Imports of palm oil by India, the world’s largest buyer, probably dropped for a second month as a shrinking discount to soybean and sunflower oils cut its appeal. Futures in Kuala Lumpur slumped to a nine-month low.
Shipments of the main crude and refined palm oils fell 3.8 percent to 625,000 metric tons in June from a year earlier, the median of estimates from five processors and brokers compiled by Bloomberg show. Imports of sunflower oil jumped 58 percent to 160,000 tons, while crude soybean oil purchases were little changed at 140,000 tons, the survey showed. The Solvent Extractors’ Association of India publishes the data next week.
Palm’s discount to soybean oil has contracted about 65 percent in the past year amid forecasts for a record U.S. soybean harvest. While purchases dropped in June, weak monsoon rains are hurting oilseed crops in India and may spur imports later this year, according to Govindlal G. Patel, managing partner at G.G. Patel & Nikhil Research Co.
“We may see palm oil imports rising from this month as there is a shortage of the oil in the domestic market and it’s easier to transport quickly due to proximity to producing countries,” Patel said by phone from Rajkot in Gujarat state. “Unless we get good rains and sowing picks up, the crop is expected to be lower than last year.”
The gap between soybean oil and palm, the world’s most-used cooking oil, averaged $94 a ton this year from $244 a ton in 2013, according to data compiled by Bloomberg. Palm futures fell 1.7 percent to 2,346 ringgit ($736) a ton on the Bursa Malaysia Derivatives today, the lowest price at close for futures since Oct. 7. Soybeans fell to $10.92 a bushel in Chicago, the lowest since October 2010.
Stockpiles of cooking oils at ports and due to arrive in India may total 1.35 million tons at the start of July from 1.42 million tons a month earlier, Sandeep Bajoria, chief executive officer of Mumbai-based broker Sunvin Group, said. “Imports will rise in July-September as people are stocking up because of a weak monsoon,” Bajoria said. “Soybean production will decline, necessitating additional imports next year.”
Soybean output in India may tumble to a five-year low of 11 million tons in the crop year beginning Oct. 1 as the weakest monsoon since 2009 delays planting, Dinesh Shahra, managing director of Ruchi Soya Industries Ltd., said on July 8. Vegetable oil purchases, including for industrial use, may climb 12 percent to 12 million tons in the year to October and rise further in 2014-2015, he said.
The monsoon, which provides more than 70 percent of annual rainfall, will be 93 percent of a 50-year average from June to September as an El Nino emerges, the India Meteorological Department said on June 9. The chances of a drought in India increased to 60 percent from about 25 percent in April amid forecasts for El Nino, Skymet Weather Services., a New Delhi-based private forecaster, said last week.
Total vegetable oil imports probably fell 1.3 percent to 935,000 tons in June from a year earlier, according to the survey. Shipments in the seven months through May were little changed at 6.2 million tons, while palm oil imports tumbled 15 percent to 4.33 million tons, the extractors’ group estimates.
Imports June 2014 (Survey) May 2014 (SEA) June 2013 (SEA) Palm Oil 625,000 647,756 649,772 Soybean Oil 140,000 174,209 138,849 Sunflower Oil 160,000 178,753 101,480 Vegetable Oil 935,000 1,033,550 947,591 Stockpiles 1,350,000 1,420,000 2,060,000 Figures are in tons.