08/10/2010 (Bloomberg) - India, the biggest vegetable oil buyer after China, will import record volumes this year even as the highest ever soybean and canola stockpiles fuel speculation that overseas purchases may slow, Godrej International Ltd. said.

Purchases may total 9 million metric tons in the year to Oct. 31, Dorab Mistry, a director at Godrej, one of the nation’s top vegetable oil buyers, said yesterday. Imports were 8.66 million tons last year. Soybean and canola inventories have risen to a record 5.5 million tons and 7 million tons, the Solvent Extractor’s Association said April 5.

Sustained imports by India, the largest palm oil buyer, may support prices that jumped 57 percent last year. Prices slumped 1.5 percent in the two days after the association’s announcement, reaching a two-month low of 2,498 ringgit ($777) a ton April 6.

“Imports will be larger than last year and the oilseeds inventory won’t affect purchases,” Mistry said in a phone interview from Vijayawada in the eastern state of Andhra Pradesh. “The Indian economy is going great guns and when the economy does well demand has shown steady growth.”

Palm oil futures for delivery in June rose 0.8 percent to 2,539 ringgit a ton on the Malaysia Derivatives Exchange yesterday. The price may reach 3,200 ringgit in the second half as El Nino parches crops in Asia, Mistry said March 9.

Mistry’s import estimate compares with the 9.1 million tons forecast last month by India’s Central Organization for Oil Industry & Trade, a processors’ group. Purchases may reach 10.1 million tons, the finance ministry said Feb. 25.

Inventory Builds
India, also Asia’s biggest supplier of soybean meal, is yet to crush 5 million tons of soybeans, 7 million tons of mustard, 6 million tons of cottonseed and 2 million tons of peanuts, the solvent association said on April 5.

“The huge inventory is the hallmark of India’s progression from being a subsistence economy to a developed economy,” Mistry said. “Indians have the ability to hold on to stockpiles and that will ensure imports continue to meet edible oil demand.”

India’s oilseed meal exports plunged 41 percent to 3.22 million tons in the year ended March 31, a five-year low, as crushers cut output after processing margins narrowed, the extractors’ association said the same day.

Soybean oil imports may exceed last year’s 990,000 tons as the premium for soybean oil over palm oil contracts, Mistry said.

Soybean oil costs $92.66 a ton more than palm oil, according to Bloomberg data. The premium narrowed to $60.81 on March 31, the lowest since Nov. 7, 2007, reducing the appeal of palm oil, its substitute.

India purchases palm oil from Indonesia and Malaysia, and soybean oil from Brazil and Argentina.