India, the world’s largest importer of cooking oils, will buy more soybean and sunflower oil this year than ever before as a global glut weakens prices and prompts buyers to switch from palm oil.
Purchases of soybean, sunflower and canola oils will probably jump 15 per cent to 4.2 million metric tons in the year that began on 1 November, said Govindlal G. Patel, managing partner at G.G. Patel & Nikhil Research. They will account for 33 per cent of shipments and palm oil will represent 67 per cent, the smallest share in eight years, he said.
Palm is losing ground after record soybean supplies from the US to Brazil sent prices of the alternative oil to a six- year low. Palm’s discount to soybean oil in 2015 is less than half the average of the past five years, data compiled by Bloomberg show. India may also buy less palm if Indonesia follows Malaysia in taxing exports, said B.V. Mehta, executive director of the Solvent Extractors’ Association of India.
“Soft oils are much more competitively priced so the palm oil share will be lower,” said Patel, who’s traded oils for more than four decades. “Much will depend on Indonesia’s decision on the duty structure,” he said. Soybean, sunflower and canola are known as soft oils.
Palm imports by India were 2.8 million tons in the four months through February, or 67 percent of the total, data from the solvent extractors show. That’s down from 76 per cent a year earlier. Purchases of soft oils were 1.4 million tons, or 33 per cent versus 24 per cent, the data show. Total imports will be a record 12.6 million tons this year, Patel said.
Palm was an average of $72 a ton cheaper than soybean oil this year compared with a five-year average of $155, data compiled by Bloomberg show. That’s spurred Indian consumers to buy more soft oils, according to Harish Galipelli, head of commodities and currencies at Inditrade Derivatives & Commodities Ltd.
“Palm oil is kind of a cheap alternative,” Galipelli said. “When soybean oil is available at a cheaper price, people tend to go for that only.”
Cooking-oil demand in India may jump to 25.7 million tons by 2020-2021 from 19.3 million tons this year, with imports rising to 16.3 million tons from 12.5 million tons, Mehta said on 23 February. India buys soybean oil from Argentina and Brazil and palm oil from Indonesia and Malaysia, the top producers.
Bloomberg News, edited by ESM
