Palm oil imports by India, the largest buyer, may climb to a record this year as rising incomes stoke demand for cookies and potato chips, potentially stemming a decline in prices from a more than nine-month low.
Purchases may jump as much as 10 percent to about 7 million metric tons in the year ending Oct. 31 from 6.38 million tons a year earlier, according to five processors and analysts in a Bloomberg News survey. The highest-ever palm oil imports previously were 6.43 million tons in 2008-09 season, data from the Solvent Extractors’ Association of India showed.
Rising Indian imports may help palm oil futures limit losses after slumping 26 percent from a 35-month high of 3,967 ringgit ($1,320) a ton reached on Feb. 10 as output expands in Indonesia and Malaysia, the biggest producers. A rebound in prices may also boost earnings at producers including Sime Darby Bhd. (SIME) and Indonesia’s PT Astra Agro Lestari and raise costs for users including Nestle SA and Unilever.
“India’s buying will support prices,” Prasoon Mathur, senior agriculture analyst at Religare Commodities Ltd., said in a phone interview yesterday. “News on the U.S. debt and weakness in crude oil prices will be other major factors” influencing prices, he said.
Mathur expects palm oil to trade between 2,800 ringgit a ton and 3,100 ringgit for the rest of the year.
Palm oil plunged to a nine-month low on Aug. 9 on concern that demand for commodities may drop as the U.S. economic recovery stalls. Standard & Poor’s on Aug. 5 cut the rating of the U.S.’s long-term debt. The Federal Reserve on Aug. 9 pledged to keep its benchmark interest rate at a record low for another two years to bolster the economy.
Indian importers are being lured by the “huge discount” that palm oil offers compared with its rival soybean oil, Murali Krishna P.V., chief executive officer of TransGraph Consulting Pvt., said from the southern city of Hyderabad.
Soybean oil’s premium over palm oil widened to $213.22 a ton today from the 12-month average of $119.43 a ton, according to data compiled by Bloomberg. The premium climbed to $271.68 a ton on July 13, the highest since December 2008.
Palm oil for October delivery gained as much as 0.8 percent to 2,959 ringgit per ton on the Malaysia Derivatives Exchange in Kuala Lumpur today. December-delivery soybean oil climbed as much as 0.8 percent to 54.03 cents per pound.
“Soybean oil is expected to become more expensive in the next three months, which also coincide with India’s festival season,” said Raj Kumar Shah, deputy managing director of Kuala Lumpur-based Josovina Commodities Sdn. Bhd.
The peak season for India’s edible oils demand starts with the Muslim fasting month of Ramadan this month and ends with the Hindu festival of Diwali in late October. Imports may climb to about 720,000 tons a month in the three months through October, compared with an average 659,000 tons bought during the same period last year, according to the Bloomberg survey.
“Palm oil imports will be higher for rest of the season as the local production is almost over now and festivals are early this year,” Ashok Sethia, senior vice president of the Central Organisation for Oil Industry & Trade, said in a telephone interview from Kolkata.
Prices of palm oil are lower in India compared with rapeseed, cotton seed and soybean oils and the gap may widen further as output in Malaysia and Indonesia rises, said Vijay Data, vice president of the Solvent Extractors’ Association.
India’s edible oil consumption may expand around 3 percent this year as population and percapita income grow, TransGraph’s Krishna said. India consumes 1.2 million tons to 1.5 million tons of edible oil each month, he said.
Soybean oil purchases may fall to 1 million tons in the year ending Oct. 31, from 1.67 million tons a year earlier, Sandeep Bajoria, chief executive officer of Sunvin Group said on July 5. India meets more than half its edible oil demand through imports. The nation buys palm oil from Indonesia and Malaysia, and soybean oil from Brazil and Argentina.
Vegetable oil imports by India fell 8 percent to 5.1 million tons in the eight months through June because of higher domestic oilseed production, according to the extractors’ association. Palm oil imports in the November-June period were almost unchanged at 3.9 million tons from a year earlier, while purchases of soybean and sunflower oils slumped 24 percent to 986,213 tons, the group said.
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