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MUMBAI (REUTERS): Indian refiners have been reducing palm oil purchases and raising soybean oil and sunflower oil imports after a steep rally in the tropical oil reduced its discount to rivals, industry officials told Reuters.
Lower purchases by the World's top edible oil importer could weigh on palm prices, which have corrected 10% from a record high hit last month but may support US soy oil futures .
“Refiners usually give preference to palm oil as it trades at a substantial discount to soy oil and sunflower oil. As there is hardly any price difference now, they are switching to soy oil and sunflower oil,” said Govindbhai Patel, Managing Director of trading firm G.G. Patel & Nikhil Research Company. Traditionally, palm oil accounts for two-thirds of India's annual edible oil imports of 13 to 15 million tons.
But Indian refiners are now slashing palm purchases after importing a record 1.26 million tons of palm oil in September, as the spread between palm and soy oil has narrowed to $ 20 per ton from more than $ 120 a year ago, dealers said.
Crude palm oil is being offered at around $ 1,395 a ton, including cost, insurance and freight (CIF), in India for December shipments, compared with $ 1,415 for crude soybean oil and $ 1,445 for crude sunflower oil, traders said.
The narrowing gap has turned buyers to soy oil, which is often perceived to be superior in taste and quality to palm.
India's palm oil imports in November fell to 585,000 tons from 693,000 tons in October, said Sunvin Group CEO Sandeep Bajoria, a vegetable oil broker.
Soy oil imports in November jumped to around 400,000 tons from 217,000 tons a month ago, while sunflower oil imports rose to 200,000 tons from 117,000 tons, Bajoria said.
India buys palm oil from Indonesia and Malaysia, with soy oil mainly imported from Argentina and Brazil. It purchases sunflower oil from Russia and Ukraine.
In December, palm oil imports would remain below 600,000 tons and soy oil imports could rise above 400,000 tons, Patel said.
The spread between palm oil and soft oils is narrow for December and January shipments, but is widening from February onwards, said a Mumbai-based dealer with a global trading firm.
“From February onwards, palm could start regaining market share. But imports would remain lower during the winter season,” the dealer said.
In winter, household palm oil consumption falls in India as the tropical oil solidifies at lower temperatures.
