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 The overall edible oil market is dull and prices are falling, be it palm or soybean oil. It is only groundnut oil whose prices are increasing because of short supply of groundnuts, observed Nirav Desai, Managing Partner of GNN Research.

According to Desai groundnut oil prices are seeing an upward trend because groundnut is in short supply for crushing. The reason is that out of the total production of groundnuts, approximately 60 percent goes for table nuts, (groundnuts consumed directly by consumers), 8 percent is used as seeds for cultivation, the rest 25 to 30 per cent groundnuts are available for crushing.

When the groundnuts production is down, short supply does not affect table nuts, it directly affects crushing. This year groundnuts production is 2 lakh metric tons less, so the crushing is less, which reflects in the prices.

Groundnuts production is less and on the other hand exports are growing. That affects the groundnuts supply to oil millers. When less oil is produced it is natural that the price will increase, says Kishor Viradiya, president of the Saurashtra Oil Millers Association.

Viradiya's fear is that the way groundnuts oil price rise is being targeted, it will unnecessarily invite government attention, which can impose some restrictions affecting the price of groundnuts. This can lead to farmers moving to other edible oils seeds. He cited how farmers have moved towards castor and cumin.

He remembers that in the 1970s and 1980s, Gujarat's farmers were cultivating two edible oil seeds, groundnuts and sesame. As many restrictions were imposed on sesame oil, its production reduced.

However, Nirav Desai does not see such a drastic fall in groundnuts cultivation in Gujarat in the near future. At the same time, he has observed that when farmers are not getting a good price for a particular crop, they do move to other crops where they get a good price. For example, last year farmers got a good price for cotton.