Palm Imports by India Tumbling as Refiners Buy Soybean Oil

Jun 11, 2014 6:32 am ET

(Updates prices in 10th paragraph.)

June 11 (Bloomberg) -- Palm oil imports by India, the world’s largest buyer, probably declined in May as refiners and traders bought more soybean and sunflower oils amid forecasts for record global supplies. Futures in Kuala Lumpur fell.

Shipments of the main crude and refined palm oils dropped 12 percent to 668,000 metric tons, the median of estimates from six processors and brokers compiled by Bloomberg show. Purchases of crude soybean oil more than tripled to 186,000 tons, while sunflower imports more than doubled to 150,000 tons, the survey showed. The Solvent Extractors’ Association of India typically publishes the data around mid-month.

Soybean oil’s premium over palm, the world’s most-used cooking oil, narrowed to average $91 a ton this year from $244 a ton in 2013, according to data compiled by Bloomberg. That’s spurred importers to stockpile soybean oil and cut purchases of palm, says Sunvin Group, a broker in Mumbai. World output of seven major oilseeds will be a record 487.5 million tons in the year to Sept. 30, according to Oil World in Hamburg.

“The soybean oil-palm oil gap was very narrow two months ago, encouraging commitments for soybean oil imports,” Sandeep Bajoria, chief executive officer of Sunvin, said by phone on June 9. “The gap has started increasing in the last two weeks and Indian importers have started looking at palm oil again.”

India imports more than 50 percent of its cooking oil demand, shipping palm from Indonesia and Malaysia, and soybean oil from the U.S., Brazil and Argentina.

Monsoon Threat

Stockpiles at ports and due to arrive to India may total 1.35 million tons at the start of June, Bajoria said. Reserves fell to 1.17 million tons a month ago, the lowest since January 2011, when the extractors’ association began compiling data.

“The possibility of a monsoon failure and an El Nino have also motivated some people to buy in advance,” Ashok Sethia, executive director of Sethia Oils Ltd., said from Kolkata.

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. An El Nino weather pattern, which brings drought to the Asia-Pacific region and heavier-than-usual rain to South America, may be established by August, Australia’s Bureau of Meteorology said on June 3.

Palm oil production may decline as much as 15 percent if El Nino occurs and futures may trade between 2,650 ringgit ($827) a ton and 2,850 ringgit a ton from August, IOI Corp. Chief Executive Officer Lee Yeow Chor said yesterday.

Futures fell 0.3 percent to 2,379 ringgit a ton on the Bursa Malaysia Derivatives, the lowest price at close for a most-active contract since Oct. 14. Prices are down 11 percent this year.

Total vegetable oil imports, including for industrial use, increased 8.9 percent to 1.06 million tons from 917,964 tons, according to the survey. Vegetable oil imports in the six months through April dropped 2 percent to 5.16 million tons, according to the extractors’ association.