Palm oil’s surge in India likely to come to an end, says report
Free Malaysia Today (30/11/2019) - NEW DELHI: Palm oil’s meteoric rally in the past few weeks will almost certainly come with a cost – shrinking sales to its largest customer.
India, the world’s biggest buyer, will shift some purchases to other edible oils this winter after palm’s surge of about 30% from last month’s low.
Palm oil’s discount to top rival soybean oil has contracted to the smallest in almost a decade, reducing its traditional appeal as a cheaper vegetable oil.
“Higher prices are a deterrent for buyers,” said Gnanasekar Thiagarajan, head of trading and hedging strategies at Kaleesuwari Intercontinental. “The Indian market was flush with oil before this rally started heating up. That’s why there’s no rush to buy.”
While India typically reduces its imports of palm oil during the three months starting December, a bigger than usual decline in sales to the country would dent palm’s rally. India mainly imports palm from Indonesia and Malaysia, the world’s largest producers.
Palm oil prices have surged since July on expectations that Indonesia will boost biodiesel consumption, with benchmark futures in Kuala Lumpur outperforming soybean oil traded in Chicago and the Bloomberg Commodity Index. Futures capped their best weekly advance since 2016 in the five days to Nov 22.
Indian imports may slump about 15% in the three months from Dec 1 compared with a year earlier, according to Thiagarajan.
Sathia Varqa, owner of Palm Oil Analytics, and GG Patel, managing partner of GGN Research, estimate that purchases will drop by 7.5% to 2.2 million tons.
India, which imports about 70% of its edible oil, usually cuts back on palm in winter because the cold solidifies the oil and turns it cloudy. Users tend to switch to other oils that look transparent and do not crystallise.