Palm Imports by India Jump to Record as El Nino Threatens Crops

(Bloomberg) – Palm oil imports by India surged to an all-time high on speculation a weak monsoon for a second straight year will cut oilseeds output and widen a cooking oil shortage.

Inbound shipments rose 39 percent to 907,347 metric tons in May from a year earlier, the Solvent Extractors’ Association of India said in an e-mailed statement on Friday. That was more than the median estimate of 800,000 tons in a Bloomberg survey. Total vegetable oil imports, including for industrial use, jumped 33 percent to a record 1.37 million tons, it said.

A strengthening El Nino may curtail rainfall from India to Indonesia and Malaysia this year, potentially hurting farm output. Palm oil prices will be supported through 2015 by the dry weather conditions caused by El Nino, prompting India and China, the world’s biggest buyers, to bring forward purchases, according to Maybank Investment Bank. Monsoon rainfall will be only 88 percent of a 50-year average in 2015, according to the India Meteorological Department.

“Expectations of a weak and delayed monsoon may have given rise to speculation that prices will rise later and this helped push up imports,” B.V. Mehta, executive director of extractors association, said by phone on Friday. “We are entering the lean season, so imports will continue to climb.”

Purchases will range between 1 million tons to 1.2 million tons each month, pushing total Indian imports to over 13 million tons in the year through October, Mehta said. A decline in the prices of soybean oil and palm from a year earlier is boosting purchases, he said.

Falling Prices

Futures in Kuala Lumpur, which lost 5.2 in the past year, closed at 2,276 ringgit on the Bursa Malaysia Derivatives on Friday. Soybean oil in Chicago retreated 13 percent in the past year, tumbling to 29.32 cents a pound in January, the lowest since December 2008.

Crude soybean oil imports jumped 66 percent to 289,266 tons in May from year earlier while sunflower oil shipments fell 14 percent to 153,048 tons, the association said. India also imported 9,027 tons of canola oil, it said.

Stockpiles at ports and in the pipeline surged to a record 2.25 million tons as of June 1, more than the monthly requirement of 1.6 million tons, the association said. Total vegetable oil shipments in the seven months ended May climbed 26 percent to 7.83 million tons, the association said.

India meets more than 50 percent of its demand through palm oil imports from Indonesia and Malaysia and soybean oil purchases from the U.S., Brazil and Argentina.