India to see edible oil import falling in 2016-17

A major stakeholder in the India oil industry, is reported saying that India's edible oil imports are set to fall for the first time in six years on a surge in local oil seed output results into overseas purchases. "But import still needs to be reduced further to fortify the health of the market", he added.

The lower purchases by the world's biggest importer of vegetable oils come amid a 13 percent decline in international crude palm oil prices this year that has also pulled down other edible oil benchmarks and kept domestic oil seed crushing in India unprofitable.

India is expected to import 14.3 million tones of edible oils in the year to end October 2017, down 300,000 tones or 2 percent from the previous year.

To prop up domestic oilseed prices India mulls to raise the import duty on edible oils, which would further limit overseas purchases of edible oils and help make the crushing of local oilseeds profitable again.

"An overall hike in duty on both crude and refined edible oils will promote domestic crushing of oil seeds," demand the stakeholders in the trade, who advocate for nearly tripling crude palm oil import duties to 2 percent from an existing 7.5 percent. Increasing crushing volumes is critical because Indian oil seed output is expected to have jumped 20 percent in 2016/17 to million tones, according to the Mumbai-based Solvent Extractors Association of India (SEA).

Already, significant stocks from this year's harvest will be held over for crushing in the next season as many farmers are reluctant to sell at the current prices, the sources reveal. That is expected to have farmers shifting to more lucrative crops like cotton in the 2017/18 crop year, pulling down India's soybean planning by 10 percent from this year they added.

India is likely to start the new season with 1.8 million tons of soybean stocks to carry forward on Oct. 1, up more than four-fold from this season's 441,000 tones.

As far as import outlook is concerned, India's edible oil purchases mainly palm oil from Malaysia and Indonesia and soybean oil from Argentina and Brazil, have increased each year since 2010/11, according to SEA.

The imports in the decade to 2015/16 rose an average of 12 percent a year making it the world's biggest importer of palm oil and soy oil. India relies on imports for 70 percent of its edible oils, up from 44 percent in 2001/02. Palm oil accounts for more than half of India's total edible oil imports. Its purchases are likely to be 8.5 million to 8.7 million tons this year, compared with 8.44 million tons in 2015/16.

Imports of sunflower oil, however perceived to be a healthier option by many Indians, could surge 33 percent to 2 million tons this year as it has started trading at a discount to soy oil. In June the landed cost of sunflower oil was $9 a ton lower than soy oil at Indian ports. A year ago, sunflower oil was $99 a tones more expensive than soy oil, according to SEA data.

That means most of the drop in edible oil imports will come in soy oil purchase, which are expected to fall nearly 17 percent to 3.5 million tones, accordingly.