Lower Indian Import May Hit Vegoil Prices.

India will process 12% more domestic oilseed crops into cooking oil this year,trimming imports of edible oil by up to 5% in the first such slowing in five years, easing global prices and blunting food-driven inflation.

India, the world’s top buyer of vegetable oils, appears to be following China in using cheaper oilseeds and cutting imports of Southeast Asian palm oil and Latin American soyaoil to feed its population of more than a billion. While China relies on soya imports, India takes comfort in stronger domestic oilseed output. Traders now say imports may fall by 5% to 8.7 million tonne in the marketing year to October versus record levels of 9.2 million a year ago.

India’s cutbacks may weigh on benchmark palm oil and soyaoil futures, which soared in early February after floods in Malaysia crimpedproduction and on-again, off-again Argentine strikes put supplies in jeopardy. Vegetable oils are getting sidelined as India’s projections of the rapeseed crop are very comforting and other big buyers are focusing more on the South American soya crop, said commodity strategist Luke Matthews of the Commonwealth Bank of Australia. Moves by India and China to slow orders may explain why the vegetable oil complex has seen only marginal price rises in comparison to wheat and corn, weather-induced shortages of which have triggered a mad rush for supplies and fed global inflation. This is the opportunity to buy. When China and India stay away from the market on occasion, the smaller guys can come out to play, said a Malaysian trader with an integrated palm oil firm that ships to the two countries.

Improved monsoon rains boosted India’s summer soya crop and increased the acreage under winter rapeseed that gets harvested this month, pushing total oilseed output up 12% to 28 million tonne in the current marketing year. That estimate shines a bright spot on the South Asian giant’s inflation story darkened by unseasonal rains in late 2010 that wrecked vegetable supplies and pushed the food price index to a one-year high in December. Soyaoil supply may be higher by 3,00,000 tonne, while supply of rapeseed oil could as high as 4,00,000 tonne, said Govindbhai G Patel, managing partner of trading firm Dipak Enterprise in the western Indian city of Rajkot.

Expectations of lower imports after discounting the annual rise in demand have been based on current global prices, said Patel, brushing aside fears of high cooking oil prices aiding food inflation that eased to a two-month low in February. Traders said higher local supplies this year would outstrip an annual rise in demand by 3,30,000-4,20,000 tonne, trimming the country’s import requirements.

India may cut combined imports by nearly half a million tonnes of mostly crude palm oil and some soyoil, limiting the exposure of Asia’s third largest economy to volatile edible oil prices.

Crude palm oil supply in top producers Indonesia and Malaysia will get a breather after floods early this year hurt yields,easing palm oil futures that hit a three-year high in early February. The same can be said for Argentine and Brazilian soyaoil supplies.

Source : financialexpress.com