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India’s Oilseed Glut Could Hit Vegetable Oil Imports
May 24, 2010

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Singapore. India’s record oilseed stockpile looks set to finally dribble into the market as forecasts for normal monsoon rains prompt speculators to release stocks and reduce vegetable oil imports.

India, the biggest importer of edible oil, still has 70 percent of this year’s oilseed output of 26 million tons to process, but crushing will pick up from June as forecasts of ample rains promise plentiful supply next year.

Higher oilseed crushing in the third quarter, usually India’s peak edible oil import season, will limit the need for overseas purchases and possibly have a bearish impact on benchmark Chicago soyoil and Malaysian palm oil markets.

“Import numbers have started dwindling and with the monsoon expected to arrive on time, definitely oilseed stocks stored in the country will start coming out,” said Sandeep Bajoria, of the industry group Central Organization of Oil Industry and Trade.

India typically finishes crushing two-thirds of its domestic oilseeds harvest by April, relying mainly on imports in the second and the third quarters. But this year will be different.

Traders said edible oil imports — chiefly palm oil from Southeast Asia and soyoil from Latin America — could slide to 1.5 million to 1.6 million tons from July to September, down 20 percent to 25 percent from an estimated two million.

“Normally, most of the crushing takes place in the first six months of the season, but this year we have a lot of stock which will be crushed now,” a vegetable oil trader based in Mumbai said.

“The oilseed availability will be higher during the offseason if the monsoon starts on time as traders who are holding stocks will start liquidating.”

Monsoon rains vital for India’s trillion-dollar economy this week hit the Andaman and Nicobar islands, touching the first landmark in their June-September progress northward.

Weather forecasts indicate the monsoon will reach Kerala on the country’s southern tip by May 30, two days sooner than usual.

Last year, India reclaimed its position as the world’s No. 1 edible oil importer, buying up 35 percent at a record 8.4 million tons.

But in April, imports fell 22.3 percent as refiners cut purchases on prospects of local oilseeds entering the market.

The slowdown in vegetable oil imports comes as Malaysian palm oil exports struggle. Prices on the Bursa Malaysia Derivatives Exchange have slid 7 percent this year on ample global stocks.

  Analysis

Reuters