March 26 (Bloomberg) -- Supplies of vegetable oil in India, the world’s biggest buyer after China, may increase as importers take benefit of duty free purchases of palm and soybean oils, likely hurting domestic oilseed prices.
Edible oil stockpiles may triple to as much as 1.5 million tons in the year to Oct. 31, said Davish Jain, president of the Central Organization for Oil Industry and Trade, the country’s biggest group of oilseed processors and traders.
Unbridled imports of palm and soybean oils may depress local prices of the edible oils, discouraging farmers to plant oilseeds including peanuts and mustard seeds. India relies on overseas purchases to meet almost half its cooking fat demand.
“Farmers will suffer as prices of some oilseeds may fall below the minimum support prices” offered by the government, Jain said in a phone interview from Indore, a central city. “We are sitting on a huge inventory. Tanks are full.”
India’s government March 24 scrapped a 20 percent duty on imports of crude soybean oil, four months after it was imposed to shield oilseed growers. The decision brings soybean oil back in line with palm oil, a main substitute product, which had been exempted from the tax.
Vegetable-oil imports may reach 7.2 million tons in the year to October, up 14 percent from a year ago, B.V. Mehta, executive director of the Solvent Extractors’ Association, said. Purchases surged 68 percent to 2.95 million tons in the four months ended February from a year ago, the association said.
June-delivery palm oil increased as much as 1.6 percent to 2,004 ringgit ($552) a ton in Kuala Lumpur, extending the year- to-date gain to 18 percent. Soybean oil futures for May delivery added 0.5 percent to 33.53 cents a pound in Chicago, its sixth straight day of gains.
‘Dumping Ground’
“We must not become a dumping ground for imported oil,” said Jain, who is also managing director of Prestige Foods Ltd., one of the nation’s biggest soybean processors. “Traders are not coming forward to buy oilseeds from farmers as they think edible oil prices are not going to be remunerative.”
India buys palm oil from Indonesia and Malaysia, and soybean oil from Argentina and Brazil.
The price of mustard seed, which will be harvested this month, added as much as 0.4 percent to 457.65 rupees per 20 kilograms on the National Commodity Exchange & Derivatives Ltd. in Mumbai. Still, the oilseed has lost 25 percent in the past six months. Refined soybean oil gained as much as 0.6 percent to 448.6 per 10 kilograms.
India’s production of oilseeds may be 24.65 million tons in the year ending June 30, little changed from 24.59 million tons a year-earlier period, the Central Organization for Oil Industry & Trade said March 22.
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