India may buy more vegetable oils; purchases set to exceed forecast

India may buy more vegetable oils; purchases set to exceed forecast
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First Published: Tue, Apr 01 2008. 11 56 PM IST
Updated: Tue, Apr 01 2008. 11 56 PM IST
Dubai: India, the world’s second biggest buyer of vegetable oils after China, may buy more of the commodity than previously forecast after government cut import taxes, the country’s biggest importer said.
Purchases in the year to October may exceed the 5.9 million tonnes (mt) that the Solvent Extractors’ Association (SEA), a trade body, had forecast in January, Dinesh Shahra, managing director of Ruchi Soya Industries Ltd, said from Mumbai. “Since India depends on imports for almost half its demand, there will be more imports,” he said.
Buying by India may support the past year’s 49% gain in palm oil prices, reaching a record last month. Prime Minister Manmohan Singh’s government has curbed exports of rice, wheat and edible oils to rein in inflation.
“The government has exhausted all options before it to control prices,” said B.V. Mehta, executive director at Mumbai-based SEA. “The big question is if prices rise further in the global market what measures can they take to control domestic prices.”
Palm oil futures in Malaysia, the global benchmark, had its biggest decline in nine days after a report that US farmers would increase soya bean acreage 18% this year, boosting supplies of soya bean oil, the main substitute.
Futures for June delivery fell as much as 10% to 3,045 ringgit (Rs38,175) a tonne on theMalaysia Derivatives Exchange, the lowest intra-day level since 24 January. Palm oil touched a record 4,486 ringgit a tonne and soya bean oil climbed to an all-time high of 72.69 cents (Rs29) a pound (.45kg) in Chicago on 4 March.
Farmers planting fewer oilseeds in favour of wheat and corn to benefit from record grain prices stoked concern that vegetable oil supplies were shrinking. Tight supplies had fuelled inflation worldwide, prompting producer countries such as Argentina and Indonesia to impose export taxes while importing countries such as India and China eased import tariffs. Soya bean oil and palm oil account for more than three-fifths of the world’s edible oils. “The government had to choose between the interests of consumers and farmers,” Shahra said. “For the moment, consumers have won.”
India scrapped the import duty on crude soya bean and palm oils, and lowered the levy on refined edible oil to 7.5% in an unscheduled cabinet meeting Monday night to curbinflation from a 13-month high. The new taxes are effective from Tuesday.
Soya bean oil futures for April delivery fell by the daily 4% limit to Rs564.30 per 10kg on the National Commodity and Derivatives Exchange in Mumbai. Prices may decline further and retail prices could decline as much as Rs8 a kg, Shahra said.
India may import 1.33mt of soya bean oil, little changed from last year, Mehta said, raising his forecast. The landed cost of soya bean oil versus palm oil has narrowed toabout $100 (Rs4,000) a tonne from $250 a tonne because of the duty cut, he said. “We were expecting soya bean oil imports of 600,000 tonnes this year,” he said. “That may now increase.”
Soya bean oil imports may become cheaper by as much as $230 a tonne, Shahra said. A 14% fall in soya bean oil prices on the Chicago Board of Trade in the past week may reduce prices by another $150 a tonne, he added. Shares of edible oil suppliers such as Ruchi Soya, K S Oils Ltd and Adani Enterprises Ltd gained on expectation that lower commodity prices will boost sales.
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First Published: Tue, Apr 01 2008. 11 56 PM IST