South Asia vegetable oil demand firm, imports seen curbed

South Asia’s demand for vegetable oils is expected to surge as much as 10 percent in the new oil year and outstrip production, but rising global prices may crimp imports as poor consumers switch to cheaper home-grown oils.

Massive bio-diesel manufacturing capacities have been installed the world over. The United States is producing the alternative fuel from soybean oil, the European Union from rapeseed oil, and Malaysia and Indonesia from palm oil.
India, the world’s second-largest edible oil importer after China, mainly buys palm oil from Malaysia and Indonesia and soy oil from Brazil and Argentina.

In the last six months, India has on several occasions revised downwards import duties on palm oils to fight rising prices, but with little success. “We fear that we may not be able to control the landed cost of imported oils even by bringing the duty to zero level due to mushrooming growth in bio-diesel capacities,” said AR Sharma, president of the Solvent Extractors’ Association of India.

Apart from the size of domestic crops in India, Pakistan and Bangladesh, the crucial factor determining demand will be prices of palm and soy oils, said G. Chandrasekhar, commodities editor at the Hindu Business Line newspaper.

“If palm or soy prices remain high, these countries will be forced to import less and high prices look inevitable because of usage for bio-diesel,” he said.

Industry officials said prospects of a good oilseed harvest in the winter due to well spread rains and greater acreage could also trim Indian vegetable oil imports in the new season by about 300,000 tonnes. “Prices of soy and palm will be steady-to-firm because soy, sunflower and rapeseed crops will be less and there will be some reduction in demand due to high prices,” said Govindhbhai Patel, an oils trader in groundnut-growing Gujarat state.

But BV Mehta, an official of the Solvent Extractors’ Association, said that despite a higher winter crop, dependence on imports would be inevitable as domestic soybean, the key oilseed, yields only 18 percent oils. Sharma said India could contain imports to reasonable levels in the current season because of good carryover stocks of rapeseed but these would be exhausted in the new season.

Daily Times