The slump in India’s rupee may fail to deter refiners and traders from importing record amounts of cooking oils for a second year amid rising demand in the world’s largest palm oil buyer.
Inbound shipments will climb to an unprecedented 10.5 million metric tons to 10.7 million tons in the year ending Oct. 31 from 10.2 million tons a year earlier, said B.V. Mehta, executive director of the Solvent Extractors’ Association of India. Imports increased 11 percent to 8.03 million tons in the nine months through July, according to the association.
Record purchases by India, the world’s second-biggest consumer of cooking oils, may help cut palm oil inventories in Indonesia and Malaysia and stem a 21 percent slump in prices in the past year. The rupee tumbled past 64 per dollar today for the first time on concern foreign outflows will accelerate as the U.S. Federal Reserve prepares to trim monetary stimulus.
“The depreciation in the rupee will put some pressure on imports of edible oils, but it being an essential commodity, we’ll have to import it,” Mehta said by phone from Mumbai today. “Fortunately for us, the international prices have come down and will be low for sometime.”
Palm oil tumbled to the lowest level in more than three years last month after dropping for five quarters, the worst run since at least 1995, as supplies of the oil used in everything from noodles to soaps outpaced demand. The contract for November delivery declined 0.2 percent to 2,329 ringgit ($708) a ton on the Bursa Malaysia Derivatives today. Futures touched 2,137 ringgit on July 26, the lowest level since October 2009.
A rising population and increasing disposable incomes will boost demand for cooking oils in India, Mehta said. Demand may surge to 23 million tons by 2020 from 17.5 million tons, and imports will rise significantly, according to the Food Ministry.
Imports may total a 800,000 tons to 900,000 tons in each of the next three months, Mehta said. The country meets more than half its demand through purchases of palm oil from Indonesia and Malaysia and soybean oil from the U.S., Brazil and Argentina.
“Costs for importers will go up and increase local prices,” said Atul Chaturvedi, chief executive officer of Ahmedabad-based Adani Wilmar Ltd. “At the end of the day, it will be a zero-sum game if importers can sell at the price they are importing.”
Imports may drop marginally in the coming months as India is set to harvest a bigger oilseed crop, said Chaturvedi, who estimates overseas purchases to total 11 million tons this year.
Farmers in India have planted 18.3 million hectares under the oilseed crop this year, 15 percent more than a year earlier, data from the Agriculture Ministry showed Aug. 16. Output of soybeans, the main oilseed sown during the monsoon, may climb from a record 14.7 million tons in 2012-2013, J.S. Sandhu, the nation’s agriculture commissioner, said July 30.
“Whatever may be the price, consumption of palm will continue to remain,” said Prathamesh Mallya, an analyst at AnandRathi Commodities Ltd. in Mumbai. “The weakness of rupee against the dollar will really not hamper demand. Nobody will stop purchases of vegetable oils as it’s not a luxury product, which you can delay for some time. It’s a necessity.”