India's palm imports to rise as rapeseed output slumps

Palm imports by the world's top buyer India will rise about 8 percent in the current marketing year ending October 2012, an industry official said on Monday, adding that a consortium of Indian companies were looking to buy land in South America for soybean production.
A slump in domestic vegetable oil crops and robust demand, will buoy palm oil buys this year, B.V. Mehta, executive director of the Solvent Extractors' Association of India, told Reuters. India's rapeseed crop could fall as much as 15 percent to between 5.8 million-6.2 million tonnes in 2011/12, he added, speaking on the sidelines at the annual Palm and Lauric Oils Conference & Exhibition Price Outlook 2012. "It will increase," said Mehta on palm oil imports. "I'm expecting this after looking at the Indian crop size and demand growth."
Indian imports of palm oil was about 6.5 million tonnes last year. "Imports are likely to be up by half a million tonnes and mostly that will be taken care of by palm," he said. Mehta said India's rapeseed production, which was 6.8 million tonnes in 2010/2011, had been hit by both warm and cold weather conditions in the current year, although output assessments were still ongoing.
Indonesia, which overtook Malaysia as the No 1 palm oil producer in 2007, has a palm export tax system that aims to boost downstream industries, secure domestic supplies and reduce volatility in cooking oil prices. Last year, Southeast Asia's biggest economy changed the structure of its palm export taxes, raising the tax for crude palm oil shipments and cutting refined product (olein) taxes in an attempt to boost its downstream industries.
That turned margins negative for refiners in Malaysia and India. Mehta added that Indian palm oil refineries have a capacity of 20 million tonnes, but are now running at 50 percent capacity due to higher imports of refined palm olein from Indonesia that recently slashed export taxes for the processed grade.
"Most of the refineries are now on the verge of closing," he said. "It now makes more sense to import RBD only, rather than CPO." In 2010/2011, India's palm imports included 5.4 million tonnes of crude palm oil (CPO) and 1.1 million tonnes of refined products, Mehta said. Without any government action to change import duties and export taxes, refined palm product imports could touch 2 million tonnes for the current year.