19/05/2011 (Bloomberg) - India, the world’s biggest user of cooking oil after China, will assure higher oilseeds prices for farmers, helping them boost output of soybeans and peanuts and potentially reducing imports of palm oil.

The government may help farmers make more money by ensuring a higher profit on monsoon-sown oilseeds compared with food grains, Ashok Gulati, chairman of the Commission for Agricultural Costs and Prices, said in an interview.

India is the world’s largest buyer of palm oil, which represents more than 80 percent of its edible-oil imports. A decline in the nation’s import demand may pressure benchmark prices in Malaysia that have risen 35 percent in the past year on higher demand for noodles to fish sticks to candy bars.

“The real deficit at present is in oilseeds,” Gulati said. “So the question is do we want to pay more to the farmers of Indonesia and Malaysia or should we pay more to our own farmers? I would say oilseeds are main priority this year.”

The cost of producing crops including rice, lentils, corn, oilseeds has increased about 20 percent in the past year, boosted by higher wages of farm workers and rising energy and fertilizer prices, Gulati said.

“We try to assure them a 20 percent to 30 percent increase over the cost of production,” said Gulati, who recommends minimum crop prices to the government.

Assured prices are meant to protect farmers from distress sales in the open market. If rates drop below those levels, the government buys the crops.

Output Surge
Oilseed output in India may jump 21 percent to 30.25 million metric tons in the year ending June, the farm ministry said April 6.

Still, the country may import a record 9.37 million tons of vegetable oils in the 2010-2011 year, including 7.6 million tons of palm oil, also an all-time high, according to estimates from the U.S. Department of Agriculture. India meets more than half its edible-oil demand through imports, and buys palm oil from Indonesia and Malaysia and soybean oils from Brazil and Argentina.

The South Asian nation, the second-biggest producer of rice and wheat, raised the minimum paddy purchase price 79 percent since the 2004-2005 season, while the benchmark rate for soybeans was increased 40 percent, according to the farm ministry. Lentil prices more than doubled in the same period.

“The government should give equal preference to oilseeds that it gave to cereals in the past,” B.V. Mehta, executive director of Solvent Extractors’ Association, said in a phone interview from Mumbai. “India is short of oilseeds and farmers should be encouraged to produce more.”

‘Ample Stocks’
State reserves of rice and wheat were 44.2 million tons on April 1, more than double the emergency stockpile requirement, according to the Food Corp. of India.

“Currently the country has ample and comfortable grain stocks,” Gulati said. “There is no compulsion or pressure on us at this stage to attract more land under cereals.”

Palm oil futures in Malaysia advanced for a fourth day today, gaining as much as 1.3 percent to 3,340 ringgit ($1,107) a ton amid speculation that China and India, the largest cooking-oil consumers, may start to rebuild inventories.

Exports from Malaysia, the second-biggest palm oil producer, increased 28 percent to 533,419 tons in the first 15 days of May from the same period in April, independent surveyor Intertek said May 16. Shipments rose 33 percent to 601,984 tons, rival Societe Generale de Surveillance estimated.

Stockpiles of cooking oils in India, including those at ports, totaled 1.27 million tons on May 1, down from 1.34 million tons on April 1, the Solvent Extractors’ Association said May 13. Imports fell 15 percent from a year earlier to 2.69 million tons in the six months ended April 30, on increased supplies from the domestic oilseed harvest, it said.

China’s palm oil imports fell 28 percent to 1.08 million tons in the three months ended March 31, according to data from the nation’s Customs Department.