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India’s Crop Failure to Keep Vegetable Oil Imports Near Record

Published on Sep 9 2015 10:29 AM in Supply Chain tagged: India / Oil / Import

India’s Crop Failure to Keep Vegetable Oil Imports Near Record

India will keep its imports of vegetable oils near a record next season because dry weather may lead oilseed crops to fail for a second year, according to researcher Oil World.

The country, already the biggest palm oil buyer, will need to bring in about 14 million metric tons in the season starting next month, the Hamburg-based industry analyst said in a report. That’s near the record 14.1 million tonnes imported this season and about 20 percent more than the year before that.

Monsoon rains, which water more than half India’s crop land, were below the 50-year average in July and August and won’t be any better in September, according to the India Meteorological Department. The El Nino weather pattern in the Pacific Ocean is forecast to be the strongest since 1998. India’s rainfall since June 1 was 12 per cent below average, the department said.

Prospects for more dry weather this month mean “the chances for a significant recovery of Indian vegetable oil production in 2015-16 have thus deteriorated,” Oil World said.

Indian imports of palm oil will rise 3.9 per cent to 9.5 million tonnes and shipments of sunflower oil will increase 1.3 percent to 1.58 million tons, Oil World estimates. The nation’s soybean oil imports will probably decline 8.5 per cent to 2.6 million tonnes.

"Consumers are taking advantage of low sun oil prices, even with higher premiums to soya oil and palm oil," Oil World said.

The country may need to raise the import duty on vegetable oils to support local farmers, Oil World said. The government must increase the levy on crude oils to 25 percent from 7.5 per cent now, according to the Solvent Extractors’ Association of India.

"While the Indian government may refrain from implementing very high duties owing to fears of stoking inflation, an at least moderate duty hike may be indispensable," Oil World said. "World market prices being at multi-year lows should facilitate such a decision."

News by Bloomberg, edited by ESM. To subscribe to ESM: The European Supermarket Magazine, click here.

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