- Purchases to rise 6.6 percent vs 20 percent in 2014-15
- Higher prices and rising local supplies to curb shipments
Vegetable oil imports by India are set to rise at the slowest pace in three years as consumption growth is curbed by higher prices and increasing domestic cooking oil supplies, according to G.G. Patel & Nikhil Research Co.
Overseas purchases, including for industrial use, may rise 6.6 percent to a record 15 million metric tons in the year starting Nov. 1 from a year earlier, Govindlal G. Patel, managing partner of the research company, said in remarks prepared for an industry conference in Mumbai on Monday. Imports surged 20 percent and 12 percent each in the previous two years, Patel said.
Slowing demand from the world’s biggest palm oil importer may stem a rally in futures in Kuala Lumpur amid record production and reduced demand for vegetable oils as biodiesel feedstock. Palm entered a bull market last week as the ringgit slumped and a strengthening El Nino spurred concern that output may shrink in top producers Indonesia and Malaysia.
“In the current year, the weighted-average price of edible oils was lower by around 8 percent in comparison with previous year and this boosted the consumption,” said Patel, who’s traded vegetable oils for more than four decades. “In 2015-16, it is likely that the consumption growth may be normal at around 5 percent. Due to the El Nino threat, palm oil prices may remain less competitive against soybean oil.”
Palm oil prices may rise if the El Nino worsens and trims crop yields in Malaysia and Indonesia, according to Bloomberg Intelligence analysts Tobias Nystedt and James Evans. This year’s El Nino, which the Australian Bureau of Meteorology has said is the strongest since 1997-98, could restrict output in the Pacific region. Prices more than doubled within months during the record event, they said.
The benchmark futures contract on Bursa Malaysia Derivatives in Kuala Lumpur has climbed 28 percent from this year’s closing low of 1,867 ringgit on Aug. 26, exceeding the 20 percent advance that’s the common definition of a bull market. Prices surged 11 percent last week, the biggest weekly gain since November 2008.
India’s decision to increase import duties on cooking oils this month will also curb inbound shipments, Patel said. The South Asian country increased the import duty on crude palm and soybean oils to 12.5 percent from 7.5 percent, while the tariff on refined oils was increased to 20 percent from 15 percent, the Central Board of Excise and Customs said on Sept. 18.
India’s cooking oil usage may total 21 million tons in 2015-16, with per-capita consumption growing at about 5 percent from 7.4 percent this year, Patel said. Palm oil shipments may jump to 9.6 million tons in 2015-16 from 9.04 million tons, while crude soybean oil imports are seen rising 18 percent to 3.55 million tons, he said.
India’s total vegetable oil availability may increase by 2 percent to 6.26 million tons next year, boosted by higher production of rapeseed oil this year, Patel said. Rapeseed production may jump 16 percent to 5.8 millions tons, while soybean output will be unchanged at 8.5 million tons and the peanut harvest may drop 12.7 percent to 3.1 million tons, he said.
“As the farmers have realized excellent prices for rapeseed, it is more likely that the area will increase substantially and rainfall in the last fortnight of September will likely prove supportive for the crop,” Patel said.
India meets more than half its cooking oil requirements through imports with palm oil shipped from Indonesia and Malaysia and soybean oil from the U.S., Brazil and Argentina. Vegetable oil purchases in the 10 months through August surged 23 percent to 11.7 million tons from a year earlier, the Solvent Extractors’ Association of India said on Sept. 15.