A Study on the Price Volatility of Indian Palm Oil

Palm oil is one of nine major oils traded in the global edible oil and fat market. One of the key factors resulting in the growth of the global palm oil market is its low prices, making it affordable to consumers in emerging economies. In India, Cost & Freight (C &F) Mumbai, Kandla and Kakinada are the three major markets where imports of palm oil takes place and the wholesale prices are quoted here. Therefore, the following study aimed at analyzing the price volatility of palm oil and relies exclusively on its wholesale prices in India which is being quoted at C & F Kandla. The study used ten years data (2008-2017) collected from various websites of MCX, SEA, MPOC, USDA etc. The collected data was analysed with the help of AAGR, CAGR, Instability Index from Exponential Trend, Cuddy- Della Valle Index and multiple linear regression analysis. The instability indices ranged between 3 to 6 per cent for the selected parameters except for production which was at 18.6 per cent. Likewise, the CDV index ranged between 4 to 7 per cent except for production which was at 13.8 percent. Also, 79 per cent of the change in the price of Palm oil is explained by the selected independent variables viz., exchange rate, domestic production, consumption, and supply, quantity of imports and price of substitute (Soy bean oil). . Further, the exchange rate (1.379*), supply (1.290*) and price of soy bean oil (1.262*) were found to be significant at 5 per cent level.