India's 2014/15 edible oil imports seen up on poor monsoon

Reuters – Thu, Jul 10, 2014 12:02 BST

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* Edible oil imports seen up as much as 11 percent in 2014/15
* India could lose 2 million tonnes oilseed output on late rains
* Increase in rains cannot guarantee healthy monsoon -meteorologist
By Anuradha Raghu and Ratnajyoti Dutta
KUALA LUMPUR/NEW DELHI, July 10 (Reuters) - Vegetable oil imports by top consumer India are forecast to rise next year as a lacklustre monsoon, blamed for the driest start since 2009 for the key planting season, is likely to hit the country's oilseed output, traders and analysts said.
With palm oil accounting for most of India's vegetable oil imports, a rise in arrivals could underpin benchmark Malaysian prices of the tropical oil that have plunged more than 10 percent so far this year.
India's edible oil purchases in the year to October 2015 are expected to grow by 1.0-1.2 million tonnes from an estimated 11.1 million tonnes this year, said Sandeep Bajoria, the chief executive of Mumbai-based trading company Sunvin Group.
The country will lose 2 million tonnes of oilseed production due to the late onset of annual rains that delayed the planting process, Bajoria said on Thursday. India produced a record 32.4 million tonnes of oilseeds in the crop year ended June.
"If the monsoon worsens, maybe another 1.0-1.5 million tonnes can be lost," Bajoria added.
Rainfall was 43 percent below average levels last month in what was the driest start to the annual June-September rainy season in five years. Only 445,100 hectares had been planted with soybeans - the main summer crop - between June up until last week, against 4.3 million hectares a year ago when the annual rains were bountiful over the country's oilseed areas.
"India's appetite for cooking oil imports will be higher if the monsoon doesn't revive by mid-July," said Govindbhai Patel, managing partner at GG Patel & Nikhil Research Co. Patel has more than four decades of experience in edible oil trade.
Sowing of oilseeds is typically most brisk in July, usually the wettest month of the monsoon season.
Weather experts and analysts say it is tricky to predict rainfall or the impact on crops for now and any increase in rains over the next week does not guarantee a healthy monsoon for the rest of the season.
"There are signs that improvement in the rainfall will occur in the southern two-thirds of India this week, but the north western one-third of the country looks to remain dry," said John Dee, a meteorologist for Global Weather Monitoring.
An El Nino weather pattern, which appears to be in the making, also increases the "odds of less-than-average rains during India's wet season", Dee added.
As one of the world's top producers and consumers of cooking oil, rice, corn, sugar and cotton, India heavily relies on the summer rains as nearly half of its farmland is rainfed.
PALM PRICES TO GAIN, NOT FLY
Also the world's leading importer of cooking oil, India brings in around 8 million tonnes of palm oil from top producers Indonesia and Malaysia, and 1 million tonnes each of soyoil from Latin America and sunflower oil from the Black Sea nations.
In 2012/13, its palm oil purchases accounted for a hefty 80 percent of its total edible oil imports, with soy and sunflower oils making up for the rest.
India's own vegetable oil accounts for about 7-8 million tonnes of its annual demand of 17-18 million tonnes, but traders see this domestic contribution dropping due to meagre rains.
The country to a "large extent" will depend on palm to fill the gap and could also opt for other soft oils, said a trader with a foreign commodities brokerage in Kuala Lumpur.
While this should boost palm oil prices, the market is unlikely to soar unless the El Nino weather pattern emerges and hinders output of the tropical oil.
A strong El Nino, which causes dry conditions in Australia, Southeast Asia and parts of Africa, would cut palm oil output in Malaysia and Indonesia by as much as 30 percent, although forecasters have not as yet warned of a severe event.
"The Malaysian palm oil industry is cautious. Even a 1 million tonne deficit of edible oil in India can cause a huge difference in the supply and demand scene of all the oils in the world," said the Kuala Lumpur-based trader.
"But I don't think the (palm) market will fly, unless we also have some problems in our rains." (Additional reporting by Naveen Thukral in SINGAPORE; Editing by Himani Sarkar)