Palm Imports by India Surge 51% as Prices Drop to Five-Year Low

(Bloomberg) – Palm oil imports by India, the world’s biggest buyer, climbed to the highest level in eight months after prices slumped to a five-year low on swelling global cooking oil supplies.

Overseas purchases of crude and refined palm oils jumped 51 percent to 789,858 metric tons in August from a year earlier, the most since December, the Solvent Extractors’ Association of India said in an e-mailed statement today. That’s less than the median estimate of 835,000 tons in a Bloomberg survey. Total vegetable oil imports, including those for industrial use, advanced 76 percent to a record 1.33 million tons last month, the association said.

Palm oil slumped to the lowest since 2009 this month as rising production in Indonesia and Malaysia, the world’s biggest growers, add to a glut in global cooking oil. The decline prompted Malaysia to scrap a tax on exports of crude palm oil for two months through October to boost shipments.

“This zero duty leaves India as a huge dumping ground,” B.V. Mehta, executive director at the trade group, said by phone from Mumbai. “Globally supply is more than the world requires and this has put pressure on prices. I won’t be surprised if India imports another 2 million tons in September-October with the way the shipments are lined up.”

Total vegetable oil imports may advance to a record 11.5 million tons in the year ending Oct. 31 from 10.7 million tons a year earlier, he said. Overseas purchases rose 8 percent to 9.53 million tons in the 10 months through August from a year earlier, the association said.

Protect Farmers

Futures tumbled to 1,914 ringgit ($593) a ton on Bursa Malaysia Derivatives on Sept. 2, the lowest level since March 2009, and traded at 2,107 ringgit by 4:20 p.m. in Kuala Lumpur. Soybean oil dropped to 31.52 cents a pound in Chicago on Sept. 10, also the lowest since March 2009. Soybean oil’s premium over palm, narrowed to $69.46 a ton this year from an average of $244 a ton in 2013, according to data compiled by Bloomberg.

India’s crude soybean oil imports almost tripled to a record 350,373 tons last month, while sunflower oil shipments more than doubled to 140,349 tons, the association said. Cooking oil stockpiles at ports and scheduled shipments rose to 1.82 million tons on Sept. 1 from 1.59 million tons a month earlier, it said.

Rising imports have depressed local cooking oil prices and farmers will be in distress as the harvest of monsoon-sown oilseed crop is set to begin in the next five to six weeks, Mehta said.

“India should increase the duty on imports to protect farmers,” he said. “The farmers will get a much lower price for their crop this year.”

Import duty on crude vegetable oils should be raised to 10 percent from 2.5 percent and refined oils to 25 percent from 10 percent, Mehta said. India imports more than 50 percent of its demand, shipping palm oil from Indonesia and Malaysia, and soybean oil from the U.S., Brazil and Argentina.