08/09/2010 (Bloomberg) - A rally in palm oil may cool demand for the world’s most used cooking oil and prompt some buyers to switch to soybean oil, according to Adani Wilmar Ltd., India’s second-biggest importer of vegetable oils.

A seasonal increase in production starting next month in Indonesia and Malaysia, the top producers, and the tendency of palm oil to cloud over in winter may cool demand from consumers including India, Atul Chaturvedi, Adani Wilmar’s chief executive officer, said in a telephone interview from Ahmedabad yesterday.

Palm oil, used in food and fuel, has advanced 15 percent from near an eight-month low on July 7, driven by demand from Asian countries celebrating festivals in the September quarter, and a stronger Malaysian currency. Soybean oil has climbed 12 percent in the same period.

“Palm will have a tough time finding a home,” Chaturvedi said. “With winter around the corner and the weather getting colder as we go along, thick oil is not bound to be all that exciting compared with liquid oil.”

Soybean oil’s premium over palm oil narrowed to the lowest in more than three months yesterday, making the rival oil more attractive. The premium fell to $59.68 a ton, the lowest level since June 4, according to Bloomberg data. Exchanges in the U.S. were closed for Labor Day holiday yesterday.

Adani Wilmar is a venture between India’s Adani Group and Singapore-based Wilmar International Ltd., the world’s largest trader of the tropical oil.

‘Marginal Increase’

India’s vegetable oil purchases in the year ending Oct. 31 may be “marginally” more than last season’s 8.66 million tons, said Chaturvedi. Imports have soared to the highest level since 1994 after the government ended taxes on palm and soybean oils.

Purchases in from November to July were 6.38 million tons, little changed from 6.42 million tons a year ago, the Solvent Extractors’ Association of India said Aug. 16. Imports in the year ending Oct. 31 may be less than 9.1 million tons forecast by the group in March because of an increase in local supplies, B.V. Mehta, executive director at the group, said the same day.

“It all boils down to how the Indian crop shapes up. If the crop is good then imports in October-December should be reduced,” Chaturvedi said. “Local oilseed crops look very exciting with so much rain.”

Farmers planted oilseeds such as soybeans and groundnuts to 16.9 million hectares as of Sept. 2, compared with 16.4 million a year earlier, helped by adequate rain this season, according to the farm ministry. The monsoon in 2009 was the driest in more than three decades.

Palm oil for November delivery fell as much as 0.5 percent to 2,608 ringgit a ton on the Malaysia Derivatives Exchange in intraday trading, a day after the biggest gain in almost a month. The jump was because of a stronger ringgit, Chaturvedi said.

“Palm looks a little high-priced and is largely currency driven,” he said. “On the demand side it’s not exciting.”

Malaysia’s ringgit yesterday reached 3.1098, the strongest level since October 1997, making shipments more expensive for holders of other currencies.