The domestic vegetable oil industry consists of 15,000 oil mills, 600 solvent extraction units, 600 vegetable oil refineries and 250 vanaspati factories with an annual turnover of Rs 100,000 crore and export-import turnover of Rs 45,000 crore. The industry has an employment potential of more than 400,000 people. It crushes and processes oilseeds, oilcakes, rice bran and vegetable oils. However, the industry's production is low, hovering around 250-270 lakh tonnes only, mainly due to inadequate raw material production and supply. Oilseeds in India are grown mainly on marginal and submarginal lands under low input usage with limited irrigation facilities.

The Indian vegetable oils industry has been increasingly depending on imports, mainly due to low indigenous oilseeds production. In fact, imports had touched a new record of 92.4 lakh tonnes for the oil year ended October, 2010, reflecting an increase of about 7 per cent over the previous year's figure.

The Solvent Extractors' Association of India (SEA) had raised fears that imports are likely to rise further in the years to come and cost the exchequer, unless, the country focuses on improvement of oilseeds production and productivity in oilseeds producing states. The government also needs to resolve pending issues, including usage of vegetable oils in chocolate, proposed utilisation of castor meal as organic fertilisers and conducting a study on the per capita consumption of edible oil in the country.

These fears seem to be coming true, if one is to go by the observations of the United Soybean Board. Last week, it said that domestic demand for soybean in India, fuelled by a growing population and economic wealth will result in the country becoming a net importer by 2015. India is the world's fifth-largest soybean producer after the United States, Brazil, Argentina and China, and it accounts for about 5 per cent of global output. So far, India has been self-sufficient and has been exporting soybean to many Asian countries. Even as we discuss concerns about India beginning to import soybean, the country is likely to export 4.1 million tonnes of soymeal in the present crop year ending in September, sharply higher than 2.2 million tonnes a year ago. Significantly, Indian soymeal is preferred by Asian buyers over Latin American supplies because it is derived from non-genetically modified soybean. Geographical proximity also makes Indian soymeal less expensive for Asian importers.

On domestic production, a Kotak Commodity Research Report, said, “This year, Indian soybean production estimates are expected to be higher and touch nearly 10.5 million tonnes, compared with last year's production of 9.687 million tonnes. The rise in production is mainly due to higher acreage this season.“ According to first advance estimate of the ministry of agriculture, oilseeds production in the kharif season is likely to be 20.89 million tonnes, against 20.85 million tonnes in the past season.

When it comes to prices, analysts say that global prices of soybeans could ease in the fourth quarter as new supply from the US, the world's largest exporter of agricultural commodities, enters the market. According to analysts and traders, the global supply isn't as tight as was being feared earlier.

In the domestic commodity market, Vinita Advani, research analyst, Geojit Comtrade, told FC Invest, “Oilseeds and edible oil futures overall witnessed a weak trade at the end of last week.

Soybean futures had opened weak in line with weak overseas markets, but then witnessed some bargain buying in the last hour of trade. Spot soybean prices were quoted stable in Indore and Nagpur on Thursday, although, the overall trend was weak in both the states.

Prices declined by Rs Prices declined by Rs 2025 in various other markets. Arrivals in Madhya Pradesh were around 75,000 bags and around 30,000 bags in Maharashtra.“ New kharif crop arrivals have started to pour in the states of Gujarat, Maharashtra, Madhya Pradesh and new arrivals in the southern and northern parts of India are expected to rise further over the coming days, she said.

“However, crushing will pick up in full swing only after second week of October. The overall spot market was reported to be dull with limited buying,“ Advani said.