decline in domestic vegetable oil production during OY2003, Indias production
increased 47% during OY2004 to 8.1 mt. Because of a decline in oilseeds production during
OY2005, edible oil production increased 0.5% in OY2005. Record oilseeds production during
OY2006 resulted in a 13% increase in production to 9.1 mt in OY2006, thereby reducing imports.
The increase was mainly because of increased groundnut and rapeseed production. During
OY2007, rapeseed acreage and production declined sharply, resulting in an 11% decline in
domestic production to 8.2 mt. During OY2008, Indias edible oil production increased 16% to
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38
Industry Comment
around 9.5 mt. However, production declined 3.2% in OY2009 to 9.2 mt primarily because of a
6.9% decline in oilseeds production. Production declined for a second successive year at 8.3% in
OY2010 to 8.4 mt, primarily because of lower production of rapeseed and groundnut oil.
Production is estimated to have increased 9.5% in OY2011 to 9.2 mt mainly because of higher
output for all major oils.
Estimated Domestic Production of Vegetable Oils in India
Thousand tonnes
Production
(thousand tonnes)
2007
2008
2009
2010
1,119
2,112
1,648
1,249
2,305
1,808
2,232
2,048
1,416
1,755
1,585
1,594
405
483
382
281
192
235
198
182
36
33
35
30
72
68
57
54
305
421
468
404
50
49
51
46
450
450
450
450
630
800
760
800
700
720
770
720
OY
2006
Groundnut
1,838
Rapeseed/Mustard
2,521
Soyabean
1,324
Sunflower
475
Sesamum
199
Nigerseed
32
Safflower
69
Castor
396
Linseed
52
Coconut
420
Cottonseed
570
Ricebran
680
Solvent Extracted
Oils
430
350
400
Tree & Forest Origin
130
120
120
Total
9,136 8,150 9,454
Source: Solvent Extractors Association of India (SEA)
400
120
9,156
420
120
8,398
Growth
2011
1,567
2,302
1,675
230
258
33
61
466
42
400
900
720
2010
-24.2%
-8.2%
0.6%
-26.4%
-8.1%
-14.3%
-5.3%
-13.7%
-9.8%
0.0%
5.3%
-6.5%
2011
25.5%
12.4%
5.1%
-18.1%
41.8%
10.0%
13.0%
15.3%
-8.7%
-11.1%
12.5%
0.0%
2009-11
-9.5%
8.4%
-1.5%
-21.9%
3.2%
0.0%
-3.6%
3.4%
-5.0%
-3.9%
4.0%
0.0%
420
120
9,194
5.0%
0.0%
-8.3%
0.0%
0.0%
9.5%
1.6%
0.0%
-0.9%
Although palm oil constitutes 45-50% of Indias edible oil consumption and is the single largest
import of oil by India, its production in India is very low at around 106,000 tonnes.
The oil palm originated from South Africa. It was introduced to East Asia as an ornamental plant
in the Bogor Botanical Garden in Java, Indonesia in 1848. This is the main cultivated oil palm
material grown in the largest palm oil producing countriesMalaysia and Indonesia. The oil palm
is the most efficient oil- producing plant, with about 3.63.7 t/ha per annum of palm oil and an
additional of 0.42 t/ha of palm kernel oil. The yields could be increased further with improved
estate and plantation management as well as high- yielding palms. The palm bears fruit that can
be harvested in the second to third year of planting in the field, and continues for about 25 to 30
years. Two types of oil are obtained from the oil palm fruit: palm oil from the mesocarp and palm
kernel oil from the kernel inside the nut. Fruit bunches are harvested regularly throughout the
year, following harvesting standards set by the plantations. Bunches are then transported to the
palm oil mills where crude oil and palm kernels are produced by mechanical and physical
extraction processes. Oil quality is maintained by careful harvesting of fruits at the optimum
stage of ripeness, minimal handling of fruits during transportation, and proper processing
conditions during oil extraction. Palm oil, semi- solid at ambient temperature (2530C), may be
fractionated into a liquid fraction (olein) and a solid fraction (stearin). The olein contains higher
levels of oleic (3945%) and linoleic (1013%) acids compared to palm oil. Palm olein is much
utilised as a cooking oil in homes and in industrial outlets. Palm oil and its fractions are accepted
www.imacs.in
39
Industry Comment
as frying oils for food products such as snack chips, crackers, cookies, pastries, doughnuts, fries
and instant noodles. Frying, being a thermal process carried out in air, generally results in a rapid
deterioration of the oil. The oxidative stability of palm oil, olein and stearin is a major advantage
of these oils. Palm olein has the longest induction period: 44 hours at 100 C4. Blending less stable
vegetable oils with palm olein improves their stability and induction periods. The improvements
are seen in the reduced levels of primary and secondary oxidation products, fatty acids, volatiles
and polymers. The cloud points of palm olein with unsaturated oil blends are also improved.
Induction P eriod and Cloud Point of Oils and Blends
OY
Refined palm oil
Refined palm olein
Refined palm stearin
Groundnut
Groundnut/palm olein
Rapeseed
Rapeseed/palm olein
Sesame
Sesame/palm olein
Soyabean
Soyabean/palm olein
Sunflowerseed
Sunflowerseed/palm olein
Cottonseed
Cottonseed/palm olein
Olive
Olive/palm olein
Induction Period at
100C (hrs)
51.7
44.0
55.8
15.0
21.0
11.5
16.0
8.0
7.0
16.0
19.0
6
7
11.1
11.8
Cloud Point (C)
9.6
1.9
2.0
5.0
0.0
0.3
9.0
2.2
9.5
2.3
3.0
5.0
10.0
10.0
There are a number of factors which explain the remarkable expansion of palm oil production
and its higher share in consumption during the past few decades:
Palm oil yields measured in terms of oil produced per ha per annum by far exceed those of
other vegetable oils.
Palm oil production costs are low when compared with other oilcrops. In fact, palm oil has
the lowest per unit production costs, followed by soya oil, sunflower oil, coconut oil and
finally rapeseed oil, which has the highest production costs. Lower labour costs in the major
palm oil producing countries (Indonesia and Malaysia) weigh strongly on palm oils overall
production costs.
The oil palm industry seems to have benefited from a favourable economic environment and
policy setting; in the two main producing countries, government presence tends to be
relatively strong and, from the beginning, the industry has enjoyed (and continues to do so)
indirect and direct protection in various forms; furthermore, the industry has been successful
in attracting domestic and foreign investors.
All fats and oils are prone to oxidation. The rapidity of oxidation depends on the degree of unsaturation, the presence
of antioxidants, and prior storage conditions. The rate of oxidation is slow until any resistance to oxidation is overcome.
This time is known as the oxidation induction period. After this induction period, the rate of oxidation increases
dramatically.
www.imacs.in
40
Industry Comment
The high level of concentration in supply (only two main producing countries and a limited
number of big players in each country) has facilitated the control and continuous
advancement and modernization of production, trade, technological development, etc.
In the Indian subcontinent and Middle-East countries, vanaspati is usually made from palm oil.
Vansaspati is often used as a substitute of ghee made from butter fat. The texture of the product
varies with different consumers. In India and Pakistan, graininess is a required criterion. Pakistani
consumers prefer grainy crystals among liquid oil, unlike the Indian counterparts who prefer their
vanaspati to be grainy, yet dry and crumbly.
Over the last three decades, oil palm development has significantly resulted in higher world
oilseed production because of higher oil yield of 4-6 t/ha, as compared with world average of 2.5
t/ha for soyabean, 1.8 t/ha for rapeseed, and 1.6 t/ha for groundnut. In India, an expert
committee appointed by the GoI had recommended that oil palm could be cost-effectively
cultivated in 0.8 mha of irrigated land in AP, Karnataka, TN, Maharashtra and Kerala. A
comprehensive Oil Palm Development Scheme (OPDS) was introduced in 1991. As of 2010-11,
only 17,925 ha had been planted, primarily in the Southern states of AP, Karnataka, and TN. The
programme has been afflicted by a number of factors including cheap imports of palm oil under
reduced import duty regime, low and unviable support prices for produce, delayed development
of irrigation, and inadequate processing facilities etc. Further, large tracts of palm oil were
uprooted by farmers during the early-2000s. This was in response to a sharp decline in world
palm oil prices from US$644/t in OY1998 to US$241/t in OY2001. During this period, farmers
uprooted the palm oil fruit and switched back to cultivation of seasonal crops, fruits and
vegetables.
Production of Oil Palm Fresh Fruit Bunches
Tonnes
OY
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
AP
Karnataka
TN
Kerala
983
3,855
6,966
11,374
33,763
56,152
125,000
125,000
108,757
109,689
129,841
138,929
203,000
215,000
220,200
259,495
347,892
585,009
237
1,197
2,144
2,665
3,439
3,347
4,589
3,998
3,563
3,677
3,483
4,127
4,528
5,415
5,764
6,685
6,385
7,499
0
0
0
0
13
188
850
2,250
230
434
415
681
1,202
1,584
1,659
1,988
2,080
2,781
14,051
4,820
32,992
32,295
29,940
33,795
34,496
29,330
38,378
35,162
41,058
www.imacs.in
Andaman &
Nicobar
9,347
0
0
0
9,771
6,864
12,971
10,011
9,801
8,957
Others
Total
0
0
28
193
427
820
1,019
1,565
1,703
1,988
2,382
2,465
2,163
2,408
2,056
3,446
5,184
1,998
24,618
5,052
9,138
14,232
47,413
67,371
144,428
142,824
128,873
157,736
168,416
176,142
244,688
258,903
259,008
309,992
396,702
638,345
41
Industry Comment
Palm fruit in its natural form is not saleable unless it undergoes processing to convert it to palm
oil. Further, oil palm fruits are highly perishable and require processing within 24 hours after
harvest. Thus development of nearby processing facilities are necessary. Because of these
constraints, Indias palm oil production has increased at a slow rate and has been inadequate to
meet domestic consumption.
State-wise Production of Crude Palm Oil
Tonnes
OY
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
AP
Karnataka
151
526
862
1,796
3,711
5,298
9,684
15,729
18,974
18,960
21,457
23,905
43,500
35,509
38,000
43,593
57,402
96,468
29
164
348
432
567
536
739
732
574
607
646
681
793
974
1,037
1,203
1,165
1,350
TN
Kerala
954
2
30
82
86
110
178
249
273
366
365
466
3,955
4,261
4,428
3,812
5,159
6,667
980
6,572
6,387
5,793
6,478
6,888
5,732
7,371
6,605
6,681
Andaman &
Nicobar
0
2,314
0
1,426
1,284
1,142
2,314
1,801
1,840
1,696
Others
Total
66
122
180
2,075
2,086
2,030
327
349
379
345
361
394
952
548
1,134
3,004
5,165
7,915
10,058
10,940
18,158
25,289
22,614
28,168
28,817
30,838
51,328
43,965
45,403
52,926
66,488
105,513
DEMAND CHARACTERISTI CS
O v e r v ie w
Indias edible oil consumption is estimated at around 17 mt in OY2011, compared with just over 2
mt annually in the early-1970s. Although consumption has grown uninterrupted over the past
few decades, consumption growth has varied based on availability and prices. The countrys
consumption places India behind only China and the EU in total edible oil consumption. The
growth in consumption of edible oil has been driven by increased population and growing
incomes. Growth has also been driven by government policies relating to oilseeds production,
domestic processing and imports, all of which have affected the edible oil price and demand in
the country.
With the population increasing from 541 million in 1971 to 1.02 billion in 2001, and to 1.21 billion
in 2010-11; and per capita income growth rising throughout the last three decades, consumption
growth in India has been almost uninterrupted till recently. However, consumption growth has
been variable in recent years primarily because of sharply higher product prices.
www.imacs.in
42
Industry Comment
The most rapid growth in consumption occurred when government trade policy changes allowed
increased access to imports, such as in the early to mid-1970s, when the state-owned monopoly
State Trading Corporation (STC) was allowed to import substantial amounts of edible oil. In 1994,
the government permitted private traders to import vegetable oils. Earlier to this change in
policy, only STC was permitted to import oil. Easier access to import has resulted in improved
availability of oil in terms of a larger quantity being available, increased consumption, and a shift
in consumption from traditional oils such as groundnut oil to palm and soyabean oils. However,
plantations of palm are primarily restricted to AP and Kerala and production of palm oil is very
small.
India's Edible Oil Consumption
Consumption-mt (LS)
20
50%
Growth (RS)
5-year (2007-11) CAGR (RS)
18
17.0
16.6 16.8
16
40%
30%
14.3
14
12.4
12
9.6
10
8.5
8
10.2
12.6
11.8
20%
12.1
10%
10.5
9.7
0%
9.0
7.3
-10%
-20%
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Compiled by IMaCS
Per capita availability of edible oils in India has increased significantly from around 3.5 kg in the
1970s to around 9 kg in the late-1990s. However, availability has declined in recent years because
of decline in production. Annual per capita consumption of edible oil has increased from 4 kg in
the 1970s to 10.2 kg in the late 1990s, and to around 13.4 kg in 2010-11. However, per capita
consumption still lags the world average of 20.5 kg.
www.imacs.in
43
Industry Comment
India's Per Capita Consumption of Edible Oils

Kg per annum
14
13.4
12
13.3
13.4
11.5
10.6
10.4
9.8
10
9.2
8.7
9.8
9.1
8.5
8.0
7.6
8
6.6
6
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
In value terms, private final consumption expenditure (PFCE) for oils and oilseeds has increased
from Rs. 251 billion in FY1995 to a peak of Rs. 469 billion in FY2009. However, consumption
declined 6.2% in FY2010 primarily because of the economic slowdown and higher prices. PFCE on
oils and oilseeds was estimated at Rs. 440 billion in FY2010, accounting for 3.2% of food PFCE,
and 1.2% of total PFCE.
India's PFCE on Oils and Oilseeds
FY
500
80%
Rs. Billion (current prices)

Growth (current prices)
Growth (constant prices)
450
60%
400
350
40%
300
250
20%
200
0%
150
100
-20%
50
0
-40%
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
The share of oils and oilseeds in PFCE has declined from 4% in the mid-1990s to 1.2% in FY2010.
Annual per capita expenditure on oils and oilseeds at current prices has increased from Rs. 132 in
FY1990 to Rs. 265 in FY1997, before declining to Rs. 205 in FY2003. However, during FY2006-10,
while PFCE on oils and oilseeds increased at a 5-year compound average growth rate (CAGR) of
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44
Industry Comment
3.1%, annual per capita expenditure increased at a 5-year CAGR of 1.6%. However, in constant
prices, while PFCE on oils and oilseeds declined at a 5-year CAGR of 0.7%, annual per capita
expenditure declined at a 4-year CAGR of 2.1%.
India's PFCE on Oils and Oilseeds
Rs. Billion
FY
Constant Prices
Share of Food PFCE
Share of PFCE
2005
377.78
4.91%
1.96%
377.78
4.91%
1.96%
Current Prices
Share of Food PFCE
Share of PFCE
2006
364.23
4.45%
1.74%
343.06
4.01%
1.59%
2007
337.79
3.99%
1.49%
335.93
3.51%
1.35%
2008
359.13
3.99%
1.45%
415.70
3.82%
1.46%
2009
380.30
4.10%
1.43%
469.02
3.89%
1.44%
2010
364.23
3.91%
1.27%
440.14
3.21%
1.16%
During the 1990s, annual per capita consumption of oils and oilseeds increased to Rs. 265 in
FY1997 before declining to Rs. 203 in FY2001. Per capita consumption increased during FY200710 because of higher prices.
India's Per Capita Consumption of Oils and Oilseeds
FY, Rs. per annum
500
Current Prices
Constant Prices
406
400
328
300
301
281
347
273
242
229
203
310
209
376
365
329
347
301
316
330
311
299
315
205
200
100
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
P a t t e r n o f C o n s u mp t io n
India is a vast country and inhabitants of several of its regions have developed specific preference
for certain edible oils largely depending upon the oils available in the region. Overall, groundnut
and mustard oil together account for 59% and 67% of total edible oil consumption in urban and
rural areas, respectively. The share of raw oil, refined oil, and vanaspati in total consumption is
estimated at 35%, 55% and 10%, respectively. About 60-70% of groundnut and mustard seeds are
www.imacs.in
45
Industry Comment
used to make non-refined or filtered oils. These tend to have a strong and distinctive test
preferred by most traditional customers.
Consumer preferences are influenced by the crops grown in their regions. For example, while
consumers in most of the southern and western states prefer groundnut oil, consumers in
eastern and north-east regions use rapeseed/mustard. Several pockets in South India have a
preference for coconut and sesame oil. In North India, vanaspati and mustard oil is preferred.
Vanaspati is a term used to denote a partially hydrogenated edible oil mixture. Vanaspati has an
important role in Indias edible oil economy. Vanaspati has an estimated share of 10% of the
edible oil market. It has the ability to absorb a heterogeneous variety of oils, which do not
generally find direct marketing opportunities because of consumers preference for traditional oil
such as groundnut oil, mustard oil, sesame oil etc. For example, newer oils like soyabean,
sunflower, rice bran and cottonseed and oils from oilseeds of tree and forest origin have found
their way to the edible oil pool largely through vanaspati route. Through technological means
such as refining, bleaching and de-odourisation, all oils have been rendered practically colourless,
odourless and tasteless and, therefore, have become easily interchangeable in the kitchen.
Almost all edible oil consumed in India in the early 1970s was groundnut oil (around 50% of
consumption in mid-1970s), and rapeseed oil (25%). Palm, soyabean, and sunflower oil together
accounted for less than 4% of the total. However, over the last two decades, palm and soyabean
oils have gradually increased their share of consumption, and have now become the leading
edible oils consumed. Market share gains for palm and soyabean oils are largely due to increased
access to imports, as well as increased domestic soyabean production.
Palm oil accounts for around 45-50% of Indias edible oil consumption. With an estimated
consumption of 7.4 mt in 2009-10, palm oil is the primary edible oil that is consumed, followed by
soyabean oil at 2 mt. The other major edible oils consumed are rapeseed oil (1.9 mt), groundnut
oil, and soyabean oil.
India's Pattern of Vegetable Oil Consumption
OY
1998
Soyabean
1,025
Cottonseed
515
Groundnut
1,696
Sunflower
574
Rapeseed/Mustard
2,042
Sesamum
138
Palm Oil
1,708
Coconut
424
Rice Bran Oil
500
Others
Total
8,622
Source: SEA, IMaCS Analysis
Thousand tonnes
2007
2008
2009
2010
2011
2,550
2,100
2,150
2,300
2,170
900
1,000
1,000
1,030
1,100
580
880
650
600
630
780
580
1,050
1,300
1,325
2,150
1,650
1,800
1,800
2,040
120
150
150
160
165
3,925
5,090
6,530
6,750
7,500
600
600
600
600
590
680
720
740
725
750
225
225
250
250
260
12,510 12,995 14,920 15,515 16,530
www.imacs.in
Growth
2010
2011 200711
7.0%
-5.7%
-5.3%
3.0%
6.8%
8.8%
-7.7%
5.0%
-9.2%
23.8%
1.9%
14.3%
0.0%
13.3%
-1.9%
6.7%
3.1%
0.6%
3.4%
11.1%
18.9%
0.0%
-1.7%
5.6%
-2.0%
3.4%
2.9%
0.0%
4.0%
-5.8%
4.0%
6.5%
6.1%
46
Industry Comment
The increased share of palm and soyabean oil in consumption largely reflects the high sensitivity
of Indian consumers to price changes. Small price changes for essential commodities such as
edible oil can have a significant effect on both total consumption and the share allocated to each
type of oil. Another factor behind the increased consumption of palm and soyabean oils is the
nature of vegetable oil sales and marketing in India. Producers and merchants face strong
incentives to supply blends that include lower cost oils, both to compete for price-sensitive
consumers and to seek higher margins by marketing unlabeled blends as pure traditional oils,
such as peanut or rapeseed-mustard oil, which usually sell at a premium.
Shar e of Indias Edible Oil Consumption
Others
Soyabean
Rapeseed
Groundnut
Palm
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
1981-90
1991-95
1996-2000
2001-05
2006-10
2008-12
M o n t h ly C o n s u mp t io n P a t t e r n s
Data on monthly consumption patterns for various items of household expenditure is available
from National Sample Survey Organisation (NSSO). According to National Sample Survey (NSS)
66th Round (July 2009-June 2010), per capita consumption of edible oil rose over the sixteen
years following 1993-94 by as much as 72% in rural India and about 46% in urban India. In both
rural and urban India, per capita consumption of oil other than groundnut oil, mustard oil,
vanaspati and coconut oil nearly quadrupled. Such oil includes sunflower oil, soyabean oil, other
vegetable oil and rice bran oil.
Per Capita Edible Oil Consumption Pattern
Kg per month
FY
Groundnut
Mustard Oil
Vanaspati
Others
1994
0.12
0.17
0.03
0.05
Rural
2000
2005
0.12
0.07
0.24
0.22
0.04
0.03
0.09
0.14
Total
0.37
0.50
0.48
2010
0.05
0.29
0.04
0.26
1994
0.24
0.15
0.06
0.11
Urban
2000
2005
0.23
0.16
0.25
0.20
0.06
0.05
0.17
0.25
0.64
0.56
0.72
www.imacs.in
0.66
2010
0.13
0.23
0.04
0.43
0.82
47
Industry Comment
According to National Sample Survey (NSS) 66th Round, average monthly per capita consumption
expenditure (MPCE) of Rs. 928 in rural India comprised Rs. 497 for food, and Rs. 431 for nonfood. The major items of food expenditure include Rs. 145 for cereals and cereal substitutes; Rs.
80 for milk and milk products; Rs. 57 for vegetables; Rs. 52 for beverages, Rs. 34 each for pulses
and edible oils, and Rs. 23 for sugar. For the urban population, average MPCE of Rs. 1,786
comprised Rs. 727 for food, and Rs. 1,058 for non-food. Of food expenditure, only Rs. 162 went
towards cereals and cereal substitutes, while Rs. 139 was spent on milk and milk products, Rs.
113 on beverages, Rs. 77 on vegetables, Rs. 48 on pulses, and Rs. 46 on edible oils. Thus, the
share of edible oil in food MPCE was 6.9% in rural India, and 6.3% in urban India. The share of
edible oil in food expenditure has fluctuated in recent surveys but has declined during the late2000s because of higher expenditure on milk and products, and beverages.
MPCE for Edible Oils and Shar e
Rural
MPCE-Rs.
Share of food
Urban
MPCE-Rs.
Share of food
Source: NSSO
198788
199394
19992000
200405
200506
200607
200708
200910
7.88
7.8%
12.50
7.0%
18.16
6.3%
25.72
8.4%
25.46
7.6%
27.22
7.5%
33.29
8.2%
34.15
6.9%
13.23
9.5%
20.10
8.0%
26.81
6.5%
36.37
8.1%
35.02
7.5%
37.52
7.3%
46.43
8.0%
46.10
6.3%
Expenditure on edible oil varies across states, reflecting food habits. The per capita consumption
of edible oil, and its share of total food expenditure is the highest in the western Indian states of
Gujarat and Maharashtra. By comparison, expenditure on edible oil is low in the North-Eastern
states.
www.imacs.in
48
Industry Comment
State-wise MPCE on Edible Oils and Shar e (2007 -08)
AP
Arunachal Pradesh
Assam
Bihar
Chhattisgarh
Delhi
Gujarat
Haryana
Himachal Pradesh
Jammu & Kashmir
Jharkhand
Karnataka
Kerala
MP
Maharashtra
Manipur
Meghalaya
Nagaland
Orissa
Punjab
Rajasthan
Sikkim
TN
Tripura
UP
Uttarakhand
West Bengal
North-Eastern States
Group of UTs
India
Source: NSSO
MPCE
(Rs.)
Rural
Share of
Food
Share of
Total
37.33
19.68
30.10
28.31
27.54
8.8%
3.5%
6.3%
7.9%
9.3%
4.6%
1.8%
3.8%
4.7%
4.7%
60.89
22.43
37.41
46.49
29.76
34.36
27.03
29.15
46.10
19.84
23.96
18.27
21.49
39.90
29.58
43.53
31.75
29.67
30.37
36.33
34.32
25.87
46.38
33.29
12.9%
4.3%
7.1%
8.8%
8.5%
8.3%
4.8%
9.0%
11.1%
4.6%
5.1%
2.5%
6.6%
7.2%
6.8%
9.2%
7.6%
6.3%
8.4%
7.9%
8.5%
5.2%
8.4%
8.2%
7.0%
2.2%
3.3%
4.7%
5.0%
4.2%
2.0%
4.6%
5.3%
2.4%
2.6%
1.4%
3.8%
3.1%
3.7%
4.7%
3.8%
3.7%
4.5%
4.0%
4.9%
2.8%
4.1%
4.3%
MPCE
(Rs.)
Urban
Share of
Food
Share of
Total
46.15
8.1%
3.0%
41.55
38.54
44.39
47.00
74.25
36.77
6.1%
7.6%
8.2%
6.8%
11.8%
5.7%
2.9%
3.6%
3.0%
2.6%
5.0%
2.3%
52.86
44.92
43.10
30.04
40.20
59.78
28.13
8.3%
7.3%
7.0%
4.3%
8.5%
9.5%
5.9%
3.8%
3.2%
2.6%
1.5%
3.4%
3.5%
2.8%
37.46
45.85
37.35
6.2%
7.6%
7.0%
2.6%
2.8%
3.0%
38.92
7.1%
2.8%
38.61
8.0%
3.4%
50.97
37.61
39.22
46.43
8.2%
5.9%
5.4%
8.0%
3.5%
2.6%
2.0%
3.2%
In terms of daily calorie intake, National Sample Survey (NSS) 66th Round, 2009-10 indicates a
daily calorie intake per consumer unit of 2,647 Kilocalorie (Kcal) in rural India and 2,604 Kcal in
urban India. Of all the food groups, cereals make the largest contribution to calorie intake, at
around 60% in rural India and 50% in urban India. The contribution of cereals varies across the
major States from 46-48% (Punjab, Kerala and Haryana) to 70% (Orissa and Assam) in the rural
sector and from 43-44% (Punjab, Kerala and Gujarat) to 62-63% (Orissa, Assam and Bihar) in the
urban sector.
For non-cereal foods, the pattern of calorie intake was similar in rural and urban areas. `Oils and
fats accounted for 23% of such calorie intake in rural areas and 25% in urban areas. The group
next in importance was `miscellaneous food, food products and beverages with a share of 20% in
calorie intake from non-cereal food in rural India and 19% in urban areas. Inter-State variation
www.imacs.in
49
Industry Comment
was more pronounced in rural than in urban India. Thus the share of `milk and milk products,
which was between 9% and 27% in the urban sector of all the major States, ranged from 4% to
37% in the rural sector, being 8% or less in 4 major States, and over 30% in 3 major States. In both
sectors, inter-State variation was wide in case of `meat, eggs and fish, but low for `oils and fats,
and also low for `miscellaneous food, food products and beverages. `Sugar and honey usually
had a higher contribution in States with higher average levels of living, while `roots and tubers,
and also `vegetables and fruits, had a larger share in poorer States such as Bihar, Jharkhand,
Assam, Orissa and WB.
Per centage Break-up of Calorie consumption from Food
Major States, 2009-10
Rural
AP
Bihar
Chhattisgarh
Gujarat
Haryana
Jharkhand
Karnataka
Kerala
MP
Maharashtra
Orissa
Punjab
Rajasthan
TN
UP
WB
Urban
AP
Bihar
Chhattisgarh
Gujarat
Haryana
Jharkhand
Karnataka
Kerala
MP
Maharashtra
Orissa
Punjab
Rajasthan
TN
UP
WB
Source: NSSO
Cereals Roots & Sugar & Pulses,

Tubers
Honey
Nuts,
Oilseeds
60
9
11
11
60
4
7
12
69
18
7
11
69
8
11
12
50
6
13
8
48
7
16
7
66
13
7
9
57
3
11
17
47
7
10
16
62
7
13
12
54
5
13
18
70
12
8
11
46
6
18
9
56
5
15
5
56
4
9
16
63
13
12
11
64
15
8
6
50
52
62
59
44
46
58
50
44
52
45
63
43
53
50
56
53
6
4
13
7
6
7
10
3
5
6
4
10
6
5
4
11
12
10
7
8
13
12
13
8
9
10
13
11
8
14
14
9
12
8
Veg.
and
fruits
7
9
10
11
6
6
8
6
9
6
6
10
5
5
7
7
10
Meat,
Eggs,
fish
3
4
3
3
1
0
3
3
9
1
2
4
0
0
4
1
7
Milk/
Milk
Products
16
13
14
4
20
37
8
14
9
17
10
6
31
32
12
19
6
Oils &
Fats
Others
23
24
24
27
30
16
22
22
14
23
28
20
21
23
20
22
24
20
26
14
24
16
11
30
24
25
21
19
29
10
15
29
15
24
8
9
9
10
8
8
9
7
8
8
8
11
6
8
7
9
9
3
4
2
2
1
1
3
3
8
1
2
4
1
1
4
1
8
17
15
16
11
20
27
14
16
11
17
15
10
27
27
16
20
10
25
24
24
30
33
24
25
22
15
28
27
20
25
26
20
24
26
19
25
18
12
11
11
20
25
27
16
18
26
11
14
25
13
21
12
13
10
14
10
9
10
15
17
12
15
10
10
6
16
10
6
www.imacs.in
50
Industry Comment
DEMAND-SUPPLY POSITION AND IMPORTS

L o n g - Te r m In c r e a s e in I mp o r t s
India is amongst the worlds largest producer and consumer of edible oils, accounting for 5% of
world production; 14% of world food use consumption; and 11% of total consumption. India was
self-sufficient in edible oils during the 1950s; however, by the 1960s the domestic demand-supply
equilibrium almost vanished. During 1980-85, annual edible oil imports averaged 1.18 mt,
accounting for more than 20% of Indias annual consumption of edible oils. Consequent to the
TMOP, India again became largely self-sufficient in edible oils for a brief period in the early1990s. India was almost self-sufficient in edible oils during 1991-92 to 1994-95 when the
sufficiency level was in the range of 95 to 98%.
However, the liberalisation of Indian economy at this point of time fundamentally changed the
import regime of Indias edible oil particularly in 1994 when as part of its obligations under World
Trade Organisation (WTO) rules, India eliminated the state monopoly on imports and placed
imports under a privatised open general license (OGL) system. Under the new rules, India also
agreed to eliminate import quotas and placed upper bound limits on tariff levels. The GoI, with a
view to avoiding scarcity of this item and consequential rise in prices, has now been allowing
liberal import of edible oils through removal of quantitative restrictions (QRs), though with stiff
tariff rates. This period also coincided with the economic crisis in the two major palm oil
producing and exporting countries in South East AsiaMalaysia and Indonesia. Their currencies
underwent sharp devaluation vis-a-vis the Indian rupee and this helped them to export more
palmolein to India, along with the reduction in Indian import duties. At the same time, sustained
growth in population, higher disposable incomes, stagnation in oilseeds production, and inability
of domestic edible oil production to keep up with demand growth has led to increased imports of
edible oil since the late-1990s. As a result, Indias self-sufficiency has declined to about 54%
during 2007-11. At present, India is the worlds second largest importer of edible oils (after China)
and demand-supply fluctuations from India have a major bearing on international edible oil
prices. India is also the worlds second largest importer of soyabean oil (accounting for 13% of
world imports), and the largest importer of palm oil, with Indias imports accounting for 19% of
world palm oil imports. In recent years, edible oil imports have accounted for a rising share of
Indias agricultural imports.
www.imacs.in
51
Industry Comment
Indias Impor t of Agricultural Products

Rs. billion
FY
2000
2006
2007
2008
2009
2010
2011
Wheat
Rice
Vegetable Oils (Edible)
Oilseeds
7.74
0.30
80.46
0.15
0.00
0.00
89.61
0.47
58.50
0.00
95.40
1.04
26.58
0.00
103.01
1.49
0.00
0.00
158.37
1.30
2.32
0.00
264.83
1.87
2.36
0.01
294.42
1.18
Wood & Wood Products

Pulses
Cashew Nuts
Fruits & Nuts excl. cashew nuts
Cotton
Others
Total
Share of Edible Oils
19.59
3.55
11.98
5.91
12.54
18.44
160.67
50.1%
41.03
24.76
20.89
13.90
7.04
17.28
214.99
41.7%
46.84
38.92
18.21
19.13
6.63
11.69
296.38
32.2%
54.57
53.75
17.15
18.58
9.12
14.81
299.06
34.4%
60.41
62.46
26.72
23.73
16.90
21.93
371.83
42.6%
74.61
98.13
30.48
28.73
12.41
81.90
595.28
44.5%
72.51
69.80
24.80
36.84
6.04
53.99
561.96
52.4%
The liberalisation of imports resulted in edible oil imports increasing from 0.35 mt in FY1993 to
4.90 mt in FY2006. Imports declined in FY2006-07 because of higher domestic production of
oilseeds and edible oils. However, imports increased sharply from FY2007 during lower oilseeds
production during 2007, and 2009-10; and generally higher import prices.
Indias Edible Oil Imports
FY
9
Volume-mt (LS)
350,000
Value-Rs. mn. (RS)
8.05
8
6.72
6.92
250,000
6
5
4.37 5.29
4.20 4.18
4.90
4.75
4.32
4.29
4.27
200,000
150,000
2.62
100,000
2
1.06
1
300,000
1.42 1.27
50,000
0.35
0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
In value terms, imports of edible oils are estimated to have increased from Rs. 1,666 million in
FY1994 to Rs. 110,769 million in FY2005, but declined to Rs. 89,610 million in FY2006. However,
imports increased 6.5% in FY2007 to Rs. 95,399 million; and 8% in FY2008 to Rs. 103,011 million.
Imports of edible oils increased sharply in 2009-10, reflecting the widening domestic supplydemand gap. In value terms, imports increased 67% in FY2010 to Rs. 264,833 million, compared
with an increase of 54% in FY2009. During FY2011, although imports declined in volume terms
www.imacs.in
52
Industry Comment
because of higher domestic production, imports in value terms increased 11.2% to Rs. 294,421
million primarily because of higher soyabean and palm oil prices.
The unit value of imported edible oils, which indicates the landed price of imported edible oil,
was as high as Rs. 28.94 per kg in FY1999, but declined sharply to Rs. 19.18 per kg in FY2000, and
to Rs. 14.31 per kg in FY2001. However, the unit value increased to an estimated Rs. 23.31 per kg
in FY2005, but declined to Rs. 21 in FY2008, primarily because of the sharp decline in customs
duties. Indias import price of edible oils declined in FY2006 mainly because of a decline in edible
oil prices during FY2006. Although oilseeds and edible oil prices increased significantly in FY2007
and FY2008, unit prices of imports remained stable because of lower customs duties. However,
unit prices increased significantly in FY2010-11 primarily because of higher prices from 2Q2009.
The price increase was highest for palm oil, where prices increased 37% during FY2011 to
US$1,004/t. Soyabean prices also increased 25% during FY2011 to average US$1,113/t during
FY2011, compared with a decline of 19% during FY2010.
Unit Prices of Indias Edible Oil Impor ts
FY, Rs./kg
45
42.6
40
35
32.9
28.9
30
25
20
21.3 20.7 21.8

18.0
22.1
23.3
20.1
19.2
20.9
22.3
23.6
21.0
14.3 15.0
15
10
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Unit Prices of Indias E dible Oil Impor tsMajor Items of Imports

Rs. per kg
FY
Soybean Crude Oil
Other Soybean Oil
Crude Palm Oil
Refined Palm Oil
Crude Sunflower & Safflower
Other Sunflower & Safflower
Crude Coconut Oil
Refined Coconut Oil
Crude Palm Kernel Oil
Refined Palm Kernel Oil
Total
2005
26.89
28.78
20.71
22.95
28.66
28.71
32.37
30.79
27.24
26.75
23.31
2006
23.39
35.37
18.57
18.89
26.06
25.88
25.46
29.17
26.75
42.15
20.90
2007
25.31
39.16
20.11
22.99
29.62
30.86
13.85
36.79
25.27
36.63
22.34
www.imacs.in
2008
23.87
40.08
18.68
24.77
29.17
62.70
43.43
36.16
37.35
21.01
2009
26.73
90.21
20.89
23.15
42.84
61.90
46.34
55.22
47.11
30.10
23.57
2010
37.38
62.87
31.01
32.44
40.69
40.60
36.70
44.24
35.30
38.28
32.90
2011
43.28
132.40
41.09
46.18
49.65
134.50
53.12
58.50
72.10
42.58
53
Industry Comment
In OY2004, the quantity of imported vegetable oils stood at around 4.4 mt and accounted for 43%
of total edible oil availability in the country. Imports declined in OY2004, because of higher
domestic production of edible oils. Import of edible oils increased during OY2005 to 5.04 mt.
While crude palm oil imports increased from 2.06 mt to 2.36 mt, crude soyabean oil imports
increased from 0.89 mt to 2 mt. Crude soyabean imports more than doubled because of a 12%
decline in domestic soyabean seeds production. During 2004-05, India imported significant
quantities of hydrogenated palm oil in the form of vanaspati from Malaysia as well as from Sri
Lanka. Higher oilseeds and edible oil production during OY2006 and large carryover of rapeseed
stocks resulted in imports declining to 4.42 mt during OY2006. While soyabean oil import
declined by 0.3 mt, import of sunflower oil increased because of some substitution for palm oil.
Import of refined oil also declined because of duty differential between crude & refined oil which
encouraged import of crude oil over refined oil, resulting in higher capacity utilisation for the
domestic industry.
Indias Impor ts of Edible Oil
Thousand tonnes
OY
RBD Palmolein
Refined Sunflower
Refined Rapeseed
Refined Soyabean
Refined
Crude Palm Oil
Crude Olein
Sunflower
Soyabean Oil
(degummed)
Canola/Rape Oil
Cottonseed
Coconut
Crude Palm Kernel
Crude
Total
2007
115
0
11
0
126
2,994
53
195
Thousand tonnes
2008
2009
2010
731
1,240
1,213
0
0
0
0
0
0
0
0
0
731
1,240
1,213
4,044
5,187
5,169
8
1
4
26
590
626
2011
1,082
0
0
0
1,082
5,374
7
804
1,323
0
13
10
0
4,588
4,715
759
0
0
13
26
4,878
5,608
1,007
11
0
3
85
7,290
8,371
990
46
5
17
108
6,943
8,183
1,666
14
13
4
112
7,610
8,823
2009
69.7%
Growth
2010
-2.1%
2011
-10.9%
69.7%
28.3%
-91.1%
2128%
-2.1%
-0.3%
494.4%
6.1%
-10.9%
4.0%
46.8%
28.4%
30.3%
68.4%
-69.9%
165.1%
-74.9%
4.0%
9.6%
7.8%
-39.6%
-20.3%
28.2%
309.8%
42.4%
45.9%
-29.3%
-24.5%
-4.2%
-5.1%
During OY2007, Indias imports increased 6.7% to 4.72 mt, mainly because of lower production of
oilseeds and edible oils during OY2007. The increase in imports were primarily of crude palm oil
which increased by 0.62 mt. The other major item of importcrude soyabeandeclined by 0.38
mt, mainly because of a 7% increase in soyabean seeds production. Although imports were
expected to be higher than the actual levels due to lower oilseeds production during OY2007,
high international and domestic prices restrained oilseeds and edible oil demand. During OY2008,
imports increased 19% to 5.61 mt, mainly driven by a 35.1% increase in crude palm oil imports.
Refined palmolein imports were also significant at 0.76 mt in OY2008. By comparison, crude
soyabean oil imports declined for a third successive year primarily because of continued increase
in soyabean seed production.
During OY2009, Indias edible oil imports increased 46% to 8.18 mt, primarily because of a sharp
increase in crude and refined palm oil imports. Imports increased primarily because of a sharp
decline in international prices and anticipation of cut in import duties by the Government. Import
www.imacs.in
54
Industry Comment
of crude sunflower oil also increased, as sunflower oil has became cheaper compared to
soyabean oil, because of imposition of 20% import duty on crude soyabean oil.
During OY2010, imports increased 7.8% to an estimated 8.82 mt, primarily because of a decline in
crude palm oil imports. However, crude soyabean imports increased 68.4% mainly because of
lower domestic availability and future expectation of higher prices. These expectations
materialised with domestic soyabean oil prices increasing from a low of Rs. 42/kg in April 2010 to
Rs. 47/kg in September 2010. In the international market, soyabean oil (Dutch, fob, ex-mill)
increased from an average of US$876/t during 2Q2010 to US$984/t during 3Q2010. Imports
increased especially of crude oils because of forecast decline in oilseeds production during
OY2010, and zero import duty on crude edible oils. Taking advantage of the lower international
prices of vegetable oils till and the zero import duty, private traders bought large quantities of
vegetable oils.
( Yoy) Growth in Imports of Edible Oil
Major Items
Refined
Of
which
Crude
Of which
OY
Total
Total
Palm
1Q07
2Q07
3Q07
4Q07
1Q08
2Q08
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
-51.0%
-55.8%
205.0%
15.6%
104.5%
171.3%
307.7%
1031.5%
750.6%
358.7%
47.9%
-23.2%
-6.5%
42.6%
-38.8%
6.1%
-22.2%
-35.5%
45.0%
-5.5%
11.3%
RBD
Palm.
-48.7%
-54.6%
185.4%
42.1%
104.5%
261.2%
335.7%
1158.8%
750.6%
358.7%
47.9%
-23.2%
-6.5%
42.6%
-38.8%
6.1%
-22.2%
-35.5%
45.0%
-5.5%
11.3%
24.7%
-23.1%
24.9%
3.6%
13.7%
47.3%
-22.6%
11.2%
63.1%
60.5%
43.6%
14.2%
13.8%
-16.7%
7.1%
34.9%
-7.4%
-18.4%
14.1%
-6.8%
1.2%
77.6%
12.3%
40.9%
1.4%
33.5%
69.9%
19.4%
28.4%
49.7%
33.0%
14.5%
18.6%
2.9%
-25.1%
1.2%
18.7%
-2.8%
-20.4%
40.7%
-1.4%
3.0%
Sunflower
-5.0%
141.4%
399.0%
116.4%
-12.5%
223.1%
3.2%
-24.1%
-3.5%
107.8%
73.5%
9.2%
22.8%
19.1%
17.9%
Soyabean
-45.7%
-74.2%
5.0%
5.9%
-37.1%
26.0%
-69.8%
-22.0%
39.7%
65.4%
95.4%
-22.8%
129.7%
40.9%
40.2%
102.3%
-55.5%
-24.2%
-47.4%
-32.4%
-52.0%
Total
Palm
Ker.
-44.8%
-34.4%
-76.5%
-86.9%
-35.6%
52.1%
275.8%
1149.7%
776.0%
784.4%
327.2%
95.3%
44.2%
-14.3%
13.6%
-21.2%
-40.5%
-71.7%
29.2%
6.6%
32.6%
20.0%
-24.3%
27.1%
3.9%
16.0%
50.0%
-12.9%
39.7%
93.7%
72.0%
44.2%
5.7%
9.9%
-10.6%
0.7%
30.1%
-9.9%
-21.2%
16.8%
-6.7%
2.7%
During OY2011, imports declined 5.1% to 8.37 mt because of substantial decline in crude
soyabean imports. Increased profitability in Indias crushing sector, caused by higher vegetable oil
prices and renewed interest in soyabean meal exports, expanded supplies of domestically
produced soyabean oil. Growing domestic production also limited the need for soyabean oil
imports.
Overall, Indias edible oil imports are expected to forecast to increase 6% during OY2012 to
around 8.9-9 mt, with the increase attributable to an expected 6% decline in oilseeds production,
www.imacs.in
55
Industry Comment
and 1-2% decline in domestic edible oils production. During the first three months of OY2012
(November 2011-January 2012), imports of edible oils have increased 2.7% (yoy) to 2.13 mt with
higher imports of palm oil. Imports of palm oil were higher than required as palm oil prices
declined, and traders anticipated higher prices during 2012.
The share of crude palm oil in Indias imports has increased from nil in OY1997 to 29% in OY2001,
and to an estimated 64% in OY2011. Other imports primarily comprise crude soyabean, refined
palmolein, and crude sunflower. Palm oil and soyabean oil constitute a significant component of
Indias agricultural imports, and India is also among the worlds largest importer of these
products. During the period from FY2007-11, edible oil imports have accounted for 43% of Indias
agricultural imports.
C u s t o ms D u t ie s a n d Ta r if f s
In accordance to the flexibilities given to India under the WTOs Agreement on Agriculture (AoA),
India was permitted to offer ceiling bindings instead of tariffication, which were not subject to
the reduction commitments. India bound its tariffs at 100% for primary products, 150% for
processed products, and 300% for edible oils. India was also initially allowed to maintain QRs in
agriculture products on account of balance of payment (BoP) problems. However, due to its
improved balance of payments (BoP) position during 1999-00, India lost the plea for retention of
QRs and accordingly removed QRs on 714 items, including 142 commodities belonging to the
category of the agriculture commodities. India further removed the QRs on the remaining 715
items by March 2001, which included 42 groups belonging to agriculture. India did not have any
market access commitments and was also not entitled to use the Special Safeguard Measures
(SSG) of the AoA.
After QRs were removed in 1999, India was allowed to renegotiate the tariffs bindings on those
commodities for which it had very low or zero tariff bindings. The tariff binding levels were
suitably revised upward to provide adequate protection to the domestic producers. India
adopted a modified tariff schedule for agricultural products in March 2000. The tariff bindings,
subsequent to revision in 1996 and renegotiations within the WTO in 1999, retain the overall
structure notified after the Uruguay Round: 100% for commodities, 150% for processed products,
and 300% for edible oils. Departures from this pattern are mainly with respect of tariff lines that
were negotiated as special cases. At present, India's bound rates for crude and refined edible oils
are as high as 300% ad valorem, except for 45% on soyabean oil, and 75% for rapeseed oil 75%.
On all other oils, the GoI can raise the level of customs duty up to 300%.
Since 2006, the GoI has reduced the customs duties on edible oils by withdrawing the special
additional duty (SAD), and reducing basic duties on palm, sunflower, and soyabean oils, in
anticipation of low domestic oilseed production and higher international prices. Because of the
significant increase in international palm oil prices, in August 2006, the GoI had reduced import
duties on crude and refined palm oil and its derivatives. While effective import duty on crude
palm oil and olein was reduced from 88.2% to 78.2%, effective import duty on refined palm oil &
RBD palmolein was reduced from 99.4% to 88.8%. Duties were further reduced with effect from
January 24, 2007. The Union Budget for 2007-08 also reduced customs duty on crude sunflower
oil from 65% to 50%, and on refined sunflower oil from 75% to 60%. In addition, the Budget also
www.imacs.in
56
Industry Comment
exempted all edible oils, crude as well as refined, from additional duty of customs of 4%. The
reduction in duties was expected to reduce the landed cost of these oils and have a softening
effect on domestic prices. However, the continued rise in palm oil prices resulted in the GoI
reducing the customs duty on palm group oils by 10% with effect from April 13, 2007. While
customs duty on crude palm oil was reduced from 60% to 50%, customs duty on RBD palmolein
was reduced from 67.5% to 57.5%. Import duties were reduced further in July 2007 on crude and
refined imports of palm oil, soyabean oil, and sunflower oil. In March 2008, the customs duty on
crude and refined edible oil were reduced from a range of 40-75% to 20-27.5% The export of all
edible oils were prohibited with immediate effect from March 17, 2008. Furthermore, on April 1,
2008, the GoI announced to allow import of crude form of edible oil at zero duty and refined
form of edible oil at a duty of 7.5%. In November 2008, the GoI had imposed a customs duty of
20% ad valorem on crude soyabean oil. By comparison, customs duty on refined soyabean oil
remained unchanged at 7.5%. However, in March 2009, the 20% customs duty on crude
soyabean oil was removed. The move was made to keep imports of crude soyabean at par with
other oils.
Recent Tr ends in Cu stoms Duty on Select Edible Oils
Oil
Crude Palm Oil and Olein
Refined Palm Oil & RBD
Palmolein
Vanaspati
Crude Edible Oil for
Vanaspati & Refiners
Crude Sunflower
Refined Sunflower
Refined Rapeseed
Refined Soyabean
Crude (Degummed)
Soyabean
Compiled by IMaCS
11-0806
70%
80%
24-0107
60%
67.5%
01-0307
60%
67.5%
13-0407
50%
57.5%
25-0707
45%
52.5%
20-0308
20%
27.5%
01-0408
0%
7.5%
17-1108
0%
7.5%
19-0309
0%
7.5%
80%
90%
80%
90%
80%
90%
80%
90%
80%
90%
80%
90%
7.5%
90%
7.5%
90%
7.5%
90%
75%
85%
75%
45%
45%
65%
75%
75%
45%
45%
50%
60%
75%
45%
45%
50%
60%
75%
45%
45%
40%
50%
75%
45%
40%
20%
27.5%
27.5%
45%
40%
0%
7.5%
7.5%
7.5%
0%
0%
7.5%
7.5%
7.5%
20%
0%
7.5%
7.5%
7.5%
0%
In order to check under-invoicing of edible oil imports, GoI had fixed tariff values on import of
certain edible oils with effect from August 3, 2001. Since then, the tariff values on various edible
oils for calculation of customs duty is revised from time to time with changes in international
prices.
E x p e c t e d D e ma n d - S u p p ly G a p
As against an estimated domestic consumption of 17.7-18 mt in OY2012, the net availability of
edible oil from all domestic sources is estimated at 9 mt. Excluding industrial use of 0.5 mt, net
domestic availability for food consumption is expected at 8.5 mt. The balance of around 9 mt is
expected to be met from imports. As compared with an increase of 9% during OY2011, Indias
edible oil production is expected to decline 2% during OY2012 to 9 mt. However, consumption
growth is expected at around 4-5%. As a result, Indias imports could increase 6% to around 9 mt.
In the next few years, edible oil consumption is expected to increase at an annual rate of 3% per
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57
Industry Comment
annum. Considering the inter-year variations but slow increase in oilseeds and edible oil
production, the shortage is expected to result in increased imports of edible oils.
IndiaProduction-Consumption Gap
Thousand tonnes
OY
Availability from
Primary
Groundnut
Rapeseed & Mustard
Soyabean
Sunflower
Sesamum
Nigerseed
Safflower
Castor
Linseed
Availability from
Secondary
Coconut
Cottonseed
Rice bran
Solvent Extracted Oils
Tree & Forest Origin
Total Availability
Less Exports/Industrial Use
Import
Domestic
Availability
Compiled by IMaCS
2005
2006
2007
2008
2009
2010
2011
6,067
1,558
2,354
1,100
392
209
34
52
317
51
6,906
1,838
2,521
1,324
475
199
32
69
396
52
5,900
1,119
2,305
1,416
405
192
36
72
305
50
6,964
2,112
1,808
1,755
483
235
33
68
421
49
6,656
1,648
2,232
1,585
382
198
35
57
468
51
5,888
1,249
2,048
1,594
281
182
30
54
404
46
6,634
1,567
2,302
1,675
230
258
33
61
466
42
2,030
550
430
620
350
80
8,097
850
4,542
2,230
420
570
680
430
130
9,136
820
4,288
2,250
450
630
700
350
120
8,150
780
4,715
2,490
450
800
720
400
120
9,454
800
5,608
2,500
450
760
770
400
120
9,156
700
8,183
2,510
450
800
720
420
120
8,398
452
8,823
2,560
400
900
720
420
120
9,194
518
8,371
11,789
12,604
12,085
14,262
16,639
16,769
17,047
Indias food demand projections indicate that while demand for food grains, including for uses
other than for direct human consumption, will grow at 22.5% per annum during the next 4-5
years; demand for traditional cash crops such as oilseeds, fibres, and sugarcane is expected to
grow at 34% per annum. By 2010-11, Indias total requirement of edible oils for the population
of 1.21 billion was around 17 mt, which is equivalent to an estimated 51 mtpa of oilseeds. By
comparison, Indias oilseeds production has averaged only 28 mt per annum over the last 5 years.
The continuing shortage in domestic oilseeds availability is expected to result in increased
imports from around 8.4 mt in OY2011 to 13 mt by the end of the present decade. Although
domestic production of oilseeds is expected to grow, the increase will not be sufficient to reduce
the current deficit between domestic supply and demand of edible oil.
WORLD DEMAND -SUPPLY TRENDS AND PROSPECTS

O i ls e e d s P r o d u c t io n Tr e n d s
Although world oilseeds production has increased at an average annual rate of 3.8% over the last
20 years (OY1991-2011), there has been significant volatility in production.
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58
Industry Comment
World Oilseeds and Vegetable Oils Production

OY
20%
Oilseeds
Edible Oils
15%
10%
5%
0%
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
-5%
-10%
Over the period 2003-12, oilseeds production increased at an average annual rate of 3.8%, mainly
driven by higher palm kernel, soyabean, and rapeseed production. By comparison, production
growth has decelerated for coconut and groundnuts. Although oilseeds annual production
growth has declined from 3.4% during 1988-98, production growth during 2003-12 has been
driven by higher yields, even as annual average increase in acreage remained at 2.1% in 1988-98
and 2.1% during 2003-12. Acreage has primarily increased for rapeseed, sunflowerseed, and
soyabean, but has declined for groundnut.
World Oilseeds Demand and Supply
OY
Beginning Stock
Production
Yields
Imports
Supply
Exports
Crush
Food Use Consn.
Feed Waste Consn.
Dom. Consn.
Ending Stocks
Source: USDA
Mt
20032008
2009
2010
2011
2012E
07
51.86
72.97
60.75
55.51
71.97
79.60
368.80 391.22 396.54 443.96 454.74 452.48
1,922
2,029
1,962
2,153
2,135
2,074
72.77
90.16
93.96
101.69
103.44
107.49
493.43
554.35
551.25
601.16
630.14
639.57
73.87
91.83
94.16
108.02
107.86
110.49
299.88
339.94
338.91
358.44
376.53
390.44
29.04
30.65
31.90
32.89
33.77
34.12
32.69
31.19
30.78
29.85
32.37
33.35
361.60 401.77 401.59 421.17 442.68 457.91
57.96
60.75
55.51
71.97
79.60
71.18
2010
Growth
2011
2012
-8.6%
12.0%
9.7%
8.2%
9.1%
14.7%
5.8%
3.1%
-3.0%
4.9%
29.7%
29.7%
2.4%
-0.8%
1.7%
4.8%
-0.1%
5.0%
2.7%
8.4%
5.1%
10.6%
10.6%
-0.5%
-2.9%
3.9%
1.5%
2.4%
3.7%
1.0%
3.0%
3.4%
-10.6%
Of the total growth in world oilseed production between 1980 and 2012, around 55% is
attributable to the growth in soyabean production, followed by rapeseed (18%), sunflowerseed
(8%), and cottonseed (8%). Soyabean is expected to account for 56% of world oilseeds production
of 452.5 mt in OY2012, as compared with 51% in 1996-97. Owing to their cost competitiveness
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59
Industry Comment
and, more recently, the meat and bone meal ban in animal feed in place in many countries,
soyabean have consolidated their position as the major oilseed.
After registering production growth for eleven consecutive years (OY1997-2007), world oilseeds
production declined 3.1% in OY2008. This was largely on account of soyabean, the production of
which declined 6.8% (after expanding steadily in the preceding years), following the diversion of
land from soyabean to maize in the US. Oilseeds also lost out to grains also in China and CIS. As a
result, acreage declined 2.5% in OY2008, after remaining stagnant in OY2007. Furthermore, the
reductions in area were accompanied by yield declines due to unfavourable weather in several
key growing regions. Prompt and substantial acreage and production increases in South America
could only partly offset these falls.
World Oilseeds Acreage
OY
Cottonseed
Peanut
Rapeseed
Soyabean
Sunflowerseed
Total
Source: USDA
200307
32.55
21.51
25.60
90.05
22.12
191.84
2008
31.98
20.87
28.24
90.60
21.09
192.77
Mha
2009
2010
29.75
21.37
31.08
96.36
23.55
202.11
29.45
20.40
31.42
102.17
22.80
206.24
2011
2012E
2010
32.66
21.33
33.32
102.76
22.88
212.95
34.81
20.74
33.44
103.29
25.85
218.13
-1.0%
-4.6%
1.1%
6.0%
-3.2%
2.0%
Growth
2011
2012E
10.9%
4.6%
6.0%
0.6%
0.3%
3.3%
6.6%
-2.8%
0.4%
0.5%
13.0%
2.4%
The decline in acreage for OY2008 was primarily because of higher crude oil prices, and related
sharp increases in biofuel5 prices. Ending stocks of oilseeds had accumulated gradually from
OY2001-04, but increased sharply from 45 mt at end-OY2004 to 73 mt by end-OY2007. Some 14
mt tonnes of oilseeds were released from stocks in 2007 to compensate for the production
decline in a context of increasing crush demand. Nevertheless, declining oilseeds production
resulted in a decline in stocks to 60.8 mt by end-OY2008, attributable primarily to liquidation of
soyabean stocks.
Presently. almost all biofuels produced around the world are either ethanol or esterscommonly referred to as
biodiesel. While ethanol is usually produced from sugar and starchy crops, such as cereals; biodiesel is produced mainly
from oilseed crops, including rapeseed, palm, sunflower seed and soyabean. The yield per hectare of feedstock crops
for biodiesel (primarily canola/rapeseed) is much lower than that for sugar and starch crops. Thus canola yields 1,0001,500 litres/ha of biodiesel compared with 3,500 l/ha of corn based ethanol. Only oil palms have a significantly higher
oil yield of 4,000-5,000 l/ha.
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60
Industry Comment
World Oilseeds Ending Stocks

Mt
OY
Peanut
Rapeseed
Soyabean
Sunflowerseed
Copra
Cottonseed
Palm Kernel
Total
Source: USDA
200307
1.28
3.83
49.03
2.61
0.07
0.97
0.16
57.96
2008
2009
2010
2011
2012E
2010
1.10
3.55
51.61
2.98
0.11
1.21
0.19
60.75
1.52
6.58
42.72
3.23
0.29
0.82
0.36
55.51
1.29
7.98
59.60
1.93
0.31
0.68
0.19
71.97
1.09
6.26
68.90
1.74
0.24
1.14
0.23
79.60
1.00
5.14
60.28
3.06
0.22
1.15
0.33
71.18
-15.3%
21.3%
39.5%
-40.2%
6.8%
-17.3%
-47.6%
29.7%
Growth
2011
2012E
-15.7%
-21.5%
15.6%
-10.1%
-22.3%
69.2%
24.1%
10.6%
-7.6%
-18.0%
-12.5%
76.4%
-11.1%
0.2%
43.1%
-10.6%
After a decline of 3.1% in OY2008, world oilseeds production increased 1.4% in OY2009 to around
396.5 mt. The rise in global output by 5.3 mt was mainly on account of rapeseed (up by 9.3 mt)
and sunflowerseed (6.1 mt), which offset an estimated 8.5 mt decline in soyabean output.
Incremental World Oilseeds Production
Thousand tonnes
OY
Peanut
Rapeseed
Soyabean
Sunflowerseed
Copra
Cottonseed
Palm Kernel
Total
Source: USDA
2006
-367
2,430
4,893
4,851
-9
-2,021
427
10,204
2007
-2,207
-3,415
15,563
7
-322
2,641
213
12,480
2008
1,560
3,373
-15,764
-2,943
443
-336
951
-12,716
2009
2,160
9,305
-8,509
6,053
163
-4,569
713
5,316
2010
-1,394
3,159
48,894
-1,624
-1
-2,085
474
47,423
2011
2,036
-565
3,326
1,071
15
4,470
422
10,775
2012E
137
433
-12,715
6,195
-56
3,039
708
-2,259
In general, growers responded to above average oilseed prices and prospects of continued
demand growth by raising acreage, which increased 4.8% in OY2009. In the US, after losing 14%
of acreage to grains in OY2008, soyabean area increased 16.4% or by 4.26 mha. However,
adverse weather conditions in the early part of the crop year led to yields falling to their lowest
level in five years. As a result, although 11% up from OY2008 season, total output remained
below average and 8% (6.3 mt) below its OY2007 peak. In the southern hemisphere, the OY2009
output fell well short of initial expectations, mainly on account of strongly adverse weather
conditions affecting soyabean crops in South America. In Argentina, where the season started
with record soyabean plantings, the crop suffered from severe and prolonged drought, causing
yields to decline 29%. Many of the late-sown soyabean (planted in late January 2009 following a
too brief respite from drought) failed to receive even half of the usual March-April rainfall. As a
result, output declined 31% to 32 mt, which represented a seven-year low. In Brazil, the soyabean
crop was less affected by dry weather, but output nevertheless declined 5.2% to 57.8 mt, as
farmers were confronted with reduced access to credit, higher production costs and lower profit
margins. As compared with a 7.5% increase in OY2008, world rapeseed production increased
19.2% in OY2009. In absolute terms, the increase in rapeseed output more than fully offset the
decline in soyabean output, and prevented high price increases in the oilseeds complex. The EU
accounts for around 32% of world rapeseed production. However, after a 14% increase in
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61
Industry Comment
rapeseed production in OY2008, EUs rapeseed production increased only 3.5% in OY2009 as
unfavourable weather conditions curbed production and yield growth. EUs rapeseed output for
OY2009 however benefited from the timely arrival of precipitation from late May 2009 through
June 2009, during the crops primary stages for flowering and pod filling. Rapeseed production in
the Ukraine nearly trebled in OY2009 allowing the country to become the worlds fifth largest
rapeseed producer in just a few years. Indias rapeseed production also increased at a high rate in
OY2009, following declines in OY2007 and OY2008. China's rapeseed production declined during
OY2006-08 because of lower profitability versus other crops. However, Chinas rapeseed
production increased 14.4% in OY2009 because of higher prices and consequently a 17% increase
in acreage.
World Oilseeds Pr oduction
Mt
OY
Peanut
Rapeseed
Soyabean
Sunflowerseed
Copra
Cottonseed
Palm Kernel
Total
Source: USDA
200307
32.31
42.50
211.24
27.27
5.40
41.00
9.08
368.80
2008
2009
2010
2011
2012E
2010
32.59
48.50
220.47
27.20
5.72
45.72
11.03
391.22
34.75
57.81
211.96
33.25
5.88
41.15
11.74
396.54
33.36
60.96
260.85
31.63
5.88
39.07
12.22
443.96
35.39
60.40
264.18
32.70
5.89
43.54
12.64
454.74
35.53
60.83
251.47
38.89
5.84
46.58
13.35
452.48
-4.0%
5.5%
23.1%
-4.9%
0.0%
-5.1%
4.0%
12.0%
Growth
2011
2012E
6.1%
-0.9%
1.3%
3.4%
0.3%
11.4%
3.5%
2.4%
0.4%
0.7%
-4.8%
18.9%
-1.0%
7.0%
5.6%
-0.5%
Following slow growth in OY2009, world oilseeds production increased 12% in OY2010 to then
record levels of 444 mt. The higher output emanated solely from a strong increase in soyabean
output, accompanied by moderate increases in rapeseed and palm kernel, and sharp declines in
sunflower seed and groundnut output. In absolute terms, output increased 47.4 mt driven by a
48.9 mt increase in soyabean output. Thus, soyabean accounted for more than 100% of the
increase in oilseeds output during OY2010, implying an overall decline in other oilseed crops.
Soyabean acreage increased 6% in OY2010 to a record 102 mha as farmers (especially in Brazil
and Argentina) responded to attractive prices and favourable weather conditions led to marked
yield improvements. After the 13% output increase in US; output in Brazil and Argentina
increased 19% and 70%, respectively because of record plantings and yield levels. However, in
China and India, oilseed plantings either fell or remained unchanged during OY2010. In China,
soyabean output declined 3.6% in OY2010. Despite government programs in China designed to
encourage soyabean production, its area increased only 0.7% in OY2010. Farmers shifted back
more cropland into corn production because of higher returns compared with soyabean.
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62
Industry Comment
Oilseeds Production in Major Pr oducing Countries

Mt
OY
US
Brazil
China
Argentina
India
EU-27
Canada
Ukraine
Russia
Indonesia
Other
Total
Source: USDA
200307
89.80
56.81
54.90
43.65
27.99
21.81
10.46
4.91
6.16
7.12
45.19
368.80
2008
2009
2010
2011
2012E
2010
82.45
64.25
52.75
51.89
33.95
24.45
12.42
5.97
6.93
8.23
47.93
391.22
89.20
60.31
58.12
35.51
33.40
27.22
16.09
10.69
8.85
9.13
48.04
396.54
98.90
71.42
57.84
57.94
32.37
29.65
16.51
10.52
8.03
9.44
51.34
443.96
100.38
79.28
57.69
53.85
34.67
29.07
17.23
11.55
7.24
9.75
54.03
454.74
91.22
75.80
57.83
52.68
36.23
28.96
18.53
13.20
12.43
10.18
55.44
452.48
10.9%
18.4%
-0.5%
63.2%
-3.1%
8.9%
2.6%
-1.6%
-9.2%
3.3%
6.9%
12.0%
Growth
2011
2012E
1.5%
11.0%
-0.3%
-7.1%
7.1%
-2.0%
4.4%
9.8%
-9.9%
3.3%
5.2%
2.4%
-9.1%
-4.4%
0.2%
-2.2%
4.5%
-0.4%
7.5%
14.3%
71.6%
4.5%
2.6%
-0.5%
As compared with record soyabean output; production of sunflower seed, groundnut and
cottonseed declined during OY2010 because of unfavourable weather conditions. However,
rapeseed production increased for the third consecutive year, as most producers reported good
yields. The decline in groundnut production was primarily because of a sharp decline in Indias
groundnut output because of deficient monsoons. In the US, production declined 29% in OY2010
because of a 28% decline in plantings and a decline in yields. In India, OY2010 production for
groundnuts declined 22% to 4.9 mt, because of lower acreage. A majority of Indias groundnuts
are grown in the western state of Gujarat and the southern states of AP and Karnataka. After a
delayed arrival of the monsoon in June 2009, planting accelerated in early July 2009 due to a
resurgence of rainfall. But, less prolific rains subsequently deterred the continuation of planting
and encouraged switching to crops with a lower moisture requirement. Yields also declined due
to prolonged moisture stress during the crop establishment stage. During OY2010, sunflower
seed output declined in EU-27, Russia, and Ukraine because of unfavourable weather conditions
which also pruned yields. These factors also caused rapeseed output to increase by less than
previously anticipated. In Russia, yields of sunflower seed and rapeseed were lower than average
due to unfavourable weather. In Ukraine, following a 1.8 mt increase in rapeseed production
during OY2009, production declined 1 mt in OY2010 because of the financial crisis and the credit
crunch. Although acreage declined 27% in OY2010, yield declines were higher because of a period
of dry weather in August-September 2009. In Canada, the worlds largest canola/rapeseed
exporter, record rapeseed production of 12.9 mt was achieved in the OY2009 season. However,
in OY2010, the area planted to canola/rapeseed declined by 2%, as less than favourable seasonal
conditions adversely affected crop development in some areas.
Following record oilseeds output during OY2010, world oilseeds output increased 2.4% in OY2011
attributable to a 0.9% decline in rapeseed output, and slow 1.3% growth in soyabean output.
Output increased at a low rate as a 3.4% increase in plantings was accompanied by a 1% decline
in yields. Acreage for soyabean increased only 0.6% during OY2011 because of record soyabean
output during OY2010, substantial rise in costs of production, and continued strong competition
between crops for land. World soyabean production increased only 1.3% in OY2011 to 264.2 mt.
Among northern hemisphere producers, the US reported a 0.9% decline in output to 90.6 mt
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63
Industry Comment
mainly because of a reduction in yields. In the southern hemisphere, crop increases for Brazil and
Paraguay more than offset a reduction for Argentina. Soyabean production in Brazil increased
9.4% (+6.5 mt) to 75.5 mt because of 3% increase in plantings (encouraged by near-record
soyabean prices) and 6.3% increase in yields. Brazils growing season started late as the rainfall
did not really pick up until mid-October. But since then, frequent rains aided yield dramatically. In
Argentina, abundant rains in the second half of January 2011 and early February 2011 eased a dry
spell from September 2010. The timely moisture encouraged farmers to continue planting into
early February 2011. Despite the stabilising weather conditions, soils in Argentina dried out
considerably after 3 months of very little rainfall. Although conditions were not as bad as the
drought of 2008-09, they similarly slowed planting progress. Yields declined 8.9% and combined
with a 1.6% decline in plantings, soyabean output declined 10.1% in OY2011 to 49 mt. In China,
production increased only 0.8%, while in India, extensive plantings and favourable weather led to
a 1% increase in output.
World rapeseed production declined 0.9% in OY2011 to 60.4 mt, reversing three successive year
of increases. Amongst the major producers, production increased only in India. Production
declined in EU, Canada, and China because of adverse weather conditions. In the EU-27, rapeseed
remains by far the most important oilseed grown, followed by sunflowers and soyabeans. With
output of 5.4 mt in 2011, France is the largest producer of rapeseed in the EU-27 accounting for
28% of EU-27 rapeseed production. Other major producers are Germany (3.9 mt), UK (2.8 mt),
and Poland (1.9 mt). In the EU, production incentives for rapeseed were robust because of
previous years disappointing harvest and growing demand. Inspite of a 7.2% increase in acreage,
EU rapeseed production declined 3.9% in OY2011 to 20.7 mt. The decline in production was most
pronounced in France, Germany, Poland, and Denmark. Wet weather during spring (France and
Hungary) and dry weather in late spring/early summer (Central and Eastern Europe) resulted in
lower yields. Only the UK, Romania, Bulgaria, and Finland showed increased production. In
Canada, although canola plantings increased 1.9% during OY2011, yields declined 2.8% resulting
in a 0.9% decline in canola production to 12.8 mt during OY2011. Late snowstorms and wet
weather reduced growth in planted area, and production in OY2011 declined. Rapeseed
production in India increased 9.4% during OY2011 to 7 mt mainly because of higher plantings.
O i ls e e d s P r o d u c t io n P r o s p e c t s f o r 20 11 - 1 2
As compared with a 2.4% increase in OY2011, world oilseed production is expected to decline
0.5% in OY2012 to 452.5 mt. The decline in absolute terms is expected at 2.3 mt primarily
because of a 12.7 mt decline in soyabean production. Rapeseed production is expected to
increase only marginally by 0.4 mt. However, output of sunflowerseed and cottonseed is
expected at record levels of 38.9 mt and 46.6 mt, respectively.
Soyabean production is expected to decline 4.8% during OY2012 to 251.5 mt primarily because of
substantial declines in US, Brazil, and Argentina. In the US, plantings declined 3.9% because of
competition with other crops especially corn and wheat. In addition, the recent change in the
relationship between new crop corn and soyabean prices has reduced the potential profit
advantage of a corn-after-corn rotation over a soyabean-after-corn rotation. Average yields and
projected costs still favour corn in those areas where corn-after-corn is common, but the margin
has narrowed substantially since the beginning of 2012 and is still narrowing. Soyabean yields in
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64
Industry Comment
the US are forecast to decline 4.5% during OY2012 resulting in an expected 8% decline in US
soyabean output during OY2012. Soyabean yield reductions for the upper Midwest States
(Minnesota, Nebraska, South Dakota, and North Dakota) are expected to account for most of the
decline in this output. In South America, competition from grains and other attractively priced
crops has limited expansion in soya plantings. In Argentina, although plantings are forecast to
increase 1.6%, yields could decline 4% because of drought conditions in almost all major areas.
The areas hardest hit by the drought account for around 25% of production area. Nearly all of the
first crop soyabean are stunted, abnormally short and the rows are not covered. As a result of
drought conditions in Argentina, soyabean production is expected to decline 2% during OY2012
to 48 mt. If rains continue like they did a year ago (after a similar bout of early dryness), yields
could still be close to average. Conversely, it is possible that soyabean yields could collapse to
2008-09 levels when the drought continued unabated. Drought conditions in Brazil are also
expected to affect soyabean yields and production. While yields are forecast to decline 8% during
OY2012, production could decline 4.6% (-3.5 mt) to 72 mt. Precipitation throughout southern
Brazil for November-December 2011 was only about half of the normal level. Avoidance of yield
losses in areas where soyabean were sown later will now hinge on better distributed rainfall in
January-February 2012. As compared with the southern regions, more northern states in Brazil
have fared much better. Excellent growing conditions in Matos Grosso, Goias, and Bahia may
partly offset yield losses in the South. In China, soybean production is forecast to decline 8.6%
during OY2012 to 13.5 mt. This forecast reflects a return to average yields following last years
near-record yield, as well as the effect of adverse seasonal conditions during planting, which
lowered the total area planted by 10% to 7.7 mha during OY2012.
Growth in World Oilseeds Production
OY
25%
2008
2009
2011
2012
2010
20%
15%
10%
5%
0%
Peanut
Rapeseed
Soyabean
Sunflowerseed
Total
-5%
-10%
-15%
Following a 0.9% decline in OY2011, world rapeseed production is forecast to increase 0.7% to
60.8 mt. Production increase in Canada is expected to more than offset declines in EU. The 2011
canola harvest in Canada has exceeded previous expectations and is estimated at a record 14.2
mt. Planting was delayed by excess soil moisture, but farmers were still able to achieved a 15%
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65
Industry Comment
increase in plantings to a record 7.5 mha. In the EU, rapeseed plantings are expected to decline
3.4% in OY2012 to 6.8 mha. Poor weather thwarted plans to raise oilseed sowings in response to
relatively firm crops. The decline is essentially due to poor conditions at planting time in many
countries, in particular Germany, Denmark, Romania and Bulgaria.
World production of sunflower seed is forecast to increase by 19% during OY2012 to a record
output of 38.9 mt. This forecast is driven by record production in both the Black Sea region
(primarily Russian Federation and Ukraine) and the EU. In the Black Sea region, record sunflower
production is forecast in OY2012 in the Russian Federation and Ukraine at around 9.6 mt and 9.5
mt, respectively. These increases are expected to driven by favourable summer rainfall, which led
to record high yields. In the EU, sunflower seed production is forecast to increase 17% to record
levels of 8.1 mt. Higher production in Spain and France is the principal driver behind this forecast
increase. Favourable seasonal conditions in most other producing countries have also led to
expected yield increases.
Over the medium-term, world oilseeds production is expected to increase 17% by 2020 (or 1.6%
per annum during 2012-20) relative to the average for 2009-11, with Brazil providing 19% of the
increase during 2012-20, followed by US (17%), China (11%), India (8%), Argentina (6%), and EU
(6%). The US is likely to remain the largest oilseed producer, followed by Brazil, China, Argentina,
India and the EU. The share held by Latin American and Eastern European producers is likely to
increase at the expense of China and the US. Indias share is expected to remain at 8%. Brazils
oilseeds production is expected to increase at around 1.7% per annum during 2012-20 driven by
a 1.5% per annum increase in acreage, and high oilseeds and vegetable oil prices. Argentinas
oilseeds production is expected to increase at an annual rate of 0.7%, mainly because of
marginally higher yields. In the US, due to high oilseed prices (relative to competing arable crops),
oilseeds acreage in the US is expected to recover in the short-term, but then stagnate. EUs
oilseeds production is expected to increase by 1.4% per annum during 2012-20 because of the
development of biodiesel, derived mainly from rapeseed oil. In China, production increases
should continue to be driven by yield improvements rather than area expansion. China is
expected to favour domestic production of coarse grains and imports of oilseeds to capture the
value added from processing oilseeds into protein meals and vegetable oils domestically. Indias
oilseeds area is projected to continue to expand. Production is projected to grow at an annual
rate of 2% during 2012-20, based on moderate area expansion and yield improvements from the
application of modern production technologies. However, the growth rate of 2.1% during 201119 is much lower than 4.8% during 2002-11, reflecting a slowdown in both acreage expansion and
yield improvements.
The global potential for increased oilseed production is more constrained than it was in previous
decades. This is due to limitations in yield increases and area expansion. Area increases could be
lower than in the past decade because of higher marginal costs of area expansion and new
constraints coming from environmental regulations in developing countries, as well as sustained
profitability of competing crops, mainly maize, in the US. Reduced area expansion is expected to
occur in particular in developing countries where annual growth rates are expected to decline
from 1.7% per annum during 2002-11 to 0.9% per annum during 2012-20. Average yield gaps
between developed and developing countries are expected to narrow further. Latin America is
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66
Industry Comment
expected to continue to expand production, but the gains are expected to be smaller than in the
previous decade.
Long-Term Forecast of World Oilseeds Production
Volume
(mt)
OY
US
Brazil
China
Argentina
India
EU-27
Canada
Ukraine
Russia
Pakistan
Australia
Uruguay
Turkey
Total
Source: OECD-FAO
Growth
2011
2020
2002-11
2012-20
98
74
57
60
35
30
17
11
8
5
3
3
2
109
87
65
64
40
33
20
16
11
5
4
3
2
0.9%
5.5%
1.0%
5.7%
4.1%
4.6%
9.5%
16.3%
10.0%
1.4%
1.2%
27.6%
0.0%
1.2%
1.7%
1.4%
0.7%
1.5%
1.4%
2.0%
4.3%
3.9%
1.7%
3.2%
3.4%
1.2%
441
507
3.4%
1.6%
Soyab ean
Compared with record output of 264.2 mt during OY2011, world soyabean production is
expected to decline 4.8% during OY2012 to 251.5 mt primarily because of substantial declines in
US, Brazil, and Argentina.
In the US, plantings declined 3.9% because of competition with other crops especially corn and
wheat. In addition, the recent change in the relationship between new crop corn and soyabean
prices has reduced the potential profit advantage of a corn-after-corn rotation over a soyabeanafter-corn rotation. Average yields and projected costs still favour corn in those areas where
corn-after-corn is common, but the margin has narrowed substantially since the beginning of
2012 and is still narrowing. Soyabean yields in the US are forecast to decline 4.5% during OY2012
resulting in an expected 8% decline in US soyabean output during OY2012. Soyabean yield
reductions for the upper Midwest States (Minnesota, Nebraska, South Dakota, and North Dakota)
are expected to account for most of the decline in this output.
In South America, competition from grains and other attractively priced crops has limited
expansion in soya plantings. In Argentina, although plantings are forecast to increase 1.6%, yields
could decline 4% because of drought conditions in almost all major areas. The areas hardest hit
by the drought account for around 25% of production area. Nearly all of the first crop soyabean
are stunted, abnormally short and the rows are not covered. Planting has not finished yet and it is
expected that some second crop soya will not even be planted. As a result of drought conditions
in Argentina, soyabean production is expected to decline 2% during OY2012 to 48 mt. If rains
continue like they did a year ago (after a similar bout of early dryness), yields can still be close to
average. Conversely, it is possible that soyabean yields could collapse to 2008-09 levels when the
drought continued unabated. Drought conditions in Brazil are also expected to affect soyabean
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67
Industry Comment
yields and production. While yields are forecast to decline 8% during OY2012, production could
decline 4.6% (-3.5 mt) to 72 mt. Precipitation throughout southern Brazil for NovemberDecember 2011 was only about half of the normal level. Avoidance of yield losses in areas where
soyabean were sown later will now hinge on better distributed rainfall in January-February 2012.
As compared with the southern regions, more northern states in Brazil have fared much better.
Excellent growing conditions in Matos Grosso, Goias, and Bahia may partly offset yield losses in
the South.
In China, Chinas soyabean production is expected to decline 11% (1.5 mt) during OY2012 to 13.5
mt. This forecast reflects a return to average yields following last years near-record yield of 1.77
t/ha, as well as the effect of adverse seasonal conditions during planting, which lowered the total
area planted by 10% to 7.7 mha during OY2012. The countrys soyabean acreage did not reach
previous expectations as more corn was sown than earlier thought. Recent crush margins for
soyabeans in China have also not been favourable, and domestic demand for soyabean meal has
moderated.
World Soyabean Seeds Demand and Supply
Mt
OY
Area Harvested
Beginning Stock
Production
Yields
Imports
Supply
Exports
Crush
Food Use Consn.
Feed Waste Consn.
Dom. Consn.
Demand
Ending Stocks
Production
US
Brazil
Argentina
China
India
Paraguay
Canada
Source: USDA
Growth
2011 2012E
200307
90.05
43.77
211.24
2,346
62.69
317.70
63.28
177.39
12.86
15.14
205.38
268.66
49.03
2008
2009
2010
2011
2012E
2010
90.60
62.09
220.47
2,433
78.32
360.88
78.77
202.85
14.05
13.61
230.50
309.28
51.61
96.36
51.61
211.96
2,200
77.40
340.96
76.85
193.33
14.22
13.86
221.40
298.24
42.72
102.17
42.72
260.85
2,553
86.83
390.40
92.55
209.50
14.63
14.12
238.25
330.80
59.60
102.76
59.60
264.18
2,571
88.83
412.61
91.97
221.09
15.18
15.46
251.74
343.70
68.90
103.29
68.90
251.47
2,434
90.76
411.13
92.79
227.42
15.37
15.26
258.05
350.85
60.28
6.0%
-17.2%
23.1%
16.1%
12.2%
14.5%
20.4%
8.4%
2.9%
1.9%
7.6%
10.9%
39.5%
0.6%
39.5%
1.3%
0.7%
2.3%
5.7%
-0.6%
5.5%
3.7%
9.5%
5.7%
3.9%
15.6%
0.5%
15.6%
-4.8%
-5.3%
2.2%
-0.4%
0.9%
2.9%
1.3%
-1.3%
2.5%
2.1%
-12.5%
29.52
21.16
14.50
7.21
9.30
2.06
1.12
25.96
21.30
16.37
8.80
8.75
2.65
1.17
30.22
21.70
16.00
9.60
9.13
2.55
1.20
30.91
23.50
18.60
9.60
9.19
2.68
1.38
31.00
24.20
18.30
9.30
8.52
2.84
1.48
29.80
25.00
18.60
10.27
7.65
2.80
1.54
2.3%
8.3%
16.3%
0.0%
0.7%
5.1%
15.5%
0.3%
3.0%
-1.6%
-3.1%
-7.3%
6.0%
7.0%
-3.9%
3.3%
1.6%
10.4%
-10.2%
-1.4%
4.4%
R apesee d
The expansion in rapeseed production over the last few years has emanated largely from the EU
and Canada. The EU accounts for around 34-35% of world rapeseed production. In the EU,
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68
Industry Comment
growth is being driven by the development of biodiesel derived mainly from rapeseed oil6. The EU
directive on energy use signed in January 2007 sets up a binding minimal objective of biofuel use
in total transportation fuel at the horizon 2020 in EU countries. The EUs Renewable Energy
Directive (RED) calls for a 10% share of renewable energy in the transport fuel mix by 2020. While
the RED remains to be implemented by member states and translated into national legislation,
the contribution of ethanol in the overall mix of biofuels is expected to increase, and ethanol
should reach an average share of 8.2% in gasoline-type transport fuels by 2020. Ethanol
production in the EU is increasingly cereal based (both wheat and coarse grains), but sugar beet is
also an important feedstock.
Following a 0.9% decline in OY2011, world rapeseed production is forecast to increase 0.7% to
60.8 mt. Production increase in Canada is expected to more than offset declines in EU. The 2011
canola harvest in Canada has exceeded previous expectations and is estimated at a record 14.2
mt. Planting was delayed by excess soil moisture, but farmers were still able to achieved a 15%
increase in plantings to a record 7.5 mha. Once sown, most canola fields thrived on the ample
moisture, although the crop in Manitoba was generally impaired by the late start. The national
crop estimate has been higher than anticipated because of higher estimates of acreage and yields
for Saskatchewan and Alberta. Although canola yields of 1,896 kg/ha in Canada during OY2012
are expected to be 6% below the record high of 2 years ago, yields are still above the long term
average.
In the EU, rapeseed plantings are expected to decline 3.4% in OY2012 to 6.8 mha. Poor weather
thwarted plans to raise oilseed sowings in response to relatively firm crops. The decline is
essentially due to poor conditions at planting time in many countries, in particular Germany,
Denmark, Romania and Bulgaria. Lower EU rapeseed production is mainly due to lower
production in Germany, Poland, Romania, and Denmark. Rapeseed yields, although forecast to
decline 4.5%, are better than previous pessimistic forecasts.
Chinas rapeseed production is expected to decline for the second successive year primarily
because of switch to competing crops and the resultant 4% decline in acreage. Low profits and
high input costs (including labour) continue to hamper rapeseed area growth. However, yields
are forecast to increase 3% because of good weather conditions during rapeseed maturation and
harvesting seasons in major-producing regions. In India, following a 24% increase during OY2011,
rapeseed production is expected to decline 8.3% during OY2012 to 7-7.5 mt. A 7% decline in
acreage is expected to be accompanied by stagnation in yields.
At present, almost all biofuels produced around the world are either ethanol or estersalso referred to as biodiesel.
While ethanol is usually produced from sugar and starchy crops, such as cereals, biodiesel is produced mainly from
oilseed crops, including rapeseed, palm, soyabean, and sunflowers. While soyabean is used in the US, almost all the
other major producers use rapeseed.
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69
Industry Comment
World Rapeseed Demand and Supply

Mt
OY
Area Harvested
Beginning Stock
Production
Yields
Imports
Supply
Exports
Crush
Food Use Consn.
Feed Waste Consn.
Dom. Consn.
Demand
Ending Stocks
Production
EU-27
Canada
China
India
Australia
Ukraine
Russia
Source: USDA
Growth
2011 2012E
200307
25.60
3.46
42.50
1,660
5.56
51.52
5.63
39.38
0.49
2.18
42.05
47.68
3.83
2008
2009
2010
2011
2012E
2010
28.24
4.64
48.50
1,718
7.55
60.69
8.15
46.64
0.46
1.89
48.99
57.14
3.55
31.08
3.55
57.81
1,860
12.13
73.48
12.05
52.09
0.48
2.29
54.86
66.91
6.58
31.42
6.58
60.96
1,940
10.74
78.28
10.79
56.55
0.53
2.44
59.52
70.30
7.98
33.32
7.98
60.40
1,813
10.03
78.40
10.83
58.86
0.55
1.91
61.32
72.14
6.26
33.44
6.26
60.83
1,819
11.30
78.39
11.54
59.11
0.57
2.04
61.72
73.26
5.14
1.1%
85.2%
5.5%
4.3%
-11.4%
6.5%
-10.4%
8.6%
10.0%
6.5%
8.5%
5.1%
21.3%
6.0%
21.3%
-0.9%
-6.6%
-6.6%
0.2%
0.4%
4.1%
3.8%
-21.8%
3.0%
2.6%
-21.5%
0.4%
-21.5%
0.7%
0.3%
12.7%
0.0%
6.5%
0.4%
3.6%
6.9%
0.7%
1.5%
-18.0%
14.00
7.49
11.83
6.03
1.22
0.23
0.28
19.74
12.41
12.49
6.51
2.06
1.75
0.75
18.36
9.60
10.57
5.45
1.21
1.05
0.63
19.00
12.64
12.10
6.70
1.84
2.87
0.75
21.55
12.89
13.66
6.40
1.92
1.87
0.67
20.71
12.77
13.10
7.00
2.38
1.47
0.67
19.10
14.17
13.00
7.00
2.94
1.50
1.05
13.4%
1.9%
12.9%
-4.5%
4.1%
-34.8%
-11.3%
-3.9%
-0.9%
-4.1%
9.4%
24.1%
-21.5%
0.4%
Sunfl ower See d

Argentina, Ukraine and Russia and the key producers and suppliers to the global market of
sunflower and by-products. During OY2011, these three countries accounted for 53% of world
sunflower seed output and 31% of world exports. Due to geographical location, sunflower
harvesting season in Argentina corresponds to a period of supply declines in Russia and Ukraine.
As a result competition between these countries on the world market has a seasonal character.
World sunflower seed output is expected to increase 18.9% in OY2012 to record levels of 38.9
mt. Production increase during OY2012 is expected to be driven by a high 13% increase in
acreage accompanied by a second consecutive year of yield increases. Output is expected to
increase at high rates in Russia, Ukraine, and EU; which is expected to more than compensate for
output declines in Argentina and the US.
Russia is the largest sunflower seed producer accounting for around 21% of world sunflower seed
output. High sunflower seed prices have caused a 30% increase in Russias sunflowerseed
plantings during OY2012. Favourable weather conditions in Russia (and Ukraine) could result in
Russia harvesting record oilseeds crop in OY2012. Russias sunflowerseed production is forecast
to increase 80% to 9.6 mt during OY2012, driven by 30% increase in plantings and a 39% increase
in yields. Summer weather in European Russia during 2011 was mostly favourable for the
sunflowerseed crop, and far better than the catastrophic drought of 2010. During 2010-11,
severe drought in European Russia had caused direct losses and a significant decline in yields. In
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70
Industry Comment
Ukraine, acreage is forecast to increase for the fourth successive year. Ukraines sunflowerseed
output had increased less than anticipated in 2010-11 because of lower increases in yields. Until
August 2010, the sunflower seed crop in Ukraine was progressing normally. However, without
any precipitation, daily temperature highs in north-eastern Ukraine were exceeding 100 degrees
Fahrenheit. Unlike in 2010, the countrys sunflowerseed crop during 2011 has benefited from
very favourable summer precipitation. Excellent weather conditions could result in Ukraines
sunflower seed output to expand for the fourth successive year to record levels of 9.5 mt.
Production of sunflowerseed in the EU is forecast to increase for the third successive year to a
record 8.1 mt. Higher output is expected to be driven by 11% increase in plantings, and recovery
of yields from the drought-induced decline of 2010-11. High increases in Spain, France, Romania,
and Portugal are largely responsible for the substantial increase.
In Argentina, higher sunflower seed prices have caused a substantial increase in sunflower
plantings during OY2011 and OY2012, following two years of substantial declines. Acreage is
expected to increase 8% in OY2012. The expansion is occurring in areas that are less suitable to
growing corn. However, drought conditions are expected to result in a 19% decline in yields.
Following record output during OY2011, production is expected to decline 13% during OY2012.
In India, acreage planted to kharif sunflower during OY2012 is estimated to have declined 4.5%
because of unfavourable weather conditions. As a result, kharif sunflower output is expected to
decline for the fourth successive year. However, rabi sunflower output accounts for three-fourth
of annual output. Decline in rabi acreage in Karnataka and AP are expected to result in rabi
sunflowerseed output to decline for the fourth successive year.
World Sunfl ower Seed Demand and Supply
Mt
OY
Area Harvested
Beginning Stock
Production
Yields
Imports
Supply
Exports
Crush
Food Use Consn.
Feed Waste Consn.
Dom. Consn.
Demand
Ending Stocks
Production
Russia
Ukraine
EU-27
Argentina
China
Source: USDA
Growth
2011 2012E
200307
22.12
2.23
27.27
1,233
1.57
31.07
1.69
23.41
1.34
2.03
26.78
28.47
2.61
2008
2009
2010
2011
2012E
2010
21.09
3.38
27.20
1,290
1.25
31.83
1.48
24.45
1.34
1.59
27.37
28.85
2.98
23.55
2.98
33.25
1,412
1.85
38.08
2.14
28.97
1.50
2.24
32.71
34.86
3.23
22.80
3.23
31.63
1,387
1.48
36.33
1.57
29.19
1.64
2.00
32.84
34.40
1.93
22.88
1.93
32.70
1,429
1.59
36.22
1.67
29.38
1.56
1.87
32.81
34.48
1.74
25.85
1.74
38.89
1,505
2.42
43.04
2.52
33.61
1.69
2.16
37.46
39.98
3.06
-3.2%
8.3%
-4.9%
-1.8%
-20.2%
-4.6%
-27.0%
0.8%
9.7%
-10.8%
0.4%
-1.3%
-40.2%
0.3%
-40.2%
3.4%
3.0%
7.6%
-0.3%
6.8%
0.6%
-5.2%
-6.4%
-0.1%
0.2%
-10.1%
13.0%
-10.1%
18.9%
5.3%
51.9%
18.8%
50.7%
14.4%
8.7%
15.3%
14.2%
16.0%
76.4%
5.31
4.23
6.05
3.57
1.73
5.65
4.20
4.80
4.65
1.25
7.35
7.00
7.13
2.44
1.79
6.43
7.60
6.91
2.30
1.96
5.35
8.40
6.92
3.67
1.90
9.63
9.50
8.10
3.20
2.00
-12.6%
8.6%
-3.0%
-5.7%
9.3%
-16.7%
10.5%
0.1%
59.6%
-2.9%
79.9%
13.1%
17.1%
-12.8%
5.3%
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71
Industry Comment
G roundnut S eed
World groundnut production declined 4% in OY2010 because of sharply lower outputs in the
major producing countries. In the US, production declined 29% in OY2010 because of a 28%
decline in plantings and a decline in yields. In India, the OY2010 production for groundnuts
declined 22% to 4.9 mt, because of lower acreage. A majority of Indias groundnuts are grown in
the western state of Gujarat and the southern states of AP and Karnataka. After a delayed arrival
of the monsoon in June 2009, planting accelerated in early July 2009 due to a resurgence of
rainfall. But, less prolific rains subsequently deterred the continuation of planting and
encouraged switching to crops with a lower moisture requirement. Yields also declined because
prolonged moisture stress during the crop establishment stage. World groundnut production
increased 6.1% in OY2011 to record levels of 35.4 mt primarily because of higher output in India,
US and China. In the US, plantings increased 16% in OY2011 because of higher prices. Plantings
increased inspite of a significant rise in cotton acreagesa traditional rotation crop with
peanut/groundnut. Crop conditions for groundnut were also above-average. In India, following
the drought-induced output decline during OY2010, groundnut output increased 52% during
OY2011. Acreage increased 52% primarily because of excess rainfall received in all the three
major producing regionsAP, Gujarat, and Rajasthan. Early monsoon rains in Southern India
helped increase groundnut acreage; especially in AP, where acreage is expected to more than
double during Kharif 2010-11. However, Gujarat reported only marginal increases in groundnut
acreage.
World production of groundnut is forecast to increase only 0.4% in OY2012 to 35.5 mt primarily
because of substantial declines in India and US, accompanied by fifth successive year of increase
in China. Chinas groundnut production is forecast to increase 3.6% during OY2012 to record
levels of 16.2 mt. Acreage has increased 3.8% and yields are expected to remain largely
unchanged. In the US, severe drought and scorching temperatures have taken a heavy toll on
groundnut crops in the southern US. In India, acreage has declined due to higher competition for
cropland from soyabeans and cotton.
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72
Industry Comment
World Groundnut Seed Demand and Supply

Mt
OY
Area Harvested
Beginning Stock
Production
Yields
Imports
Supply
Exports
Crush
Food Use Consn.
Feed Waste Consn.
Dom. Consn.
Demand
Ending Stocks
Production
China
India
US
Nigeria
Indonesia
Source: USDA
Growth
2011 2012E
200307
21.51
1.35
32.31
1,502
1.81
35.48
2.18
15.09
14.35
2.58
32.02
34.20
1.28
2008
2009
2010
2011
2012E
2010
20.87
1.24
32.59
1,562
2.03
35.86
2.44
15.10
14.81
2.42
32.32
34.77
1.10
21.37
1.10
34.75
1,626
1.88
37.73
2.42
15.62
15.71
2.47
33.79
36.21
1.52
20.40
1.52
33.36
1,636
1.95
36.82
2.39
14.59
16.08
2.47
33.14
35.54
1.29
21.33
1.29
35.39
1,659
1.96
38.64
2.28
16.01
16.49
2.79
35.28
37.56
1.09
20.74
1.09
35.53
1,713
1.97
38.59
2.57
16.09
16.49
2.43
35.01
37.58
1.00
-4.6%
38.7%
-4.0%
0.6%
3.5%
-2.4%
-1.0%
-6.6%
2.4%
0.0%
-1.9%
-1.9%
-15.3%
4.6%
-15.3%
6.1%
1.4%
0.7%
4.9%
-4.8%
9.7%
2.5%
12.8%
6.4%
5.7%
-15.7%
-2.8%
-15.7%
0.4%
3.3%
0.5%
-0.1%
13.0%
0.5%
0.0%
-12.7%
-0.8%
0.1%
-7.6%
13.96
6.36
1.82
1.52
1.15
13.03
6.80
1.67
1.55
1.15
14.29
6.25
2.34
1.55
1.25
14.71
4.90
1.68
1.55
1.25
15.64
5.85
1.89
1.55
1.25
16.20
5.35
1.65
1.55
1.25
3.0%
-21.6%
-28.5%
0.0%
0.0%
6.3%
19.4%
12.5%
0.0%
0.0%
3.6%
-8.5%
-12.5%
0.0%
0.0%
V e g e t a b le O i ls
About two-thirds of world supply of vegetable oil is produced by crushing oilseeds and the
remainder is harvested directly from the fruit of the palm tree. World production of vegetable
oils is estimated to have increased at a 5-year CAGR of 4.4% to 147.2 mt in OY2011. During the
same period, consumption increased at a 5-year CAGR of 4.8% to 150.7 mt in OY2011. Thus,
consumption increased at a higher rate than production, primarily because of higher growth
(11%) in industrial demand for biodiesel. By comparison, food use consumption increased at a
lower rate of 3.3%. There have been significant yearly fluctuations resulting in yearly variations in
stocks. Vegetable oil stocks declined in OY2008 primarily because of lower growth in production.
Stocks increased in OY2009-10, but are forecast to decline in OY2011 and OY2012.
www.imacs.in
73
Industry Comment
World Vegetable Oil Production and Consumption

OY
12%
Production
Consumption
10%
8%
6%
4%
2%
0%
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
-2%
-4%
-6%
Growth in World Food and Industrial Use Vegetable Oil Consumption

OY
30%
Food Use
Industrial Use
25%
20%
15%
10%
5%
0%
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
-5%
Over the period 2002-11, world vegetable oil production has grown at an annual rate of 5.1%,
driven primarily by higher output of palm, and moderate growth in rapeseed oil. By comparison,
the share of groundnut, coconut, and sunflower oil has declined.
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74
Industry Comment
World Vegetable Oil Production and Consumption

Mt
OY
Production
Coconut
Cottonseed
Palm Kernel
Peanut
Rapeseed
Soyabean
Sunflowerseed
Olive
Palm
Consumption
Coconut
Cottonseed
Palm Kernel
Peanut
Rapeseed
Soyabean
Sunflowerseed
Olive
Palm
Source: USDA
20032008
2009
2010
2011
2012E
07
110.29 128.71 133.68 140.60 147.17 153.10
3.31
3.53
3.53
3.62
3.68
3.68
4.64
5.20
4.78
4.63
5.00
5.36
3.97
4.88
5.17
5.50
5.66
5.70
4.85
4.86
5.02
4.67
5.14
5.16
15.33
18.44
20.51
22.32
23.32
23.33
32.95
37.82
35.91
38.87
41.23
42.49
9.56
10.11
11.99
12.10
12.20
13.81
2.81
2.78
2.78
3.05
3.01
3.02
32.87
41.08
43.99
45.86
47.93
50.57
107.63 125.13 129.71 137.78 144.62 150.76
3.30
3.43
3.39
3.88
3.91
3.92
4.54
5.12
4.77
4.63
4.84
5.24
3.87
4.55
4.91
4.92
4.96
5.12
4.90
4.78
4.89
4.83
5.13
5.18
15.36
18.25
20.15
22.42
23.30
23.20
32.30
37.74
35.99
38.26
41.02
42.58
8.95
9.07
10.59
11.35
11.34
12.88
2.72
2.88
2.95
2.99
3.01
3.03
31.69
39.32
42.09
44.51
47.11
49.61
2010
5.2%
2.5%
-3.3%
6.3%
-6.9%
8.8%
8.2%
0.9%
9.5%
4.3%
6.2%
14.4%
-2.9%
0.3%
-1.2%
11.2%
6.3%
7.2%
1.4%
5.8%
Growth
2011
2012E
4.7%
1.7%
8.0%
2.9%
10.0%
4.5%
6.1%
0.8%
-1.1%
4.5%
5.0%
0.9%
4.5%
0.7%
6.3%
3.9%
7.2%
-0.1%
0.8%
5.8%
4.0%
0.0%
7.2%
0.6%
0.4%
0.0%
3.1%
13.2%
0.2%
5.5%
4.2%
0.2%
8.5%
3.3%
0.9%
-0.4%
3.8%
13.6%
0.7%
5.3%
Soyabean now dominates world edible oil production and consumption. Soyabean has
consolidated its position as the major edible oil along with palm oil. Palm and palm kernel oil
share of world consumption has increased from 26.5% during 1993-2002 to 34.7% during 200312. The share of rapeseed and soyabean has been maintained at 15% and 29%, respectively.
However, while the share of sunflower seed declined from 11% to 8%, the share of groundnut oil
declined from 6% to 4%. The share of both soyabean and palm oil has increased over the last
three decades mainly because of an increase in acreage under these oilseeds.
Shar e of World Edible Oil Consumption
Others
Soyabean
Rapeseed
Groundnut
Palm
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
1981-90
1991-95
1996-2000
2001-05
www.imacs.in
2006-10
2008-12
75
Industry Comment
Although vegetable oil consumption has continued to grow at a strong rate, there has been a
slowdown in consumption during OY2007-09, followed by higher growth in OY2010-11. Supply
stagnation and high prices have resulted in reduced growth in global oils and fats consumption.
Edible uses in countries in Asia and the EU have been most affected, whereas utilisation of
vegetable oils for biofuel production increased further, driven by high crude oil prices and policy
targets in some countries.
World Vegetable Oil Demand and Supply
Mt
OY
Beginning Stock
Production
Imports
Exports
Indl. Dom. Consn.
Food Use Consn.
Feed Dom. Consn.
Domestic Consn.
Ending Stocks
Source: USDA
20032008
2009
2010
2011 2012E
07
10.01
11.67
11.54
13.27
13.49
12.68
110.29 128.71 133.68 140.60 147.17 153.10
40.91
50.26
53.78
55.46
56.92
60.00
43.05
53.97
56.02
58.06
60.28
62.70
16.33
25.25
27.23
30.20
32.67
34.64
90.29
98.78
101.37
106.43
110.87
115.08
1.01
1.10
1.11
1.16
1.07
1.05
107.63 125.13 129.71 137.78 144.62 150.76
10.53
11.54
13.27
13.49
12.68
12.32
Growth
2010
2011 2012E
15.0%
5.2%
3.1%
3.6%
10.9%
5.0%
4.5%
6.2%
1.7%
1.7%
4.7%
2.6%
3.8%
8.2%
4.2%
-7.4%
5.0%
-6.0%
-6.0%
4.0%
5.4%
4.0%
6.0%
3.8%
-2.2%
4.2%
-2.8%
World vegetable oil consumption increased 5% in OY2011, which was lower than the growth of
6.2% in OY2010. The higher growth during OY2010 was primarily because of recovery from the
global economic crisis, which had caused consumption growth to decline from 4.8% in OY2008 to
3.7% in OY2009. Although consumption growth in OY2009 was lower because of the global
economic crisis, the slowdown was less than initially expected, because of the decline in prices
which encouraged consumption. As the economic recovery gained momentum in 2009-10,
consumption growth also recovered in almost all countries, except India, where high inflation
levels of almost all commodities in general caused a slowdown in consumption growth.
Following growth of 4.7% in OY2011, world vegetable oil production is expected to increase at a
lower rate of 4% in OY2012, primarily because of a decline in oilseeds production. However,
inspite of lower oilseeds production, vegetable oil production is expected to increase 4% because
of higher oilseeds diverted towards crush, and lower growth in diversion towards feed. All major
oils are likely to post output increases.
While Indonesias palm oil production is expected to grow at a high rate of 7.6% to 25.4 mt in
OY2012 (compared with growth of 7.3% during OY2010 and OY2011), Malaysias production is
expected to increase 2.7% in OY2012 to 18.7 mt, compared with growth of 1.2% in OY2009-11.
Indonesias palm oil production is expected to increase by 1.8 mt due to an increased harvested
area and moderate yield improvements. However, Indonesias efforts to maintain strong palm oil
production growth is challenged by low productivity of smallholders and spatial planning
disagreements between central and local governmental authorities. The use of low quality seeds,
poor agricultural practices, marginal land and premature harvesting are some of the main factors
that lead to lower levels of productivity in smallholder plantation.
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76
Industry Comment
By contrast, world soyabean and sunflower oil production could expand by around 3.1% and
13.2%, respectively in OY2012. Rapeseed oil output could stagnate at around 23.3 mt because of
lower production in EU-27, and India; offset by an expected 5.5% increase in Canada.
World Vegetable Oil Production Major Countries
Mt
OY
Indonesia
Malaysia
China
EU-27
US
Argentina
Brazil
India
Russia
Ukraine
Other
Total
Source: USDA
200307
16.06
16.37
13.38
12.47
9.72
6.78
6.08
6.26
2.10
1.61
19.46
110.29
2008
2009
2010
2011
2012E
2010
20.98
19.73
14.69
14.49
10.55
8.49
6.85
7.05
2.51
1.94
21.44
128.71
23.69
19.43
16.11
15.48
9.67
7.37
6.78
6.74
3.06
2.82
22.54
133.68
25.59
19.94
17.88
16.71
10.07
7.72
7.14
6.39
3.12
3.15
22.91
140.60
27.30
20.44
18.99
16.42
9.80
8.74
7.73
7.40
2.71
3.47
24.17
147.17
29.10
20.96
20.22
16.38
9.55
8.81
7.96
7.39
3.97
3.75
25.01
153.10
8.1%
2.7%
10.9%
7.9%
4.1%
4.7%
5.3%
-5.3%
1.8%
11.6%
1.7%
5.2%
Growth
2011
2012E
6.7%
2.5%
6.2%
-1.7%
-2.6%
13.3%
8.3%
15.8%
-13.1%
10.4%
5.5%
4.7%
6.6%
2.5%
6.5%
-0.3%
-2.6%
0.8%
3.0%
0.0%
46.6%
8.0%
3.5%
4.0%
World domestic supplies of vegetable oils are estimated to increase 3.2% in OY2012, compared
with higher growth of 4.4% in OY2011, and 6% in OY2010. The growth is still considerably less
than the growth of 5.9% observed in OY2004-08. The supply slowdown for OY2012 applies in
particular to rapeseed and coconut oil, along with a substantial slowdown in supplies of soyabean
oil. However, sunflower oil supplies are expected to increase 11.1% in OY2012, compared with
growth of 0.5% in OY2011. While world soyabean oil production is expected to increase 3.1% in
OY2012, supplies are expected to increase at a lower rate of 2.7%. However, while rapeseed oil
production is expected to stagnate in OY2012, supplies are expected to decline 0.6% in OY2012
because of a 13% decline in stocks at end-OY2011. Rapeseed oil supply growth is expected to
decline substantially from 10.2% in OY2010.
World Vegetable Oil Supply
Mt
OY
Coconut
Cottonseed
Palm Kernel
Peanut
Rapeseed
Soyabean
Sunflowerseed
Olive
Palm
Total
Source: USDA
200307
3.70
4.79
4.42
5.09
15.88
35.93
10.23
3.89
36.36
120.30
2008
2009
2010
2011
2012E
2010
3.89
5.47
5.39
4.94
18.91
41.60
10.86
3.85
45.48
140.38
3.96
5.06
5.79
5.17
21.28
39.19
12.98
3.66
48.13
145.22
4.36
4.82
6.12
4.90
23.45
41.81
13.94
3.68
50.78
153.87
4.26
5.16
6.29
5.21
24.54
44.30
14.01
3.54
53.34
160.66
4.19
5.58
6.33
5.27
24.40
45.48
15.57
3.35
55.62
165.78
10.1%
-4.6%
5.7%
-5.2%
10.2%
6.7%
7.4%
0.4%
5.5%
6.0%
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Growth
2011
2012E
-2.3%
6.9%
2.8%
6.3%
4.7%
6.0%
0.5%
-3.8%
5.1%
4.4%
-1.7%
8.2%
0.6%
1.2%
-0.6%
2.7%
11.1%
-5.3%
4.3%
3.2%
77
Industry Comment
World Vegetable Oil Incremental Production Minus Incremental Consumption

mt
OY
Coconut
Cottonseed
Palm Kernel
Peanut
Rapeseed
Soyabean
Sunflowerseed
Olive
Palm
Total
Source: USDA
2005
0.20
0.18
0.21
0.02
0.17
0.71
0.64
0.23
1.16
3.51
2006
-0.07
0.03
0.19
-0.03
0.35
1.12
0.81
-0.06
1.95
4.28
2007
-0.10
0.09
0.06
-0.15
-0.39
1.06
0.47
-0.02
1.35
2.37
2008
0.10
0.09
0.34
0.08
0.19
0.09
1.04
-0.10
1.77
3.58
2009
0.14
0.02
0.27
0.13
0.36
-0.08
1.40
-0.16
1.91
3.97
2010
-0.27
0.00
0.58
-0.16
-0.10
0.61
0.75
0.06
1.35
2.82
2011
-0.24
0.16
0.71
0.01
0.02
0.21
0.86
0.00
0.82
2.55
2012E
-0.25
0.11
0.58
-0.01
0.13
-0.09
0.94
-0.02
0.95
2.34
After a slowdown in consumption in OY2009, world vegetable oil consumption increased 5% in

OY2011, which was lower than the growth of 6.2% in OY2010. The higher growth during OY2010
was primarily because of recovery from the global economic crisis. The sharp decline in
international prices during 2008-09 stimulated demand during 2009-10. As the economic
recovery gained momentum in 2009-10, consumption growth also recovered in almost all
countries. Conversely, high growth in prices till mid-2011 and the recent economic slowdown has
caused demand growth to be lower during OY2011.
World Vegetable Oil Consumption Major Countries
Mt
OY
China
EU-27
India
United States
Indonesia
Brazil
Malaysia
Pakistan
Argentina
Russia
Other
Total
Source: USDA
200307
20.12
18.24
11.47
10.67
5.00
3.67
4.04
2.50
0.78
2.58
28.56
107.63
2008
2009
2010
2011
2012E
2010
23.34
22.31
12.99
12.25
5.51
4.85
4.99
2.97
1.46
3.12
31.36
125.13
24.74
23.29
14.51
11.17
5.86
5.23
5.00
3.13
1.86
3.04
31.89
129.71
26.91
24.45
15.29
11.20
6.62
6.13
5.05
3.22
2.37
3.07
33.46
137.78
27.66
24.34
16.26
11.93
8.27
6.43
4.81
3.38
3.01
3.15
35.38
144.62
29.12
24.73
17.14
12.59
8.92
6.67
5.02
3.51
3.34
3.29
36.43
150.76
8.8%
5.0%
5.4%
0.3%
12.9%
17.2%
1.1%
2.9%
27.5%
1.1%
4.9%
6.2%
Growth
2011
2012E
2.8%
-0.4%
6.3%
6.5%
24.9%
4.9%
-4.7%
4.8%
26.7%
2.5%
5.7%
5.0%
5.3%
1.6%
5.4%
5.5%
7.9%
3.8%
4.3%
4.0%
10.9%
4.3%
3.0%
4.2%
World vegetable oil consumption growth is expected to be lower at 4.2% in OY2012 as food use
consumption growth declines from 4.2% in OY2011 to 3.8% in OY2012 because of higher prices
and recent downward revisions in world economic growth. However, vegetable oil consumption
growth would be marginally above the long term trend of 3.7% during 2003-12. Vegetable oil
prices have declined substantially from mid-2011, and had declined 14% (yoy) during December
2011. However, market fundamentals seem to call for a gradual strengthening in prices during
2012. Poor growth in global supplies of oilcrops and derived products (especially oilmeals) is
forecast to coincide with a steady expansion in global demand. Therefore, the market will be
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78
Industry Comment
faced with a gradual drawdown in global inventories as well as a reduction in overall stock-to-use
ratios.
Over the medium-term, world vegetable oil demand is expected to rise by an average of 2.3% per
annum during 2012-20. Annual average growth is expected to slow down from 5.7% during 200211 because of projected price firmness. Growth in global population and rising incomes are
expected to continue to play an important role in demand growth. In developing countries,
demand is expected to grow at annual rate of 2.5%, with more than 80% of growth driven by
food use. China is expected to remain the worlds leading vegetable oil consumer, followed by
the EU, India and the US. While in China and India, growth occurs primarily in food use, in the EU
and the US, the biodiesel industry is projected to represent a significant source of demand. In per
capita terms, the discrepancy between edible oil intake in developed and developing countries is
expected to remain significant but will narrow.
Long-Term Forecast of World Vegetable Oil Consumption
Volume
(mt)
OY
China
European Union-27
India
United States
Brazil
Malaysia
Pakistan
Argentina
Russia
Mexico
Egypt
Total
Source: OECD-FAO
Growth
2011
2020
2002-11
2012-20
30.4
24.8
16.0
11.4
5.8
4.2
3.1
2.9
3.1
2.6
2.0
36.2
29.8
20.4
13.2
6.7
5.1
4.3
3.8
3.2
2.9
2.4
6.7%
6.0%
4.5%
1.1%
5.3%
5.3%
4.3%
15.8%
3.3%
3.3%
4.9%
2.0%
2.0%
2.7%
1.6%
1.6%
2.1%
3.8%
2.7%
0.3%
1.4%
1.7%
149.4
182.1
5.7%
2.3%
Over the last few years, the share of industrial consumption (primarily biodiesel) in total domestic
vegetable oil consumption has increased from 12% in OY2003 to 23% in OY2011. For the
foreseeable future, edible vegetable oil is expected to remain the major feedstock used to
produce biodiesel. However its share in total biodiesel production is expected to decline from
almost 90% at present to about 75% by 2020. This is due to the development of the production of
biodiesel based on jatropha mainly in India7, to the increasing use of animal fats to produce
biodiesel in the US and to the availability of biomass based second generation biodiesel in the
latter years of the projection period.
Almost all biofuels are used in cars and trucks, though small quantities are also used as railway
and aviation fuel. Global production of biofuels was estimated at 119 billion litres (bl) in 2010,
7
Indias biofuel policy pertaining to biodiesel has identified Jatropha curcas and Pongamia pinnata as the main
feedstocks for biodiesel. The growth of jatropha is being promoted in different parts of India through various
incentives, such as community development programmes, minimum support pricing for jatropha seed, afforestation
programs, etc.
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79
Industry Comment
comprising 99.4 bl of ethanol and 20 bl of bio-diesel. World gasoline demand was estimated at
around 1.4 trillion litres in 2010. Thus, world fuel ethanol demand was around 7% of the
combined demand for petrol and fuel ethanol. Global diesel demand was estimated at around 0.9
trillion litres in 2010, with biodiesel demand accounting for only around 2.2% of the combined
demand for diesel and biodiesel.
Stimulated by higher demand for fuel use, global fuel ethanol production increased at an annual
rate of 11% during 2008-10. Production is projected to continue its rapid growth, albeit at a
slightly slower pace than previously expected. For 2011, growth in global fuel ethanol production
and consumption is forecast at only 4%. Ethanol producers in the US will be constrained by the
delays in commencing widespread sales of E15. Brazil's ethanol output is forecast to decline with
expected higher cane diversion towards sugar production. In India, strong growth in molasses
production and higher government prices for fuel ethanol are expected to double ethanol output.
World Biofuel Production
Ethanol
US
Brazil
China
EU-27
India
Canada
Ukraine
Australia
South Africa
Argentina
Japan
Biodiesel
EU-27
Brazil
Argentina
US
Malaysia
Australia
Canada
Pakistan
India
2006
58.08
21.50
17.92
6.91
3.67
1.79
0.74
0.32
0.16
0.43
0.21
0.30
7.83
5.56
0.05
0.00
0.82
0.37
0.09
0.05
0.23
0.09
2007
72.06
29.94
22.33
7.00
4.07
2.08
0.92
0.37
0.18
0.36
0.23
0.30
10.95
6.49
0.32
0.46
1.50
0.45
0.30
0.10
0.35
0.11
Volume (bl)
2008
83.64
35.75
26.49
6.90
5.02
2.05
1.37
0.36
0.19
0.38
0.21
0.30
15.82
8.06
0.95
1.40
2.37
0.66
0.61
0.14
0.39
0.13
2009
91.91
44.35
25.07
7.32
5.70
1.55
1.47
0.50
0.31
0.37
0.32
0.30
17.18
9.57
1.29
1.15
1.65
0.75
0.63
0.25
0.19
0.15
2010
99.42
48.47
26.72
7.35
6.23
2.07
1.61
0.52
0.40
0.40
0.38
0.32
19.83
9.92
2.41
2.18
0.95
0.89
0.64
0.31
0.26
0.26
Growth
2010
2008-10
8.2%
11.3%
9.3%
17.4%
6.6%
6.2%
0.5%
1.6%
9.3%
15.3%
33.4%
-0.2%
9.6%
20.4%
3.0%
11.7%
30.3%
30.5%
6.7%
3.2%
17.6%
18.4%
6.7%
2.2%
15.4%
21.9%
3.7%
15.2%
85.9%
95.9%
89.4%
68.0%
-42.2%
-14.0%
17.9%
24.9%
1.0%
28.3%
24.3%
47.8%
36.8%
-8.7%
72.2%
32.9%
So far, increases in production of biofuels continue to be driven more by policy incentives than
economic fundamentals. In fact, use mandates and tax concessions have been expanded in many
countries. There is growing evidence that indirect land use change related to biofuels eliminates
much of the climate change benefits of this technology. This has prompted the EU to require in
its RED that liquid biofuels should contribute to a reduction of at least 35% (50% by 2017) in
greenhouse gas emissions compared with petroleum fuels.
The share of vegetable oil consumption used for biodiesel production is expected to increase
driven by biofuel mandates and consumption incentives in many countries. More than 75% of
global biodiesel production is expected to come from vegetable oil in 2020. Jatropha should
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80
Industry Comment
account for 7% of global biodiesel production in 2020. In developed countries, the share of
vegetable oil based biodiesel over total biodiesel produced should decrease from 85% on average
over 2008-10 period to 75% in 2020. Second generation biodiesel production is expected to grow
in developed countries from 2018 and to represent about 10% of world biodiesel production in
2020. The key players will be soyabean oil in North and South America and rapeseed oil in
Europe, followed by palm oil and eventually copra oil in Asia. Demand growth should be driven
mainly by higher national blending requirements, for instance in Brazil and several EU countries.
Recent policy shifts could lead to a reduction in future targets for biofuel use from firstgeneration feedstock (e.g. vegetable oils), which could curtail the expansion of demand in future
years. However, biofuel demand could experience significant variation from estimates primarily
because of the relation between mineral and vegetable oil prices, which bears directly on the
profitability of biodiesel production.
Shar e of Feedstocks in World Biodiesel Production
Jatropha
Non agricultural feedstock
Biomass-based
Vegetable Oil
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2008-2010
2011
2015
2020
Following a substantial increase in stocks during OY2009 and stabilisation during OY2010, world
vegetable oil ending stocks declined by 0.8 mt in OY2011 and are expected to decline by an
additional 0.36 mt in OY2012. By comparison, ending stocks had increased 2 mt during OY2009
and OY2010. The increase in vegetable oil stocks in OY2009-10 implied a partial recovery from
OY2008s below average inventories. However, stocks declined in OY2011 as high production
growth of 4.7% was exceeded by a 5% increase in consumption, driven by recovery in both food
use and industrial consumption. These trends are expected to continue during OY2012. During
OY2012, world vegetable oil stocks are expected to decline for the second successive year to a
four-year low of 12.3 mt because of an expected decline in stocks for soyabean and rapeseed.
Overall, the anticipated changes in global stocks and consumption could give rise to a third
successive year of decline in stock-to-use ratio. Such forecasts suggest that, international prices
for oils/fats could increase in the course of OY2012. On the other hand, downward pressure on
prices could arise from the current ample availabilities of oils and meals, the price weakness
prevailing in grain markets and continued macroeconomic uncertainties. Markets will also
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Industry Comment
continue to be influenced by developments outside the oilseed complex, in particular price

trends in related feedgrain and mineral oil markets.
World Vegetable Oil Ending Stocks
Mt
OY
Coconut
Cottonseed
Palm Kernel
Peanut
Rapeseed
Soyabean
Sunflowerseed
Olive
Palm
Total
Source: USDA
200307
0.40
0.19
0.47
0.21
0.51
3.12
0.72
1.10
3.81
10.53
2008
2009
2010
2011
2012E
2010
0.44
0.27
0.62
0.15
0.77
3.28
0.99
0.88
4.14
11.54
0.75
0.20
0.62
0.23
1.14
2.95
1.85
0.63
4.91
13.27
0.59
0.16
0.63
0.07
1.23
3.07
1.81
0.53
5.41
13.49
0.51
0.22
0.63
0.11
1.07
3.00
1.76
0.33
5.05
12.68
0.41
0.24
0.55
0.07
1.03
2.68
1.92
0.27
5.16
12.32
-21.8%
-20.1%
1.8%
-69.6%
7.7%
4.2%
-1.8%
-16.4%
10.2%
1.7%
Growth
2011
2012E
-12.6%
39.6%
0.5%
59.4%
-12.7%
-2.5%
-3.2%
-36.4%
-6.7%
-6.0%
-20.0%
6.3%
-13.6%
-36.4%
-3.3%
-10.6%
9.1%
-19.2%
2.2%
-2.8%
In terms of vegetable oil trade, palm oil and soyabean oil continue to drive world trade,
accounting for 77% of total exports during OY2008-12. World exports are expected to increase
4% in OY2012 to 62.7 mt, primarily because of higher palm oil shipments, in particular by
Indonesia to meet substantial growth in import demand from India and China. About 84% of the
forecast increase in exports should be on account of palm oil, with record export availabilities in
Indonesia forecast to boost its shipments by 8%. Compared with Indonesia, Malaysias increase in
palm oil sales should be considerably lower at 3% due to its sluggish growth in domestic
production. However, Indonesian exports of crude palm oil could be costlier and availability be
lower because of the recent decision by the Government of Indonesia to reduce export tax on
refined palm oil from 20% to 10%. The tax on crude palm oil (CPO) was reduced only slightly to
22.5%. The substantially wider differential in tax rates is designed to promote domestic refining
of the oil, including downstream industries such as biodiesel producers. In recent years, more
than 60% of Indonesias palm oil exports were in the form of crude oil. Following implementation
of the new export tax rates, export prices for Indonesian refined palm oil drifted lower than the
price for crude oil. Indias vegetable oil refiners apprehend a substantial decline in capacity
utilisation. CPO accounts for around 64% of Indias imports. Indias imports of palm oil from
Indonesia is estimated at 5 mt, of which CPO accounts for 80%.
Soyabean oil exports are expected to decline 9.9% in OY2012 or by 0.94 mt. The decline would be
driven by a 0.92 mt decline in US shipments, which will not offset modest increases in shipments
from South America. The decline in US shipments could be driven by lower domestic production
and lower import demand from China, where soyabean oil output is expected to increase 8.4% in
OY2012 to record levels of 10.7 mt. US sales could improve within a few months but perhaps not
without more competitive prices. Domestic supplies of soyabean oil have been lower because of
lower soyabean oil carryover (the result of smaller output and higher use). Domestic use of
soyabean oil for industrial use is also likely to grow during OY2012 because of its higher use for
biodiesel. Indias soyabean oil imports could also decline because of anticipated 2% increase in
domestic production.
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Industry Comment
World Vegetable Oil Exports

Mt
OY
Coconut
Cottonseed
Palm Kernel
Peanut
Rapeseed
Soyabean
Sunflowerseed
Olive
Palm
Total
Source: USDA
200307
1.88
0.15
1.76
0.17
1.43
9.42
3.10
0.64
24.50
43.05
2008
2009
2010
2011
2012E
2010
1.93
0.16
2.32
0.16
1.90
10.99
3.52
0.68
32.31
53.97
1.48
0.15
2.60
0.20
2.43
9.18
4.55
0.65
34.80
56.02
2.17
0.10
2.91
0.19
2.74
9.12
4.49
0.70
35.64
58.06
1.72
0.15
3.13
0.17
3.46
9.51
4.62
0.76
36.77
60.28
1.75
0.15
3.14
0.19
3.58
8.57
5.90
0.63
38.81
62.70
47.3%
-33.8%
11.8%
-4.6%
13.0%
-0.7%
-1.2%
7.1%
2.4%
3.6%
Growth
2011
2012E
-21.0%
46.1%
7.7%
-11.7%
26.2%
4.2%
2.8%
9.3%
3.2%
3.8%
1.6%
0.0%
0.4%
11.4%
3.4%
-9.9%
27.9%
-18.0%
5.5%
4.0%
India has strengthened its role as a provider of oilseed meals within Asia, reflecting ample
domestic crops and the recent rise in ocean freight rates that have favoured nearby supply
sources. Target markets for exports remain those Asian countries with growing livestock sectors
such as the Philippines, Malaysia, Saudi Arabia and Egypt where Indian oilseed meals enjoy the
competitive advantage of high protein content and biotech free status plus low freight costs.
As in the past, Indonesia and Malaysia (for palm oil); and Argentina (for soyabean oil) are
expected to remain as the largest vegetable oil exporters. These three countries cumulatively
accounted for 71% of world vegetable oil exports during OY2008-12. Four other countries
Ukraine, Canada, Brazil, and Russiaaccounted for an additional 12% of world vegetable oil
exports during OY2008-11. By comparison, China (palm oil and soyabean), EU (palm oil and
sunflower), and India (palm oil and soyabean) remained as the largest importers, cumulatively
accounting for 48% of world vegetable oil imports during OY2008-12. China, in addition to
covering a considerable part of its vegetable oil needs via the crushing of imported oilseeds, is set
to expand edible oil imports by an annual average of 2.3% during 2012-20, which will maintain its
share of world imports at 16%. In the EU, to meet both industrial and traditional vegetable oil
demand, imports are expected to increase at an annual rate of 2.6% during 2012-20, with the
share of EU in world imports increasing from 16% during 2008-12 to 21% by 2020. Although more
than half of Indias additional vegetable oil needs are expected to be supplied by domestic
sources, India is expected to remain as the third largest vegetable oil importer in the world.
Indias share of world vegetable oil imports is expected to increase from 15% during 2008-12 to
16-17% by 2020. Amongst other countries, imports by US and Pakistan, primarily of palm oil are
also expected to increase.
Over the medium-term, the world market will continue to depend heavily on South America
(Argentina and Brazil) and South East Asia (Indonesia and Malaysia) for supplies. However, the
potential for further expansion of production in these areas could be constrained by resource and
environmental limitations. In the case of Malaysia, future growth in palm oil output would need
to be achieved almost entirely through yield improvements because of limited land availability.
However, past productivity improvements have been modest and future improvements will
largely depend on the development and adoption of genetically improved planting material and
new varieties. Key environmental concerns facing oilseed production in the all these regions
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83
Industry Comment
include the risk of soil degradation, water scarcity, loss of biodiversity and deforestation.
Furthermore, given the size of production and exports in these countries; any weather anomalies
or important shocks to their economies could have huge consequences on markets and world
prices for oilseeds and oilseed products. Also on the demand side, the trend towards
concentration of consumption growth in relatively few countries, especially China and India,
might lead to increased market instability, as any unexpected development in these countries
would greatly affect the global market for oilseeds and oilseed products.
World Vegetable Oil Trade Major Countries
Mt
OY
Imports
EU-27
China
India
United States
Malaysia
Pakistan
Egypt
Bangladesh
Exports
Indonesia
Malaysia
Argentina
Ukraine
Canada
Brazil
Russia
Source: USDA
200307
40.91
7.01
6.87
5.18
2.04
1.00
1.60
1.03
1.01
43.05
10.97
13.22
5.98
1.20
0.99
2.56
0.38
2008
2009
2010
2011
2012E
2010
50.26
9.03
8.76
5.91
3.11
1.33
2.02
1.25
1.13
53.97
16.07
15.57
7.05
1.35
1.36
2.44
0.35
53.78
9.25
9.77
8.79
3.23
1.61
2.00
1.75
0.96
56.02
18.09
16.53
5.64
2.16
1.57
1.97
1.02
55.46
8.90
9.00
9.07
3.34
1.98
2.07
1.90
1.31
58.06
18.72
16.91
5.10
2.69
1.86
1.49
0.76
56.92
8.51
8.39
8.58
3.61
2.43
2.16
2.09
1.42
60.28
18.46
18.02
5.61
2.70
2.49
1.74
0.41
60.00
9.72
9.23
9.10
3.80
2.45
2.25
2.08
1.56
62.70
20.02
18.41
5.64
3.17
2.48
1.75
1.39
3.1%
-3.7%
-7.9%
3.2%
3.3%
22.8%
3.6%
8.5%
36.4%
3.6%
3.4%
2.3%
-9.7%
24.4%
18.3%
-24.4%
-25.2%
Growth
2011
2012E
2.6%
-4.4%
-6.8%
-5.4%
8.2%
22.6%
4.1%
10.3%
8.9%
3.8%
-1.4%
6.6%
10.0%
0.2%
34.2%
16.4%
-46.2%
5.4%
14.2%
10.1%
6.0%
5.3%
1.0%
4.2%
-0.8%
9.4%
4.0%
8.4%
2.2%
0.6%
17.6%
-0.4%
0.7%
239.0%
PRICE TRENDS AND PRO SPECTS

Trends
Domestic oilseeds and edible oil prices are linked to international and domestic demand-supply
conditions in oilseeds and edible oils. The global market for oilseeds and derived products is
characterised by a high degree of geographic and product concentration. Soyabean have
accounted for 56% of world oilseed output over the last decade (2003-12) and around 81% of
soyabean output is concentrated in three countries on the American Continent (US, Brazil, and
Argentina). Similarly, palm oil (along with soyabean oil) occupies a key role in global vegetable oil
production cumulatively accounting for 60% of world vegetable oil production. Nearly 90% of the
world palm oil output is accounted for by two countries in South-East Asia (Indonesia and
Malaysia). Given the size of production and exports of these oils by the above countries, any
weather anomalies, important shocks to their economies or radical policy decisions have had
huge consequences on world markets and prices for oilseeds and oilseed products. On the
demand side, vegetable oil consumption (and import) growth has been heavily concentrated in a
few, import dependent countries (primarily China and India), which has again led to increased
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84
Industry Comment
market instability as any unexpected developments in these countries strongly affect global
market and prices.
Prices of oilseeds increased sharply during the first half of OY2004 because of tight soyabean
supplies and a slower growth in palm oil production. Soyabean prices started to rise in August
2003, climbing to a 15-year high in March 2004, when it became clear that an unexpected 5%
decline in OY2004 soyabean output would coincide with a sizeable expansion in global demand.
Tightness in the soyabean market caused the prices of other oilseeds to rise considerably. Prices
reached highs in April 2004 but then started to fall considerably during the later part of the
OY2004 season. The decline was partly because of an expected 15-16% increase in soyabean
production caused by an expected 27% increase in US soyabean production.
The record world oilseed production during OY2005 season led to downward pressure on prices
for oilseeds, meals and cakes, particularly with respect to soyabean. The main factor influencing
international oilseed prices during the first half of the OY2006 season was the favourable outlook
for the South American crop. The prospect of ample world supplies of soyabean (relative to
expected demand) in particular and oilseeds in general caused oilseed prices to drop below the
level recorded during the corresponding period of the previous season. During the second half of
the OY2006 season, prices in the oilseed complex moved upward in response to forecasts of only
modest growth in OY2007 production combined with a rise in demand to new record levels. The
market reacted to the prospect of less ample supplies and reduced inventories compared with
the preceding years, when supplies were abundant relative to demand.
International Prices of Select Oilseeds
US$/t
1,000
900
Rapeseed
Sunflower seed
Soyabean (1)
Soyabean (2)
800
700
600
500
400
300
200
Jan-04
Mar-04
May-04
Jul-04
Sep-04
Nov-04
Jan-05
Mar-05
May-05
Jul-05
Sep-05
Nov-05
Jan-06
Mar-06
May-06
Jul-06
Sep-06
Nov-06
Jan-07
Mar-07
May-07
Jul-07
Sep-07
Nov-07
Jan-08
Mar-08
May-08
Jul-08
Sep-08
Nov-08
Jan-09
Mar-09
May-09
Jul-09
Sep-09
Nov-09
Jan-10
Mar-10
May-10
Jul-10
Sep-10
100
Rapeseed: Hamburg (CIF); Soyabean seed (1): Rotterdam (CIF); Sunflower seed: Rotterdam (CIF): Soyabean seed (2):
Argentina FOB Buenos Aires
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85
Industry Comment
At the beginning of OY2007 season, poor production prospects gave rise to concerns of
tightening supplies and falling stocks. However, global soyabean output eventually exceeded the
original expectations and OY2007 production increased 3.3%. Nevertheless, oilseeds prices
increased sharply in OY2007, not driven entirely by market fundamentals. Instead, prices came
under the direct influence of developments in the related feed grain markets, notably the
unprecedented surge in international maize prices caused by a decline in global coarse grain (and
wheat) production, which coincided with a strong increase in demand, especially for maize used
as biofuel feedstock. With soyabean and maize both in demand in the feed and the energy
market, the two commodities are competing for land. Considering the shortage of maize, maize
plantings increased at the expense of soyabean, especially in the US. Tightening soyabean
supplies remained the main factor behind the rise in prices for oilseeds and oils. Increasing
demand for rapeseed oil for biodiesel production boosted demand and prices for the other
oilseeds and vegetable oils as well.
Oilseeds prices increased sharply during most of the OY2008 season as oilseeds production
declined, demand continued to remain strong, and high maize prices continued to pressure US
soyabean acreage. World oilseeds output declined 3.1% in OY2008 mainly on account of a 6.8%
decline in soyabean seed production. Moreover, world sunflower seed output declined 9.3%
caused by sharp declines in Russian Federation and Ukraine. By contrast, world production of
rapeseed, groundnut, palm kernel and copra recovered in OY2008 after poor performance in
OY2007. Additional factors that resulted in rising prices include rise in ocean freight costs,
resulting from a shortage of vessels complying with the new international regulations that came
into force in January 2007, and the weakness of the US Dollar. Between October 2007 to June
2008, the price increase was estimated at 52% for soyabean, 50-52% for sunflower seed, 30-33%
for rapeseed, and 40-60% for groundnuts.
Year ly Average of International Prices of Select Oilseeds
US$/t
800
Rapeseed
Soyabean Seed (1)
Soyabean (2)
Sunflower seed
700
600
500
400
300
200
100
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
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Industry Comment
However, oilseed prices declined significantly from around June-July 2008. The general price fall
was triggered by poor demand for oilseeds and products as well as by better production
prospects for OY2009. The sharp downturn in energy prices also contributed to the fall in prices.
The sharp upsurge and declines are partly attributable to speculation or increasing investment in
commodities as assets, rather than to shifts in fundamentals affecting supply and demand. The
bearishness in oilseed and product markets was primarily because of the sharp decline in stocks
markets around the world, tight credit markets, financial turmoil, and fears of global economic
recession. Also, fears of global economic recession seem to be contributing to the continued slide
in futures prices. Compared with averages for June 2008, average prices in October 2008 were
lower by 40% for soyabean, 33% for rapeseed, 50% for sunflower seed, and 8-10% for
groundnuts.
( Yoy) Growth in FAO Price Index for Oilseeds and Oils/Fats
2002-04=100
120%
Oilseeds
Oils and Fats
100%
80%
60%
40%
20%
-20%
Jan-03
Mar-03
May-03
Jul-03
Sep-03
Nov-03
Jan-04
Mar-04
May-04
Jul-04
Sep-04
Nov-04
Jan-05
Mar-05
May-05
Jul-05
Sep-05
Nov-05
Jan-06
Mar-06
May-06
Jul-06
Sep-06
Nov-06
Jan-07
Mar-07
May-07
Jul-07
Sep-07
Nov-07
Jan-08
Mar-08
May-08
Jul-08
Sep-08
Nov-08
Jan-09
Mar-09
May-09
Jul-09
Sep-09
Nov-09
Jan-10
Mar-10
May-10
Jul-10
Sep-10
Nov-10
Jan-11
Mar-11
May-11
Jul-11
Sep-11
Nov-11
Jan-12
0%
-40%
-60%
-80%
Prices in the oilseeds complex bottomed out by late-2008, but thereafter started moving upward
from April 2009. The price firming mainly reflected a sharp downward revision in forecast OY2009
output; and concerns regarding the progressive tightening of global supplies, in particular in the
soyabean complex. The supply problem was caused primarily by deteriorating OY2009 crop
prospects in South America, where soyabean production estimates had to be lowered several
times because of persisting, severe weather problems. Soyabean prices also increased because of
high growth in Indias soyabean oil imports from the US because of fewer supplies from
Argentina and a disappointing domestic output. The consequent rise in soyabean prices spilled
over to the entire oilseeds complex. However, prices again declined by an estimated 16% during
July 2009-March 2010, because of an estimated 12% increase in world oilseeds production during
OY2010 driven by a 23% increase in soyabean output, accompanied by 5.5% growth in rapeseed
production. Overall oilseeds prices subsequently firmed up substantially from July-August 2010
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87
Industry Comment
because of anticipated supply tightness for the OY2011 season. By January 2011, prices of
oilseeds and oils had increased 47% and 63% respectively over May 2010 levels.
International Prices of Select Oilseeds
US$/t
1,000
Rapeseed
Sunflower seed
900
Soyabean (1)
Soyabean (2)
800
700
600
500
400
300
200
Jan-05
Mar-05
May-05
Jul-05
Sep-05
Nov-05
Jan-06
Mar-06
May-06
Jul-06
Sep-06
Nov-06
Jan-07
Mar-07
May-07
Jul-07
Sep-07
Nov-07
Jan-08
Mar-08
May-08
Jul-08
Sep-08
Nov-08
Jan-09
Mar-09
May-09
Jul-09
Sep-09
Nov-09
Jan-10
Mar-10
May-10
Jul-10
Sep-10
Nov-10
Jan-11
Mar-11
May-11
Jul-11
Sep-11
Nov-11
Jan-12
100
For OY2011, a tightening of the global oilseed supply and demand situation had been earlier
anticipated, primarily because of expected stagnation in soyabean, and decline in rapeseed
production. With regard to soyabean, the situation improved during the course of OY2011 season
as production estimates were revised upwards because of expected record production in Brazil,
accompanied by declines in US and Argentina. However, world rapeseed production is estimated
to have declined 0.9% in OY2011 primarily because of lower output in EU and Black Sea Region
because of dry and hot weather. Overall oilseeds prices firmed up substantially from mid-2010
because of emerging supply tightness for the OY2011 season. Prices in February 2011 had
increased 46% over the 2010 low levels in May 2010, and were 46% above year ago levels.
However, oilseed prices eased subsequently from February 2011 because of improved prospects
of Brazilian soyabean crop combined with a seasonal shift in Chinas buying demand. Palm oil
stocks did not also decline as much as was expected, and availability improved. Further, the
earthquake-related events in Japan caused a general decline in commodity market prices and for
the oilseeds complex. By December 2011, though still high in historical terms, the price indices
for oilseed and oils had fallen 16% and 13% respectively, compared with their mid-season peaks.
The decline came with an upward revision in supply estimateslarger than expected soybean
crops were harvested in South America, and Southeast Asian palm oil production began to
recover ending eight months of poor growth. The improvement of crop prospects coincided with
a temporary slowdown in global import demand for soyabean and derived products and palm oil,
resulting in an unexpected rise in inventories held by major exporters.
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Industry Comment
Prices of edible oils and fats had strengthened since 2006 due to strong consumption demand
from China and India and demand for non-food uses like biodiesel from the EU and the US. Rising
biodiesel production in the US and the EU boosted demand for rapeseed oil and other edible oils.
The depreciation of the US dollar against major currencies also led to an increase in prices, as
favourable demand-supply has enabled producers to demand higher prices (in US$ terms) to
compensate for lower realisations (in domestic currency). However, edible oil prices also declined
from mid-2008 primarily because of the same factors that have led to a decline in oilseeds prices.
Unlike oilseeds, the market for edible oils has been characterised by a tight supply and demand
situation. Although vegetable oil production increased 5.2% in OY2010, growth slowed down to
4.7% in OY2011. Lower growth in export supplies from 2009-10 and reduced output of high oilyielding oilseeds coincided with revived growth in global demand for oils from both the food as
well as the energy sector. While food use demand growth declined from 5% in OY2010 to 4.2% in
OY2011, industrial demand growth was high at 8.2% in OY2011 (albeit lower than the 10.9%
growth in OY2010). The renewed firmness in crude oil prices also contributed to the gradual
strengthening in oils and fats values. Prices firmed up further in 2010. The price increases were
also because of prospects of limited growth in the production and export of palm oil, and
recovery in demand from biodiesel industry, as countries started enforcing higher domestic
biofuel blending rates.
International Prices of Select Edible Oils
US$/t
2,150
Rapeseed Oil
Soyabean
1,950
Palm
Sunflower
1,750
1,550
1,350
1,150
950
750
550
350
Jan-05
Mar-05
May-05
Jul-05
Sep-05
Nov-05
Jan-06
Mar-06
May-06
Jul-06
Sep-06
Nov-06
Jan-07
Mar-07
May-07
Jul-07
Sep-07
Nov-07
Jan-08
Mar-08
May-08
Jul-08
Sep-08
Nov-08
Jan-09
Mar-09
May-09
Jul-09
Sep-09
Nov-09
Jan-10
Mar-10
May-10
Jul-10
Sep-10
Nov-10
Jan-11
Mar-11
May-11
Jul-11
Sep-11
Nov-11
Jan-12
150
Rapeseed: Dutch, fob, ex-mill; Soyabean: Dutch, fob, ex-mill; Sunflower: fob North West European Ports; Palm:
Malaysia, fob, RBD
However, after February 2011, international prices of oils also started declining. The decline came
with a turnaround in market prospects from the tightness anticipated at the beginning of the
OY2011 season. Ample and larger than expected soybean crops were harvested in South America
and Southeast Asian palm oil production began to recover ending eight months of poor growth.
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89
Industry Comment
The improvement of crop prospects coincided with a temporary slowdown in global import
demand for soyabean and derived products and palm oil, resulting in an unexpected rise in
inventories held by major exporters. Furthermore, price weakness in global feed grain markets
started spilling over to the oilseed complex, and growing fear of another global economic
recession, which could depress demand, caused prices to decline.
In the domestic market, oilseed prices hardened in the first half of FY2005 despite the bumper
crop of OY2004. Reports of a domestic crop failure resulting from inadequate rainfall were
compounded by uncertainties over the possibilities of El Nino damaging Malaysian palm oil
production. Oilseeds prices began to soften in the second phase beginning September 2004
because of higher kharif and rabi crop. In order to contain rising prices, the GoI reduced tariffs on
vegetable oils in September 2004. A mix of reduction in tariff values alongside an increase in
import duties was deployed in February 2005 to take care of the interests of both the farmers
and the consumers. Overall, while the wholesale price index (WPI) for oilseeds increased 1.7%
during FY2005, WPI for edible oils declined 0.9%. During FY2006, oilseed prices hardened initially
during reflecting a shortfall in domestic production during the FY2005 season and the
unsatisfactory progress of the South-West monsoon during June 2005. However, oilseeds prices
moderated since November 2005 on improved crop prospects. Edible oil prices also declined.
Domestic prices of oilseeds and edible oils firmed up during FY2007 and FY2008 due to a decline
in domestic oilseeds production during OY2007 and higher import prices. Import prices increased
because of higher world prices caused by strong consumption demand from China and India, and
demand for non-food uses such as biodiesel from the EU and the US. Change in shipping rules
also resulted in higher freight costs on imported edible oils from January 2007 onwards. Edible
oils will be classified as chemicals per the International Maritime Organisation (IMO) convention
and will have to be transported by single hulled or double-hulled vessels. This curtailed the
availability of vessels for shipping edible oils, pushing up freight rates and impacting imported oil
prices. Overall, while WPI for oilseeds increased 4.6% during FY2007 and 19.8% in FY2008, WPI
for edible oils increased 8.9% in FY2007 and 13.2% in FY2008.
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Industry Comment
Annual Change in WPI for Edible Oils and Oilseeds

FY, figures for FY2006 are based on new series
Edible Oils
35%
Oilseeds
25%
15%
5%
-5%
1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
(9M)
-15%
-25%
Compiled by IMaCS
Annual Change in WPI for Major Edible Oils

FY, figures for FY2006 are based on new series
60%
50%
Groundnut
Rape/Mustard
Soyabean
Palm Oil
40%
30%
20%
10%
0%
-10%
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
(9M)
-20%
-30%
-40%
Compiled by IMaCS
During FY2009, higher edible oil production during OY2008 and sharp decline in world prices
resulted in a downward trend in prices since July 2008. As compared with Q1FY2009, prices in
Q4FY2009 were lower by 39% for palm oil, 26% for soyabean, and 22% for groundnut. However,
rapeseed prices declined at a lower. Overall, while the wholesale price index (WPI) for oilseeds
increased 15.9% during FY2009, WPI for edible oils increased 4.8%. During FY2010, while the WPI
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Industry Comment
for oilseeds increased 2.9%, the WPI for edible oils declined 5.9%. The increase in oilseed prices
was driven by an increase in prices of soyabean and groundnut, primarily attributable to a decline
in production during OY2009-10. All major varieties of edible oils witnessed a decline in prices
during FY2010. However, the rate of decline varied from 2-3% for vanaspati, palm, and groundnut
oil to a decline of 7-9% for rapeseed/mustard and sunflower oil.
Domestic Edible Oil Prices
Rs. /kg
110
100
Groundnut Oil
Soyabean Oil
Vanaspati
Palm Oil
Rapeseed Oil
90
80
70
60
50
40
30
Jan-04
Mar-04
May-04
Jul-04
Sep-04
Nov-04
Jan-05
Mar-05
May-05
Jul-05
Sep-05
Nov-05
Jan-06
Mar-06
May-06
Jul-06
Sep-06
Nov-06
Jan-07
Mar-07
May-07
Jul-07
Sep-07
Nov-07
Jan-08
Mar-08
May-08
Jul-08
Sep-08
Nov-08
Jan-09
Mar-09
May-09
Jul-09
Sep-09
Nov-09
Jan-10
Mar-10
May-10
Jul-10
Sep-10
Nov-10
Jan-11
Mar-11
May-11
Jul-11
Sep-11
Nov-11
Jan-12
20
During FY2011, domestic prices mirrored international prices with edible oil prices increasing
3.8% (yoy) in Q2FY2011, reversing six consecutive quarters of decline. Prices thereafter increased
at higher rates to 11.9% (yoy) in Q4FY2011. By comparison, oilseed prices increased from
Q3FY2010 with higher price increases during the course of FY2011. Overall, while the WPI for
oilseeds increased 4.7% during FY2011, the WPI for edible oils increased 5.4%. The increase in
edible oil prices was primarily been driven by a deficit-driven increase in groundnut oil prices,
which increased 13.6% in FY2011. The substantial growth of 52% in groundnut output during
OY2011 is still 10% below the peak level output of OY2008. Further, groundnut seed prices are
expected to be firm for OY2012 as production is expected to decline 16% in OY2012 resulting in
near negligible ending stocks. Prices of other vegetable oils are expected to also tend higher
during OY2012 because of expected decline in OY2012 production, depletion in stocks, and
expected increase in world prices during 2012.
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92
Industry Comment
Monthly Change in WPI for Oilseeds and Edible Oils

(yoy), figures for April 2005 onwards are based on new WPI series
30%
Oilseeds
Edible Oils
25%
20%
15%
10%
5%
-5%
Jan-03
Mar-03
May-03
Jul-03
Sep-03
Nov-03
Jan-04
Mar-04
May-04
Jul-04
Sep-04
Nov-04
Jan-05
Mar-05
May-05
Jul-05
Sep-05
Nov-05
Jan-06
Mar-06
May-06
Jul-06
Sep-06
Nov-06
Jan-07
Mar-07
May-07
Jul-07
Sep-07
Nov-07
Jan-08
Mar-08
May-08
Jul-08
Sep-08
Nov-08
Jan-09
Mar-09
May-09
Jul-09
Sep-09
Nov-09
Jan-10
Mar-10
May-10
Jul-10
Sep-10
Nov-10
Jan-11
Mar-11
May-11
Jul-11
Sep-11
Nov-11
Jan-12
0%
-10%
-15%
-20%
During FY2012 upto January 2012, while domestic oilseed prices increased 12.5% (yoy), edible oil
prices increased 13.3% (yoy). Oilseed prices increased 15.1% during Q2FY2012, but at a lower
rate of 10.8% in Q3FY2012, primarily because of a 2.4% (qoq) decline in Q3FY2012. The (yoy)
increase in edible oil prices has been primarily been driven by a deficit-driven increase in
groundnut oil prices, which increased 13.6% in FY2011, and 10.64% in 10MFY2012 (April 2011January 2012). Prices of soyabean and rapeseed oil increased at even higher rates of 19.2% and
16.1%, respectively during 10MFY2012. On a (qoq) basis, prices have remained firm in inspite of
record oilseeds production during OY2011 and recent decline in international prices. The relative
firmness in the domestic market has also been caused by lower stocks and recent sharp
depreciation of the rupee. The substantial expected groundnut output during OY2011 is still 10%
below the peak level output of OY2008. Further, groundnut seed prices are expected to be firm
for OY2012 as production is expected to decline 16% in OY2012 resulting in near negligible
ending stocks. Prices of other vegetable oils are also expected to tend higher during OY2012
because of expected decline in OY2012 production, depletion in stocks, expected increase in
world prices during 2012, and higher import costs.
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93
Industry Comment
( Yoy) Growth in Prices of Major Edible Oils

40%
All Edible Oils
Groundnut
Palm
Rapeseed/Mustard
Soyabean
30%
20%
10%
0%
Q1FY07 Q3FY07 Q1FY08 Q3FY08 Q1FY09 Q3FY09 Q1FY10 Q3FY10 Q1FY11 Q3FY11 Q1FY12 Q3FY12
-10%
-20%
Prospects
The general downward trend in prices observed throughout the oilseed complex since
February/March 2011 came to a halt in January 2012. Compared with December 2011, prices
increased 3-4% in January 2012. Although 14-16% below the corresponding values recorded in
January 2011, the current levels are high in historical terms. The generalised strengthening in
prices primarily reflected concerns regarding tighter than earlier anticipated fundamentals in the
oilseed complex, triggered by further deteriorating crop prospects in South America. Based on
this development, a critically low supply of soy at the global level appears unavoidable.
With soyabean production falling in both the US and South America, global soybean supplies and
export availabilities have been below initial expectations. In order to keep crush levels at last
seasons level, a sizeable reduction in global inventories seems inevitable, with world soyabean
seed ending stocks forecast to decline 13% (-8.6 mt) during OY2012. Moreover, renewed
competition for land between grains and soyabeans in 2012-13 and indications that global
rapeseed ending stocks could also decline for the second successive year during OY2012 are
adding uncertainty to the market.
The key driving factors behind the recent increase in vegetable prices are firming export demand
for palm and soyabean oil, combined with a slow-down in palm oil production and the prospect
of below average export availabilities of soyabean oil. In Southeast Asia, the seasonal decline in
palm oil production has been magnified by excessive rainfall caused by La Nia. Moreover, with
palm oil import demand on the rise, there is concern about possible reductions in Malaysian palm
oil inventories.
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94
Industry Comment
For OY2012, a gradual tightening of the global vegetable oil supply and demand situation is
anticipated. Following a substantial increase in stocks during OY2009 and stabilisation during
OY2010, world vegetable oil ending stocks declined 0.81 mt in OY2011 and are expected to
decline by an additional 0.36 mt in OY2012. The increase in vegetable oil stocks in OY2009-10
implied a partial recovery from OY2008s below average inventories. However, stocks declined in
OY2011 as high production growth of 4.7% was exceeded by a 5% increase in consumption,
driven by recovery in both food use and industrial consumption. These trends are expected to
continue during OY2012. During OY2012, world vegetable oil stocks are expected to decline for
the second successive year to a four-year low of 12.3 mt because of an expected decline in stocks
for soyabean and rapeseed. With regard to soyabean, the situation is expected to gradually
deteriorate as forecast demand starts to overtake production. Soyabean oil stocks are forecast to
decline for the second successive year, with ending stocks forecast to be lower by 0.32 mt during
OY2012, compared with a decline of 0.08 mt during OY2011. Similar second-year decline is
anticipated for rapeseed, although the magnitude of the decline is expected to be substantially
lower than for soyabean. The decline in stocks of soyabean and rapeseed is expected to be only
partially compensated by increases in stocks of palm and sunflower. However, the prospective
tightening in global soyabean and rapeseed oil supplies will increase the markets dependence on
palm oil, also because larger sunflower oil supplies for OY2012 are being rapidly absorbed by the
market. Overall, the anticipated changes in global stocks and consumption could give rise to a
third successive year of decline in stock-to-use ratio. Such forecasts suggest that, international
prices for oils/fats could increase in the course of OY2012. On the other hand, downward
pressure on prices could arise from the current ample availabilities of oils and meals, the price
weakness prevailing in grain markets and continued macroeconomic uncertainties. Markets will
also continue to be influenced by developments outside the oilseed complex, in particular price
trends in related feedgrain and mineral oil markets. Growth in global oil and meal demand will be
influenced by several external factors, notably the course of energy prices, possible changes in
national biofuel policies, adjustments in the livestock sector and developments in the cereal
market with direct effects on oilseed prices.
REVIEW OF FINANCIAL PERFORMANCE

M a r g in s
The financial performance of the edible oil sector has improved significantly during FY2005-10,
though performance had deteriorated in FY2009. Buoyant domestic edible oil demand in relation
to supply coupled with high international edible oil prices have enabled the sector to post good
results. During FY2009, profitability peaked in Q1FY2009, before registering a sharp decline
during H2FY2009 thereafter because of a significant decline in product prices. The sharp decline
in prices resulted in (yoy) growth in operating income (OI) growth declining from 41% in
Q1FY2009 to -3% in Q1FY2010. However, OI growth subsequently improved to 22% (yoy) in
Q3FY2010, but growth slid to 5% (yoy) in Q4FY2010 because of lower prices.
As compared with a 9% increase in OI during FY2010, the combined OI of listed companies
increased 30% in FY2011. OI increased 5% (yoy) in Q4FY2010, but growth improved to >20% in
each of the quarters of FY2011 because of higher prices. Although raw material costs have
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95
Industry Comment
increased at high rates, significant increase in selling prices resulted in a 18% increase in
operating profits during FY2011.
IMaCSs analysis of a sample of 60 companies indicates stable operating margins during FY200005, followed by a significant increase in FY2006-08, a decline in FY2009, significant improvement
during FY2010, and a modest decline in FY2011. During the last few years, although oilseeds
prices have increased at high rates, edible oil prices have also increased at a high rate, resulting in
a long-term improvement in operating margins. Lower increase in other operating costs have also
resulted in an improvement in operating margins. Although interest costs (as percent of
operating income or OI) have increased from FY2006 onwards, higher other income also resulted
in improved net margins.
Financial Indicators of Listed Edible Oil Companies
Percent of OI
FY
Gross Sales
Less Excise
OI
Raw Material Cost
Employee Costs
Power & Fuel
Other Operating Costs
Cost of Sales
OPBDIT
Interest
Depreciation
OPBT
Other Income
PBT
Tax
PAT
19992003
100.4
0.4
100.0
84.6
1.9
1.2
10.1
97.7
2.3
1.5
0.9
0.0
0.8
0.7
0.3
0.5
2004
2005
2006
2007
2008
2009
2010
2011
101.2
1.2
100.0
89.8
1.4
0.9
5.7
97.9
2.1
0.9
0.7
0.5
1.0
1.5
0.5
1.0
101.1
1.1
100.0
85.4
1.6
1.0
10.0
98.0
2.0
1.1
0.8
0.0
1.6
1.6
0.4
1.2
100.3
0.3
100.0
85.4
1.7
1.0
9.4
97.5
2.5
1.4
1.0
0.1
2.1
2.2
0.5
1.7
100.3
0.3
100.0
84.6
1.7
0.9
9.1
96.3
3.7
1.6
0.9
1.2
1.6
2.8
0.8
2.0
100.3
0.3
100.0
86.8
1.5
0.9
6.6
95.7
4.3
1.6
0.8
1.9
1.7
3.6
1.1
2.5
100.2
0.2
100.0
85.6
1.6
0.9
9.3
97.4
2.6
1.5
0.8
0.3
2.0
2.3
0.7
1.6
100.2
0.2
100.0
85.0
1.5
1.0
8.2
95.7
4.3
1.6
0.9
1.8
1.3
3.1
0.8
2.3
100.2
0.2
100.0
87.8
1.6
1.0
6.5
96.8
3.2
2.1
0.9
0.2
1.3
1.5
0.7
0.8
Compiled by IMaCS
Returns
The edible oil industry is moderately capital intensive, resulting in low barriers to entry. This is
reflected in the sales turnover ratio, which was 1.9 in FY2010. However, the ratio declined in
FY2010-11 as the industrys asset size increased because of capital expenditure and increase in
inventory levels. For the edible oil industry as a whole, the sharp improvement in operating
margins during FY2005-08 has resulted in the return on capital employed (RoCE) and return on
net worth (RoNW) exhibiting an increase till FY2008. However, returns have declined in FY200911 initially because of lower operating margins (FY2009) but subsequently because higher levels
of assets to support capital expenditure and increased inventories in response to lower prices.
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Industry Comment
Trends in RoCE and RoNW in Edible Oil Industry

FY
25%
RoCE
RoNW
23.0%
22.5%
20%
17.9%
14.5%
14.1%
15%
14.4%
12.4%
16.6%
16.1%
19.4%
13.6%
12.4%
12.1%
18.5%
15.9%
16.0%
13.7%
10.6%
10%
7.9%
5.3%
5%
0%
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
The Indian edible oils industry had exhibited an increase in debt-equity ratio during FY2000-04,
because of declining operating margins, low level of profits, and increased requirement of debt to
finance operations. However, the debt equity ratio declined in FY2004-10 attributed to increased
activity levels within the industry, as well as a reflection of higher net margins and profitability.
Higher operating margins resulted in an improvement in interest coverage ratio till FY2010, but
interest coverage declined in FY2011 because of lower operating margins and higher debt levels.
Debt-Equity and Interest Coverage
FY
3.0
Interest Coverage
2.5
2.0
Debt Equity
2.3
2.3
2.2
1.9
1.7
2.7
2.7
1.7
1.7
1.7
1.5
1.5
1.3
1.4
1.7
1.3
1.3
1.3
1.2
2007
2008
1.2
1.1
2009
2010
1.0
0.5
0.0
2002
2003
2004
2005
2006
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2011
97
Industry Comment
R e c e n t F in a n c ia l P e r f o r ma n c e
During H1FY2012, the combined OI of listed companies increased 40% (yoy) to Rs. 297.12 billion.
OI increased 53% (yoy) in Q1FY2012, but growth declined to 29% in Q2FY2012. Growth was
higher in H1FY2012 because of the base effect. Although OI has increased at high rates,
significant increase in input costs have resulted in an 81% (yoy) decline in operating profits during
H1FY2012.
( Yoy) Growth in OI and Operating Profit
70%
OI (LS)
200%
Operating Profit (RS)
60%
150%
50%
100%
40%
50%
30%
0%
20%
-50%
10%
-100%
0%
Q1FY07 Q3FY07 Q1FY08 Q3FY08 Q1FY09 Q3FY09 Q1FY10 Q3FY10 Q1FY11 Q3FY11 Q1FY12
-10%
-150%
Financial Performance
Rs. Million, except percentages
Rs. Million
H1FY
Net Sales/OI
Raw Material Cost
Employee Costs
Power & Fuel
Other Operating Costs
Cost of Sales
OPBDIT
Interest
Depreciation
OPBT
Other Income
PBT
Tax
PAT
2012
297,115
263,181
2,678
59
29,078
294,996
2,119
4,071
2,317
-4,270
675
-3,595
1,179
-4,773
2011
212,005
182,898
2,307
27
15,386
200,619
11,387
2,793
2,266
6,328
712
7,040
1,678
5,362
Change
(%)
40.1
43.9
16.1
115.8
89.0
47.0
-81.4
45.8
2.3
-5.2
-29.8
% of OI
2012
100.0
88.6
0.9
0.0
9.8
99.3
0.7
1.4
0.8
-1.4
0.2
-1.2
0.4
-1.6
2011
100.0
86.3
1.1
0.0
7.3
94.6
5.4
1.3
1.1
3.0
0.3
3.3
0.8
2.5
On a quarterly basis, operating margins declined from 3.1% in Q4FY2011 to 0.1% in Q2FY2012,
primarily because of higher increase in input costs.
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98
Industry Comment
Trends in OI and Operating Mar gins

170,000
OI (Rs. million)
7.0%
Operating Margin
150,000
6.0%
130,000
5.0%
110,000
4.0%
90,000
3.0%
70,000
2.0%
50,000
1.0%
30,000
10,000
0.0%
Q1FY07 Q3FY07 Q1FY08 Q3FY08 Q1FY09 Q3FY09 Q1FY10 Q3FY10 Q1FY11 Q3FY11 Q1FY12
CONCLUSION
Although Indias oilseed acreage area has increased at an annual rate of 1.7% during 2002-11,
production has increased at an annual rate of 5.8% mainly because of a 4.1% per annum increase
in yields. Yield gains have been high for the three major crops, though annual average gains were
higher at 5% for soyabean, and 3% each for soyabean and rapeseed. Indias oilseeds area is
projected to continue to expand. Production is projected to grow at an annual rate of 2% during
the medium term, based on a moderate 1% per annum growth in acreage and yield
improvements from the application of modern production technologies.
With its large population and continued strong economic growth, India is likely to register growth
of 3.5-4% per annum in total vegetable oil consumption in the medium term. The extent to which
increased consumption is met by importsand the types of oil importedwill be strongly
influenced by Indias trade and domestic agricultural policies. However, as in recent years,
consumption growth is expected to be higher than production, resulting in ~4% annual growth in
the volume of imports over the medium-term. Despite the growth in total consumption, Indias
average per capita consumption level is expected to remain behind that of most other developing
countries in Asia.
The financial performance of players in the Indian edible oil industry is expected to improve
during 2012 because of expected lower production and increase in product prices. Prices of
vegetable oils are expected to tend higher during OY2012 because of expected decline in OY2012
production, depletion in stocks, expected increase in world prices, and higher import costs.
For 2012/OY2012, a gradual tightening of the global vegetable oil supply and demand situation is
anticipated. Following a substantial increase in stocks during OY2009 and stabilisation during
OY2010, world vegetable oil ending stocks declined 0.81 mt in OY2011 and are expected to
www.imacs.in
99
Industry Comment
decline by an additional 0.36 mt in OY2012. The increase in vegetable oil stocks in OY2009-10
implied a partial recovery from OY2008s below average inventories. However, stocks declined in
OY2011 as high production growth of 4.7% was exceeded by a 5% increase in consumption,
driven by recovery in both food use and industrial consumption. These trends are expected to
continue during OY2012. During OY2012, world vegetable oil stocks are expected to decline for
the second successive year to a four-year low of 12.3 mt because of an expected decline in stocks
for soyabean and rapeseed. With regard to soyabean, the situation is expected to gradually
deteriorate as forecast demand starts to overtake production. Soyabean oil stocks are forecast to
decline for the second successive year, with ending stocks forecast to be lower by 0.32 mt during
OY2012, compared with a decline of 0.08 mt during OY2011. Similar second-year decline is
anticipated for rapeseed, although the magnitude of the decline is expected to be substantially
lower than for soyabean. The decline in stocks of soyabean and rapeseed is expected to be only
partially compensated by increases in stocks of palm and sunflower. However, the prospective
tightening in global soyabean and rapeseed oil supplies will increase the markets dependence on
palm oil, also because larger sunflower oil supplies for OY2012 are being rapidly absorbed by the
market. Overall, the anticipated changes in global stocks and consumption could give rise to a
third successive year of decline in stock-to-use ratio. Such forecasts suggest that, international
prices for oils/fats could increase in the course of OY2012. On the other hand, downward
pressure on prices could arise from the current ample availabilities of oils and meals, the price
weakness prevailing in grain markets and continued macroeconomic uncertainties. Markets will
also continue to be influenced by developments outside the oilseed complex, in particular price
trends in related feed grain and mineral oil markets. Growth in global oil and meal demand will
be influenced by several external factors, notably the course of energy prices, possible changes in
national biofuel policies, adjustments in the livestock sector and developments in the cereal
market with direct effects on oilseed prices.
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100
Industry Comment
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Industry Comment

ICRA Management Consulting Services Limited

IMaCS Research & Analytics

THE INDIAN EDIBLE OILS INDUSTRY

Programme Leader (Research & Analytics)

ENVIRONMENT ANALYSIS : PORTERS MODEL

Annual Installed Capacity

Oilseed crushing units

42.5 (in terms of seeds)

41.9 (in terms of oil bearing

3.7 (in terms of oil)

3.5 (in terms of oil)

Source: Directorate of Vanaspati, Vegetable Oils & Fats

KEY ISSUES FACING TH E PLAYERS

Trends in Are a and Production of Nine Major Oilseeds

Area (million hectares)-LS

Conversion Ratios between Raw Material and Processed Products

Madhya Pradesh (MP)

Season- wise Yield of Oilseeds in Major States

Oilseeds Acreage, Pr oduction and Yields Major States

Season- wise Oilseeds Production

Long Term Trends in Indias Soyabean Oilseed Production

Share of Total (RS)

State-wise Are a, Production, and Yield of Soyabean

Average composition fo r Rapeseed and Canola Oil

State-wise Area, Production, and Yield of Rapeseed

Long Term Trends in Indias Groundnut Oilseed Production

Share of Kharif (RS)

Share of Rabi (RS)

Share of Total (RS)

State-wise Area, Production, and Yield of Groundnut

Long Term Trends in Indias Oilseed Production

Quarter ly ( Yoy) Growth in Prices for Major Oilseeds

Rape & Mustard Seed

Trends in Indias Oilseeds Acreage under Irrigation

Groundnut (in shell)

Long-Term Trends in Oilseed Yields

IndiaYields for Some Oilseeds

Nine Major Oilseeds

Cloud Point (C)

India's Per Capita Consumption of Edible Oils

Rs. Billion (current prices)

Source: National Accounts

State-wise MPCE on Edible Oils and Shar e (2007 -08)

Cereals Roots & Sugar & Pulses,

DEMAND-SUPPLY POSITION AND IMPORTS

Indias Impor t of Agricultural Products

Wood & Wood Products

Value-Rs. mn. (RS)

21.3 20.7 21.8

Unit Prices of Indias E dible Oil Impor tsMajor Items of Imports

WORLD DEMAND -SUPPLY TRENDS AND PROSPECTS

World Oilseeds and Vegetable Oils Production

World Oilseeds Ending Stocks

Oilseeds Production in Major Pr oducing Countries

World Rapeseed Demand and Supply

Sunfl ower See d

World Groundnut Seed Demand and Supply

World Vegetable Oil Production and Consumption

Growth in World Food and Industrial Use Vegetable Oil Consumption

World Vegetable Oil Production and Consumption

World Vegetable Oil Incremental Production Minus Incremental Consumption