Palm Oil Imports by India Seen Surging to Record as Prices Slump

(Bloomberg) – Palm oil shipments by India, the world’s biggest buyer, will climb to a record this year as tumbling prices and zero-tax on exports from Malaysia make the oil attractive to refiners, said Ruchi Soya Industries Ltd. (RSI)

Inbound shipments may increase to 9 million metric tons in the year ending Oct. 31, more than the 8 million tons estimated in July, Dinesh Shahra, managing director of the nation’s biggest importer, said in an e-mail interview. Purchases were at 8.3 million tons in 2012-2013, the highest ever, data from the Solvent Extractors’ Association of India show.

Palm and soybean oils slumped to the lowest in five years this month as forecasts for record supplies threatened to widen a glut in global cooking oils. Palm will drop in the next few weeks toward the cost at which growers in Asia produce the world’s most-used cooking oil, Dorab Mistry, director at Godrej International Ltd., said Sept. 15. The decline spurred Malaysia, the world’s second-biggest grower, to scrap export tax on crude palm oil for two months through October to boost shipments.

“We have seen and would see a surge in imports in the nearby month” because of the Malaysian tax cut, Shahra said. “Stockpiles are thinner versus previous years,” he said. Most traders had “hand-to-mouth” stockpiles as longer dated deliveries were cheaper than spot rates, he said.

Futures tumbled to a five-year low of 1,914 ringgit a ton on Sept. 2. and traded at 2,127 ringgit today on the Bursa Malaysia Derivatives in Kuala Lumpur. Palm’s discount to soybean oil averages about $91 a ton this year, compared with $244 in 2013 as the U.S. harvests a record soybean crop, data compiled by Bloomberg show.

Rising Demand

India’s imports of vegetable oils, including those for industrial use, may jump to an all-time high of 13 million tons this year, Shahra said. The country bought 10.7 million tons in 2012-2013, according to the extractors’ association.

“Our oilseed crops are not big and demand will continue to outpace production,” Faiyaz Hudani, associate vice president at Kotak Commodity Services, said by phone from Mumbai. “Palm will have to be at a very good discount to motivate demand and shift people from soybean and sunflower oils.”

Soybean oil shipments will jump to more than 2 million tons and sunflower oil imports may climb to 1.6 million to 1.7 million tons, Shahra said. Soybean oil prices in Chicago have dropped 17 percent this year, reaching 31.52 cents a pound on Sept. 10, the lowest since 2009.

“The price gap should remain narrow due to ample supply of both oils,” Shahra said. “Though the supply suggests that prices should remain lower to attract demand, however, amid policy driven steps, prices for palm may get underpinned.”

Argentina, Brazil

India buys more than 50 percent of its annual demand, shipping palm oil from Indonesia and Malaysia, and soybean oil from the U.S., Brazil and Argentina. Imports rose 8 percent to 9.53 million tons in the 10 months through August from a year earlier, the extractors’ association estimates.

Domestic soybean production may decline to 9.5 million tons to 10.5 million tons in the crop year starting Oct. 1 from 11 million tons predicted in July because of inconsistent monsoon rainfall, lower acreage and some crop losses during the germination stage, Shahra said.

Plantings of oilseeds fell to 17.68 million hectares (43.69 million acres) from 19.25 million hectares a year earlier, the Agriculture Ministry said yesterday. Monsoon rains were 11 percent less than the 50-year average since June 1, the India Meteorological Department said yesterday.