How big traders gained from edible oil tariff hike
A handful of big traders took hugely bullish positions on the leading commodity exchanges, NCDEX and MCX, in edible oil contracts, ahead of the central government’s announcement on Friday of steep rises in import duty.
On Monday, all trade in edible oils on the comexes were locked after reaching the upper circuit of 4 per cent.
An increase in these import duties was announced in August but that didn’t stop oilseed prices from slumping, as imports rose. On Friday night, the government issued a notification raising the duty on all edible oils. As a sequel, edible oil refineries are soon expected to announce price hikes.
And, as mentioned earlier, some had anticipated the government move. On Friday evening, some of the top traders on the NCDEX had a threefold bigger short position than long; the overall market was also short. On Monday, soybean prices increased by 2-2.5 per cent, trapping short sellers; however, in soy oil, the largest position holder was holding a long position of 31,940 lots against the largest short seller’s 6,310 lots. Indicating that long traders were expecting a steep rise in import duty. Without top bull traders, the overall soy oil market was short.
Similarly, on the MCX, the top 10 long positions totalled 6,219 lots; the top 10 shorts were 6,099 on Friday. Market watchers say one of the influential players built long positions ahead of the duty hike and now with prices rising and likely to stay high, he is making huge money.
On the exchanges, crude palm oil (CPO) and soya oil prices hit the four per cent higher circuit on Monday. In the Malaysian commodity exchange, CPO futures fell around three per cent from Friday, on worry of a fall in Indian import due to the higher duties.
In the Indore wholesale market, benchmark soybean prices went up sharply on Monday, from ~2,700 a quintal to ~2,800 a qtl; this is still below the government's Minimum Support Price of ~3,050 a qtl. Soya degum and refined oil were up by about five per cent.
The government trigger for raising of duty was the steep rise in import, even as domestic seed production was high and prices were unremunerative for farmers.