Cooking-oil imports by India, the biggest palm oil buyer, will climb as much as 12 percent to a record after dry weather and excessive rain curbed oilseed crops, according to GG Patel & Nikhil Research Co.
Purchases will total 9.2 million metric tons to 9.4 million tons in the year that began on Nov. 1, compared with 8.37 million a year earlier, said Managing Partner Govindlal G. Patel, who has traded vegetable oils for more than three decades. India bought a record 8.82 million tons in 2009-2010.
The tropical oil, used in everything from candy bars to biofuels, advanced to the highest level in eight months on Feb. 28 as dry weather cut soybean harvests in South America. Global inventories of soybean and palm oils will drop to 7.84 million tons by the end of 2011-2012, the lowest in four years, U.S. Department of Agriculture data show. About 80 percent of India’s purchases consist of palm oil.
It’s “a cheaper option for India,” Ryan Long, vice president of futures and options at OSK Investment Bank Bhd., said by phone from Kuala Lumpur. “Higher demand from India will support palm-oil prices.”
The May-delivery contract gained 0.5 percent to 3,285 ringgit ($1,094) a ton on the Malaysia Derivatives Exchange today. Futures, which have rallied from a 12-month low of 2,754 ringgit on Oct. 6, may reach 4,000 ringgit by June as demand growth outstrips production, according to Dorab Mistry, director of Godrej International Ltd.
Shipments from Malaysia may jump to a record 19.8 million tons in 2012 from last year’s 18 million tons, aided by rising demand in India and China, Lee Yeow Chor, chairman of the Malaysian Palm Oil Council, said last month. Exports to India climbed 25 percent to 460,220 tons in the four months ended Feb. 29 from a year earlier, according to surveyor Societe Generale de Surveillance.
Oilseeds production in India may drop to 30.5 million tons in the year ending June 30 from 32.48 million tons a year earlier, according to the farm ministry.
The soybean harvest was damaged in Madhya Pradesh state, the biggest grower, because of excessive rains, while the mustard harvest crop will decline after dry weather in November and December curbed yields, Patel said.
A lower crop may boost domestic oilseed prices by 20 percent in June from a year earlier, said Sujan Hajra, the chief economist at Anand Rathi Financial Services Ltd. in Mumbai. The wholesale oilseeds-price index climbed 13 percent in January from a year earlier, according to the commerce ministry.
Cooking-oil imports climbed 2.9 percent to 2.13 million tons in the three months ended Jan. 31 from a year earlier, the Solvent Extractors’ Association of India said on Feb. 14. Palm-oil purchases rose 4.9 percent to 1.8 million tons, it said. Consumption may gain 3.8 percent to 16.3 million tons in 2011-2012 from 15.7 million tons a year earlier, said Patel.