29/08/2007 (Reuters), Kuala Lumpur - India is expected to buy 1.5 million tonnes of edible oils in the last three months of the oil year to October to meet surging festive demand, a top industry official said on Wednesday, 29 August.

“Although the winter crop is supposed to hit a record in November, there is festival demand in the earlier months that still needs to be met,” said B.V. Mehta, executive director of the Solvent Extractor’s Association of India.

The nation is trying to secure supplies for a slew of festivals beginning this month, bringing total vegetable oil imports to 5.8 million tonnes in the oil year to October.
But imports during the year will be lower by about 500,000 tonnes as rising prices dent demand in the price-sensitive country, he said.

“Palm oil has gained a foothold in India this year over soybean oil but the market here is price sensitive, which has resulted in a demand squeeze for both,” Mehta told Reuters in an interview.

“The lower and middle sections of Indian society have been affected and demand of half a million tonnes has just been burnt.”
Palm oil, mostly imported from Indonesia and Malaysia, is nearly 13% off a historic high of 2,764 ringgit reached in June. Rival soyoil hit 23-year highs on the Chicago Board of Trade earlier this year.

Soyoil imports from Argentina and Brazil compete with palm oil for Indian demand.
Demand can only move higher in India, given its rapidly expanding economy and a population rising at a rate equal to Australia’s 20.4 million people each year, Mehta said.
India, the world’s second-largest edible oil buyer after China, is forecast to import 6.2 million tonnes in the new oil year to October 2008, the official said on the sidelines of an industry seminar.

“This can only be achieved through imports, unless there is a breakthrough in domestic production.”

Domestic oilseeds production is likely to decline 4.7 million tonnes to 23.2 million tonnes in the current oil year as farmers prefer to cultivate wheat, cotton and pulses, which have yielded higher returns last year.

“Domestic soyabean oil usually has lower yields and it’s more profitable to either move to other crops or buy overseas, which is relatively cheaper,” Mehta said.

But prospects look brighter in the new year and production is likely to rise over 12% to 25-26 million tonnes as farmers return to oilseed crops following a surge in prices.

“Most of the oilseed-producing states have received normal to excess rainfall, ideal conditions for a record winter crop,” Mehta said, referring to central Madhya Pradesh, western Maharashtra and Gujarat states.

“Acreage has increased 6-7% as farmers were encouraged to come back to oilseeds due to the high prices”.