India's rapeseed and mustard output is set to drop by at least 10 percent for the 2017/18 crop year as scanty rains and high temperatures prompted farmers to switch to other crops despite a recent hike in the import duty on edible oils, trade officials said. Rapeseed is typically processed into canola oil and is the main winter-sown oilseed crop in India. Lower rapeseed output could require the world's biggest edible oil importer to raise overseas purchases of palm oil, soyaoil and canola oil. India imports about two-thirds of its edible oil demand.
"The reduction in area suggests at least a 10 percent drop in the production. The output could be even lower if weather remains adverse," said B.V. Mehta, head of the Solvent Extractors' Association (SEA), a Mumbai-based trade group for oilseed processors. Farmers have cultivated 5.55 million hectares (13.7 million acres) of rapeseed as of Dec. 1, down 9.5 percent from a year ago, data compiled by Ministry of Agriculture and Farmers Welfare showed.
Farmers reduced the area under oilseed cultivation in Rajasthan, the country's top rapeseed producing state located in India's northwest, because of higher temperatures and lower moisture levels at the time of sowing, said Managing Director of trading firm G.G. Patel & Nikhil Research Company, Govindbhai Patel. "Higher temperatures hit germination of seeds. This year yields are likely to be lower than normal," Patel said.
India produced a record 6.73 million tonnes of rapeseed during the 2016/17 marketing year that ended on Oct. 31, the SEA said. To boost oilseed crop cultivation and reduce edible oil imports, India last month raised the import tax on edible oils to the highest in more than a decade.
But the decision came too late to change sentiments hit by a drop in rapeseed prices, said Vijay Data, an oil miller. "Rapeseed gave poor returns to farmers last year. Before the import duty hike most farmers had sold their crop at lower levels," Data said.
Edible oils imports, including palm oil and soyaoil rose to a record in the 2016/17 crop year, which dampened local prices of rapeseed and soyabeans during 2017. India primarily imports palm oil from Indonesia and Malaysia and soyaoil from Argentina and Brazil. It also imports small amounts of sunflower oil from Ukraine and canola oil from Canada.
The country's edible oil imports could rise to 15.5 million tonnes in 2017/18 marketing year that started Nov. 1, up from 15 million tonnes a year ago, said a Mumbai-based dealer with a global trading firm. "Output of soyabean was down. Now you will have lower rapeseed crop. On the other hand consumption is going up. So there is no option but to raise imports," the dealer said.
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