India is the largest importer of vegetable oils in the world. This purchase could support benchmark palm oil futures prices and threaten to reduce imports of sunoil and soyoil rivals.
Officials in the industry said that Indonesian palm oil producers are trying to reduce their large inventory with aggressive sales to India and discounts against rivals.
Producers are looking to reduce their stockpiles at attractive prices, supported by Jakarta’s waiver on palm oil export levies. This was after they had been banned from international trade in May.
India is the largest importer of vegetable oil in the world. This could offer potential suppmarketorts to set benchmark palm oil futures prices and threaten to reduce imports from rival soyoil or sunoil.
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“India has been aggressively purchasing palm oil from Indonesia because prices are attractive, and festival demand is approaching,” stated Sandeep Bajoria (chief executive of Vegetable Oil Brokerage and Consultation Sunvin Group).
“We expect imports of 2,000,000 tonnes between August and November.”
According to data compiled and maintained by The Solvent Exporters’ Association of India (SEA), India would have imported triple the amount of palm oil from Indonesia, the largest producer in the world, over the four previous months from April to July.
According to Eddy Martono (Secretary General of the Indonesian Palm Oil Association), this momentum could help bring Indonesia’s palm oils stocks back to 4.5 to 5. million tonnes by September. They had risen to 6.69million tonnes at end-2021 from about 4 million tonnes at that time.
He said that the drawdown would also benefit from a slower pace of production now that peak harvest has ended.
These stocks were built up over Jakarta’s gradual escalation in export restrictions earlier this year that culminated in the severe three-week export ban.
Although the government wanted to lower local edible oil prices, it caused world prices to soar to a record high of 7,268 Malaysian Ringgit ($1,598) per ton.
Malaysian palm oil producers were second in the world, after rival oils such as sunoil and soyoil. They rushed to capture Indonesia’s market share.
Bajoria of Sunvin Group noted that sunoil and soyoil, which are usually much more expensive than palm oils, were now comparable in price after a few months due to a squeezed Indian market.
According to SEA data, Malaysia has also surpassed Indonesia as the top palm oil supplier in India for the 2021/22 year to October.
The ban was eventually scrapped by the Indonesian government, and they began waiving export levies in mid-July to help fund biodiesel, replanting programs, and growing more concerned about palm oil stocks bulging and struggling palm farmers.
A New Delhi-based palm oils dealer stated that “Indonesian sellers now try hard to regain market share by offering discount,”
The palm oil futures price has dropped nearly half off its record high. Palm oil is also at a significant discount to other oils. It was offered at $940 per tonne inclusive cost, insurance, freight (CIF), to India for September shipment. This compares with $1,288 for crude soybean oil, dealers stated.
With aggressive discounting, Indonesian producers are regaining business from Malaysian counterparts.
“Indonesia sellers are much more competitive than Malaysia right now.” A Mumbai-based dealer working for a global trading company said that they offer a $5 per tonne discount under Malaysia.
He said that they had offered discounts up to $15 in July and August, before the export levy was removed.
According to a senior industry official, Zuklifli Hasan, Indonesia’s Trade Minister, urged India not only to purchase more palm oil but also to increase its imports when he visited India last month. Because the meeting was confidential, the official requested not to be identified.
Market players anticipated that Jakarta would soon return to its normal export levies, given Indonesia’s stock returns to normal and strong India demand.
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