April 15, 2019
Palm oil imports are going to rise in the coming months. At the current price level, it is very competitive compared to soy oil and sunflower oil. India’s palm oil imports in 2018/19 are likely to jump a tenth from a year earlier to a record high, as a sharp fall in the prices made the tropical oil more attractive for buyers than rival soy oil and sunflower oil. Higher purchases by the world’s biggest edible oil importer could support palm oil prices that are trading near their lowest level in three months.
Palm oil’s discount to rival soy oil has widened to over $200 per tonne from $133 in March 2018, according to data compiled by the Solvent Extractors’ Association of India (SEA), a Mumbai-based trade body.
Malaysian palm oil futures fell to 2,038 ringgit ($499.82) a tonne on Friday, the lowest in three months, due to weak demand and ample supplies.
India’s sunflower oil imports are likely to remain largely steady around 2.5 million tonnes, but soy oil imports could fall slightly from last year’s 3.05 million tonnes as local supplies have increased, Patel said.
Soybean production in 2018/19 is estimated to have risen 38 percent from a year ago to 11.5 million tonnes, according to the Soybean Processors Association of India.
India primarily imports palm oil from Indonesia and Malaysia and soyoil from Argentina and Brazil. It also buys small volumes of sunflower oil from Ukraine and canola oil from Canada.
Palm prices are attractive but refiners are not making money due to lower refining margins, and refiners are gatekeepers. As they are earning less from palm oil refining, they are not aggressively importing despite lower prices. The import duty difference between crude and refined palm oil halved to 5 percent for supplies from Malaysia after India changed the duty structure.
The lower duty difference is prompting some traders to import refined palm oil instead of crude and the country’s imports of refined palm oil could jump a third from a year ago to 2.8 million tonnes in the current marketing year.
The winter is over. As palm is cheaper and the temperature is rising, refiners will step up imports. In winter months, household palm oil consumption falls in India as the tropical oil solidifies at a lower temperature.