Palm oil imports drop on increased availability of other edible oils

During March, palm oil imports from Malaysia dropped to a two-year low

Palm oil imports to India have started declining, thanks to rising availability of alternative oils in the domestic markets. According to latest reports, during March, India's palm oil imports from Malaysia dropped to a two-year low on increased availability of domestic oilseeds for crushing.

A report from Rabobank Food & Agribusiness Research and Advisory noted that India's palm oil imports would remain weak during April due to rapeseed harvest. Palm oil export from Malaysia to India has dropped 46 per cent year-on-year in March to 64,202 tonnes.

"We forecast India's rapeseed crop will be up 22 per cent y-o-y, which will increase on the availability of domestic oilseeds for crushing during March and April. With crushing parity in place, rapeseed crushing will increase the oil supply in the country," the Rabobank report noted.

Notably, favourable weather has increased the prospect of growth in rapeseed/mustard production in India. According to estimates provided by the Solvent Extractors' Association of India, India's rapeseed production in 2012-13 could rise 20.95 per cent to around 7.11 million tonnes against the estimated production of 5.88 million tonnes in 2011-12.

"Rapeseed production will increase in the country, this will improve the seed availability for crushing. This will help substitute palm imports with local oils to some extent," said an industry insider in Ahmedabad.

However, experts noted the relief for the edible oil industry was temporary, as imports would surge after May, when the supply of local oilseeds exhaust.

"Palm oil imports have reduced a bit in recent months. But that is likely to surge after May. In the current oil year (November-October), we expect palm oil imports to India to rise to around 8.5 million tonnes, up from 7.7 million tonnes last year," said Govindbhai G Patel, an industry analyst and edible oil expert.

In its report, Rabobank noted that once the domestic harvest was processed, the country's import demand would remain strong from May to June.

Reduced imports by India were reflected in palm oil prices in the international markets. The contract for July delivery had dropped to the lowest in a month at 2,294 ringgits ($756) a tonne on the Bursa Malaysia Derivatives.

However, higher export data from Malaysia supported prices at the bottom levels. The bullish sentiment was also reflected on the Indian exchanges - crude palm oil (CPO) prices ended positive. The CPO for April contract ended at Rs 464.8 on the Multi-Commodity Exchange.

In the international markets, the contract for July delivery climbed as much as 1.1 per cent to 2,334 ringgits ($769) a tonne on the Bursa Malaysia Derivatives.