India to boost soybean oil imports as premium drops

India, the world’s second-biggest vegetable oil consumer after China, may boost imports of soybean oil by 80 per cent this year as its premium over rival palm oil drops, amid record global output.

Purchases may jump to 1.8 million tonnes (mt) in the year ending October 31, from 1 mt a year earlier, Govindlal G Patel, director of vegetable oils trading company Dipak Enterprise, said in a phone interview. Overall edible oil imports may climb 6.7 per cent from the previous year to 8.7 mt, he said.

Higher imports may support soybean oil prices, which have dropped about 6 per cent in Chicago this year on a record global soybean harvest. The premium of soybean oil over palm oil plunged to $66.10 a tonne today, lower than the 12-month average of $129.30 a tonne, according to data compiled by Bloomberg.

“Soybean oil will make up whatever increase in imports that will be seen this year,” Patel said. “Soybean oil is cheaper and people are taking advantage.”

Soybean futures in Chicago have fallen 8 per cent this year as global output expands to a record, led by rising production in the U.S., Brazil and Argentina, the world’s top growers. China, the largest user of soybean oil, suspended purchases from Argentina last month because of quality concerns. Argentina supplies about 75 per cent of China’s demand.

“India’s own soybean oil supply will be less than last year as nearly half the crop has not been crushed,” Patel said. “With China shunning Argentine supplies, it’s turned cheaper for Indians.”

Palm Imports
India is yet to crush more than 1.45 mt of soybeans, mustard and other oilseeds, the Solvent Extractors’ Association of India said in a statement today. Stockpiles of 10 mt are considered normal, according to Ashok Sethia, the group’s president. Crushing has slowed because of cheaper imports and because low prices of soybean meal, used to make animal feed, have wiped out crushers’ profits.

India may import around 6.4 mt of palm oil in the year to October 31, compared to 6.6 mt a year earlier, Patel said. Edible oils purchases last month slumped 18 per cent to 543,252 tonnes from 659,477 tonnes a year earlier, the Solvent Extractor’s Association said today.

Vegetable oil imports, including crude palm oil, had not changed much, at 4.29 mt in the six months to April, the group said. Soybean oil imports surged 73 per cent to 611,877 tonnes from a year earlier, it said.

India buys palm oil from Indonesia and Malaysia and soybean oil from Argentina and Brazil.

Palm oil futures in Malaysia, which have dropped 6.6 per cent this year, may trade between 2,470 ringgit ($772) and 2,800 ringgit a tonne in the next four months, Patel said.

July-delivery palm oil fell as much as 1 per cent to 2,481 ringgit a tonne on the Malaysia Derivatives Exchange today. Soybean oil for July delivery in Chicago dropped as much as 0.4 per cent to 38.27 cents a pound.