Palm oil imports by India, the world’s largest consumer, probably fell for the second month in August as a record plunge in the nation’s currency prompted buyers to defer purchases. Futures in Malaysia declined.
Inbound shipments of crude palm oil and refined, bleached and deodorized palmolein fell 29 percent to 500,000 metric tons last month from a year earlier, according to the median of estimates from five processors and brokers compiled by Bloomberg. The Solvent Extractors’ Association of India will release data this week. Total vegetable oil imports, including for industrial use, fell 18 percent to 740,000 tons, the survey showed.
The rupee tumbled 8.1 percent in August, the biggest monthly loss since 1992, on concern that a deepening economic slowdown will deter investors at a time when the U.S. prepares to pare stimulus, boosting import costs of everything from cooking oils to crude and gold. A drop in Indian palm oil purchases may help to expand stockpiles in Malaysia, the largest producer after Indonesia, just as output climbs seasonally.
“The rupee continues to shock and awe all the importers,” said Sandeep Bajoria, chief executive officer of Mumbai-based Sunvin Group. “People are importing less and consuming stocks already imported before.”
Stockpiles at ports and in pipelines probably fell to 1.65 million tons at the start of this month from 1.99 million tons a month earlier and may further decline to 1.35 million tons by Oct. 1, he said.
Palm for delivery in November fell as much as 2.1 percent to 2,349 ringgit ($717) a ton on the Malaysia Derivatives Exchange in Kuala Lumpur today, the lowest level for the most active contract since Aug. 23. Futures surged 7.5 percent in August, the biggest monthly gain since December 2010, as a rally in soybeans and a weaker ringgit boosted shipments.
“One does not know what the cost of the imported oil will be because of the volatility in the rupee,” said Govindlal G. Patel, managing partner of GG Patel & Nikhil Research Co. “People do not want to take the risk. There might be a shortage in September-October.”
The rupee weakened 14 percent against the dollar this year, reaching a record low of 68.845 on Aug. 28. The currency could sink past 70 this year, according to Arvind Virmani, a member of the Reserve Bank of India’s advisory panel on monetary policy.
Consumption of cooking oils usually rises during the festival season, which started in August and ends in November. India meets more than half its cooking oil demand through imports and buys palm from Indonesia and Malaysia and soybean oil from the U.S., Brazil and Argentina.
“Demand will not fall as it is a day-to-day consumption item,” Bajoria said. “But the industry cannot absorb the higher cost anymore, so they will pass this to consumers.”
Vegetable oil purchases in the nine months through July rose 11 percent to 8.03 million tons, association data show. Inbound shipments will climb to a record 10.5 million tons to 10.7 million tons in the year ending Oct. 31 from 10.2 million tons a year earlier, B.V. Mehta, executive director of the Solvent Extractors’ Association of India, said on Aug. 20.
Crude soybean oil imports probably rose 17 percent to 130,000 tons in August from 110,758 tons a year earlier, while sunflower oil purchases may have gained to 80,000 tons from 68,900 tons, the survey showed.
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