Palm oil demand up on weak soybean crushing

Lower soybean processing due to profit margin issues has helped increase the market share of palm oil among edible oils this winter, industry experts and analysts said.

Palm oil demand usually wanes in winter as it freezes below 24 degrees Celsius.

“Soyoil production is not at its peak this year as it used to be. The pace of crushing is very slow on account of lower profit realisation from soy product sales. (Soy) oil is being replaced by palm oil derivatives, especially RBD palmolien,” said Davish Jain, former president of Central Organisation for Oil Industry and Trade.

Soyoil production usually picks up in November-December after soybean harvest ends in September. The country produces around 200,000 tonnes of soyoil a month during the peak crushing season. But this year, its production has halved, Jain said. Small soybean processors have either stopped or limited crushing in Indore — the soy commodity hub of the country — because of disparity between soybean buying cost and soymeal sales, local crushing plant officials said.

India’s November soymeal export fell 54 per cent on year to 297,340 tonnes as lower crushing led to rise in prices of soymeal, a Solvent Extractors’ Association of India release said today. “We are bullish about soyoil rates. I think soyoil will go up by around Rs 20 soon from the current level due to lower crushing,” Veeresh Hiremath, analyst with Karvy Comtrade, said.

In the Indore spot market, soyoil quoted at Rs 468-472 per 10 kg on Friday. Significant price difference between soyoil and palm oil retail rates has made the latter attractive even as it solidifies in winter, industry sources said. “The price gap between soyoil and palm oil is higher. That’s why winter demand of soyoil is not as good as it should be,” DS Shridhara, owner of Bangalore-based edible oil maker Krishna and Co, said.

Palm oil is being sold at a discount of around Rs 100 to soyoil due to sufficient stock in the country. Palm oil is currently sold at Rs 380 per 10 kg.

Indian palm oil imports rose more than 37 per cent in 2008-09 (November-October) to 5.9 million tonnes as importers took advantage of duty-free regime and cheaper prices.

India surpassed China in 2008-09 as the largest consumer of palm oil.

India would import almost similar quantity of palm oil this year too as it was cheaper and duty-free, said Jain, who is also director of city-based feed meal company Prestige Foods.

Malaysian palm oil exports to India in November were higher at 181,500 tonnes against 124,510 tonnes exported last year, trade sources said.

India currently imposes zero-duty on crude edible oil imports while 7.5 per cent on refined oil. The country imports around 55 per cent of its of its 15 million tonnes annual edible oil requirement, mainly in the form of palm oil from Indonesia and Malaysia.

Wedding season
Soyoil oil demand also fell this marriage season due to lesser number of auspicious days, traders and brokers said.

“Hindu marriage season started late October and will end on December 12, much earlier than other seasons. There will be no marriage season demand for soyoil after December 12,” Rameshchand Malpani, a city-based soy commodity broker said.

At least 25 per cent of Madhya Pradesh’s cooking oil requirement was met by palm oil this year, he said.

The state, which usually consumes soyoil and groundnut oil, requires around 2,000 tonnes cooking oil each day.