India’s vegoil imports shrink on bigger domestic supply | Pakistan Today

India’s vegoil imports shrink on bigger domestic supply

NEW DELHI – India will process 12 percent more domestic oilseed crops into cooking oil this year, trimming imports of edible oil by up to five percent in the first such slowing in five years, easing global prices and blunting food-driven inflation.
India, the world’s top buyer of vegetable oils, appears to be following China in using cheaper oilseeds and cutting imports of Southeast Asian palm oil and Latin American soyoil to feed its population of more than a billion.
While China relies on soy imports, India takes comfort in stronger domestic oilseed output. Traders now say imports may fall by five percent to 8.7 million tonnes in the marketing year to October versus record levels of 9.2 million a year ago. India’s cutbacks may weigh on benchmark palm oil and soyoil futures, which soared in early February after floods in Malaysia crimped production and on-again, off-again Argentine strikes put supplies in jeopardy.
“Vegetable oils are getting sidelined as India’s projections of the rapeseed crop are very comforting and other big buyers are focusing more on the South American soy crop,” said commodity strategist Luke Matthews of the Commonwealth Bank of Australia. Moves by India and China to slow orders may explain why the vegetable oil complex has seen only marginal price rises in comparison to wheat and corn, weather-induced shortages of which have triggered a mad rush for supplies and fed global inflation.
“This is the opportunity to buy. When China and India stay away from the market on occasion, the smaller guys can come out to play,” said a Malaysian trader with an integrated palm oil firm that ships to the two countries. Improved monsoon rains boosted India’s summer soy crop and increased the acreage under winter rapeseed that gets harvested this month, pushing total oilseed output up 12 percent to 28 million tonnes in the current marketing year.
That estimate shines a bright spot on the South Asian giant’s inflation story darkened by unseasonal rains in late 2010 that wrecked vegetable supplies and pushed the food price index to a one-year high in December. “Soyoil supply may be higher by 300,000 tonnes, while supply of rapeseed oil could as high as 400,000 tonnes,” said Govindbhai G Patel, managing partner of trading firm Dipak Enterprise in the western Indian city of Rajkot.
“Expectations of lower imports after discounting the annual rise in demand have been based on current global prices,” said Patel, brushing aside fears of high cooking oil prices aiding food inflation that eased to a two-month low in February. Traders said higher local supplies this year would outstrip an annual rise in demand by 330,000-420,000 tonnes, trimming the country’s import requirements.
BUYING OPPORTUNITY? India may cut combined imports by nearly half a million tonnes of mostly crude palm oil and some soyoil, limiting the exposure of Asia’s third largest economy to volatile edible oil prices. Crude palm oil supply in top producers Indonesia and Malaysia will get a breather after floods early this year hurt yields, easing palm oil futures that hit a three-year high in early February.
The same can be said for Argentine and Brazilian soyoil supplies, which will be limited in global markets as China snaps up more soybean cargoes to turn into cooking oil and animal feed. China’s demand has kept the US soy complex on the boil. “There will be volatility in vegetable oil prices and India will definitely stay on the sidelines at times. That would spell a buying opportunity for smaller countries,” said Abah Ofon, an analyst with Standard Chartered Bank in Singapore.
Thailand, which is usually self-sufficient in palm oil but saw erratic weather sap production early this year, will do just that. In early February the government announced plans to buy 120,000 tonnes till the end of March. Faced with rising food prices and possible contagion from Egyptian and Tunisian protests, Gulf Arab countries could participate more frequently in international markets to secure palm oil and soyoil cargoes.
“We are getting some additional firm orders from Egypt as well as the Gulf for palm oil just so that supplies in these countries can be ensured,” said a trader in Malaysia. Some countries are starting to tweak import duties to allow for more stockpiling. Last week, Bangladesh cut its import duties on edible oils to 10 percent to stabilise domestic prices and fend off potential social unrest. Despite the promise of higher oilseed harvests and lower imports, India is unlikely to raise import duties on vegetable oils from zero just in case erratic weather strikes at home or abroad.
“India is keeping things loose,” said a regional trader in Singapore who regularly ships to India. “With such a big population and inflation remaining high, its better to keep the taxes at zero, leaving the doors open to bigger imports, because things can change very quickly.”



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