India turns to soy oil, cuts import of palm oil as price hits 8-yr high

Lower overseas purchases by the world’s biggest edible oil importer could cap palm prices, which hit an eight-year high on Friday, but will support US soy oil futures trading near their highest level in four years. “Indian buyers are reducing purchases of palm oil for November and December shipments, and replacing it with soy oil,” said Govindbhai Patel, MD of trading firm GG Patel & Nikhil Research Company.

Palm oil usually trades at a discount of $100 to $200 a tonne to soy oil, but a rally in Malaysian futures - currently trading just below their eight-year peak of 3,405 Malaysian ringgit per tonne - has reduced the spread to $80.

Crude palm oil is being offered at around $880 a tonne, including cost, insurance and freight (CIF), in India, compared with $960 for degummed soybean oil, traders said. The narrowing gap has turned buyers to soy oil, which is often preferred as it is perceived to be superior in taste and quality to palm. Refiners have been slashing palm oil imports for winter, said Sandeep Bajoria, chief executive of Sunvin Group, a vegetable oil broker. In winter months, household palm oil consumption falls in India as the tropical oil solidifies at lower temperatures.

India’s monthly palm oil imports could dip to 600,000 tonnes in January from around 750,000 tonnes in October if the current narrow price gap remains, said a Mumbai-based dealer with a global trading firm.

Soy oil imports could jump to 350,000 tonnes in January from 270,000 tonnes in October, he said.

There was also a sharp rise in sunflower oil prices in the last two months, further heightening soy oil’s appeal to refiners, the dealer said. The South Asian country imports palm oil mainly from Indonesia and Malaysia, and other oils such as soy and sunflower oil from Argentina, Brazil, Ukraine and Russia.