(Updates prices in sixth paragraph.)
(Sept 11): Palm oil imports by India, the world’s largest buyer, probably jumped to the highest level since December as a drop in prices to five-year lows prompted traders to stockpile before the peak period of festival demand. Futures rallied to the highest level in more than three weeks.

Shipments of the main crude and refined palm oils jumped 60 percent to 835,000 metric tons in August from a year earlier, according to the median of estimates from five processors and brokers compiled by Bloomberg. Total vegetable oil imports, including for industrial use, probably rose 68 percent to a record 1.28 million tons, the survey showed. The Solvent Extractors’ Association will publish the data next week.

Expanding global inventories have sent prices of palm and soybean oils to the lowest level since March 2009, helping cut world food costs to a six-month low. After taking delivery of record amounts of cooking oils last month, refiners and traders in India may not rush to import more, said Sandeep Bajoria, chief executive officer at Mumbai-based broker Sunvin Group.

“The market is in a bearish mode and traders are in wait and watch mode,” Bajoria said on Sept. 9. “India has good stockpiles right now and traders will not be in a rush to buy.”

Futures in Kuala Lumpur, the global benchmark, tumbled into a bear market in July on rising stockpiles in Indonesia and Malaysia, the biggest producers, amid forecasts for a record crop of U.S. soybeans, used to produce an alternative oil.

Shrinking Spread

Prices, which fell as low as 1,914 ringgit ($600) a ton on Sept. 2, rose 1.9 percent to 2,072 ringgit on the Bursa Malaysia Derivatives today, the highest level at close since Aug. 18. Soybean oil dropped to 31.52 cents a pound in Chicago yesterday, also the lowest since March 2009. Soybean oil’s premium over palm narrowed to $56.42 a ton today from an average of $244 in 2013, data compiled by Bloomberg show.

“We imported record vegetable oils last month as prices were attractive” and to meet festival demand, Ashok Sethia, executive director of Sethia Oils Ltd., said by phone from Kolkata. “Prices are falling everyday and traders are waiting for them to stabilize. In the next few months, imports won’t be as high as last month, but we will see a moderate amount of imports before the new local crop comes in November.”

The decline in the premium helped soybean oil imports more than double to 260,000 tons in August, according to the survey. Purchases of sunflower oil doubled to 125,000 tons, it showed. Total cooking oil shipments in the nine months through July increased 2 percent to 8.19 million tons, the extractors’ association estimates.

Port Congestion

Stockpiles at ports and supplies scheduled to arrive were probably 1.55 million tons at the start of September, according to the survey. Traders may also slow purchases because of congestion at Kandla port, the biggest terminal for cooking oil imports, Bajoria said by phone from Mumbai.

Malaysia’s decision to scrap the tax on crude palm oil exports for two months through October may not spur Indian imports because of high local stockpiles and record shipments last month, Govindlal G. Patel, managing partner at G.G. Patel & Nikhil Research Co., said by phone from Rajkot in Gujarat.

India meets more than 50 percent of its demand through palm oil imports from Indonesia and Malaysia and soybean oil purchases from the U.S., Brazil and Argentina.

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Imports   August 2014 (Survey) July 2014 (SEA) August 2013 (SEA)
Palm Oil         835,000        648,503              521,877
Soybean Oil      260,000        306,068              127,699
Sunflower Oil    125,000        111,936               63,190
Vegetable Oil  1,275,000      1,109,674              757,830
Stockpiles     1,550,000      1,590,000            1,685,000
Figures are in tons.
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