11/02/2009 (Bloomberg) - India, the world’s biggest buyer of vegetable oils after China, may import 14 percent more cooking oil in the year to October because of a drop in palm oil prices.

Purchases may increase to as much as 6.5 million metric tons from 5.7 million tons a year ago, Govindlal G. Patel, director of Dipak Enterprises, said from Rajkot in western India. Patel, 69, has been trading the commodity for more than four decades.

An increase in purchases by India may help support palm oil prices that slumped 44 percent last year in Malaysia, the second- biggest producer of the commodity. Palm oil accounts for almost 90 percent of the Asian nation’s edible oil imports.

“Palm oil is very cheap and that’s really boosted demand contrary to most people’s expectations,” Patel said. “India’s imports will be higher than last year despite a bigger crop.”

India probably bought 2.1 million tons of edible oils in the November-January period, of which 850,000 tons arrived last month, he said.

Palm oil futures for April delivery dropped 2.2 percent to 1,925 ringgit ($534) a ton on the Malaysia Derivatives Exchange. Futures reached after a four-week high yesterday.

Crop Damage
Prices may reach 2,100 ringgit a ton in the next two months as dry weather threatens to damage soybean crops in South America, Patel said. Soybean oil, the main substitute for palm oil, has gained 6 percent so far this month.

“The outlook is good for palm oil as the stockpiles are declining and demand is picking up at a time when there’s threat to Latin American crop,” Patel said.

Palm oil stockpiles in Malaysia dropped 8.3 percent from December to 1.83 million tons in January, the lowest in nine months, the Malaysian Palm Oil Board said today. Output fell 10 percent to 1.33 million tons, also a nine-month low.

India relies on overseas purchases to meet almost half its edible-oil demand. It buys palm oil from Indonesia and Malaysia, and soybean oil from Argentina and Brazil.