June 2 (Bloomberg) -- India, the world’s biggest buyer of vegetable oils after China, may slow the pace of imports after domestic stockpiles surged on record purchases, a trader said.
Cooking oil reserves probably climbed 55 percent to 1.7 million metric tons in the seven months ended May, exceeding normal levels of 1.1 million tons, Govindlal G. Patel, director of Dipak Enterprise, said in a phone interview from western India.
A 53 percent rally in world palm oil may cool as a result of fewer purchases by the South Asian nation. Prices have surged as soybean crops decline in Brazil and Argentina, and stockpiles in the U.S. are forecast to reach a five-year low. Palm oil competes with soybean oil for applications in food and fuel.
The report is “definitely negative,” for palm oil prices, Alvin Tai, an analyst at OSK Research Sdn. in Kuala Lumpur, said by email. “A slowdown in India’s purchases will help replenish palm producing countries’ inventory.”
Malaysia’s palm oil stockpiles in April fell to 1.29 million tons, the lowest since June 2007. Reserves in Indonesia, the No.1 producer, have fallen below 1 million tons, the nation’s Palm Oil Board Deputy Chairman Derom Bangun said May 29.
August-delivery palm oil declined 1 percent to 2,598 ringgit ($744) a metric ton on the Malaysia Derivatives Exchange. Futures earlier gained as much as 1 percent.
The price may reach 3,000 ringgit by August as a decline in soybean oil supplies boosts demand for palm oil, said Patel, who has traded vegetable oils for four decades.
India may have purchased more than 800,000 tons of cooking oils last month, including 700,000 tons of refined and crude palm oils, said Patel. Imports in May last year were 302,345 tons, data from the Solvent Extractors’ Association of India shows.
‘Rush to Buy’
“India will have to reduce the pace of imports as off-take has slowed in the local market,” said Patel. “The rush to buy large quantities of crude palm oil has slowed.”
Cooking oil imports surged 82 percent in the six months to April 30 after the government scrapped import tax amid a decline in local oilseed output.
India in March scrapped a 20 percent duty on imports of crude soybean oil four months after it was imposed to shield oilseed growers. Crude palm oil can be imported tax-free.
Production of oilseeds may drop to 28.12 million tons in the year ending June, down from 29.75 million tons a year earlier, the agriculture ministry said last month.
Edible oil imports may exceed 8 million tons in the year to October, from 5.6 million tons a year ago, Patel said. The nation may buy about 500,000 tons of non-edible vegetable oils, he said.
India relies on overseas purchases to meet almost half its edible-oil demand. It buys palm oil from Indonesia and Malaysia, and soybean oil from Argentina and Brazil. Palm oil accounts for almost 90 percent of all edible oil imports.
Source : Bloomberg.com