14/11/2007 (Bloomberg) - India's oilseed output may decline this year as dry weather in the state of Rajasthan, the nation's biggest mustard-grower, curbs winter plantings, further boosting purchases of alternatives such as palm oil.

With the planting season ending in a week's time, farmers in Rajasthan have sowed 40 percent less area to mustard oil seed than targeted because of scant rains, said Pannalal Agyat, chief statistical officer at the state's farm ministry.

Lower production may force India to buy more palm oil from Malaysia and Indonesia, likely supporting prices of the tropical oil that reached a record last week. Mustard oil is the third- most used cooking oil in India and accounts for more than 70 percent of the nation's output of winter-sown oilseeds.

``A shortage in the mustard seed harvest may increase imports at a time when global vegetable oils supplies are tight,'' M. Somasekhar, an analyst at TransGraph Consulting, which advises commodity traders, said yesterday.

Palm oil for January delivery, the most-active contract, was little changed at 2,926 ringgit ($875) a metric ton on the Malaysia Derivatives Exchange today. Futures reached a record 3,013 ringgit on Nov. 9. Prices may reach 3,300 ringgit in two months, Somasekhar said.

Prices of mustard seeds for immediate delivery have risen 20 percent in the past six months on the National Commodity & Derivatives Exchange in Mumbai. The contract for delivery in December rose 0.2 percent to 493 rupees per 20 kilograms today.

Below Target

Farmers in Rajasthan planted 1.61 million hectares with mustard as of Nov. 13. That's 37 percent less than a year ago, said Agyat. Rains in the state's growing area were 15 percent below normal in the June-September rainy season.

``Looking at the sowing pattern, I think we could go up to 2.2 million hectares by end of the season,'' short of the 2.7 million hectare target set by the state, he said. ``Some farmers are shifting to gram and wheat,'' lured by higher prices.

A smaller crop area may cut the nation's mustard harvest by between as much as 20 percent from 7 million tons a year earlier, said Devi Prasad Khandelia, managing director of Khandelia Oil & General Mills Pvt., an oilseeds processor.

Planting of other winter-grown oilseeds such as sunflower also lags behind last year. Farmers across India planted 2.3 million hectares to oilseeds as of Nov. 1, down 21 percent from a year earlier, the farm ministry said Nov. 2. Winter-sown oilseeds account for 40 percent of India's oilseed production.

India's edible oil imports rose 11 percent to 4.21 million tons in the 11 months ended Sept. 30 from a year earlier, the Solvent Extractors' Association, a trade body, said on Oct. 15. Crude palm oil imports rose 32 percent to 2.62 million tons in the period from a year ago.