M.R. Subramani

Chennai, July 13

Palm oil trade, particularly in the South, has come to a standstill with no takers for it.

On Monday, palm oil was quoted at Rs 345 for 10 kg in Chennai and very few buyers showed interest, according to trade sources. Last week, palm oil was unquoted on Thursday and Friday.

“Trade have imported excess palm oil and huge stocks have been built up in the ports and warehouses. Demand, on the other hand, is lacking. New players have queered the pitch with lower quotes,” said an importer.

Vegetable oil imports in the first seven months of the current season starting November have almost doubled to 47.96 lakh tonnes (lt) against 25.46 lt during the same period a year ago. Of this, crude palm oil imports were 31.46 lt (21.74 lt) and RBD palmolein 7.57 lt (1.12 lt).

In the global market on Monday, crude palm oil futures for delivery in September slid to 1,990 ringgit (Rs 28,850) a tonne. The prices have dropped 17 per cent in the last one month.

“What has happened in India is that some of the buyers had bought at Rs 45,000 a tonne from the importers. But the prices slid to Rs 40,500, then to Rs 37,500. Some of them are trying to square it up buying at every fall and suddenly couldn’t honour their commitments. So, when the prices touched Rs 35,000, sales were stopped,” said trade sources.

For example, an edible oil producer in the South bought 250 lorry loads of 10 tonnes each at Rs 45,000 a tonne. He went on buying as the prices fell and is now caught with stocks bought at high prices, the sources said.

Due to the fall in prices, many traders too have been left with stocks and lack of space.

According to the sources, anticipating festival demand some importers had booked shipments for July at $750-800 a tonne (Rs 36,850-39,300).

Trade is now eyeing with suspicion the export data put out on Malaysian palm oil exports. Data for July1-10 showed exports had increased 38 per cent but with Indian traders cutting down buying, a question mark hangs over the actual imports.

Outlook on the edible oil front is bearish with reports of higher soyabean plantings in the US.

An analysis by Malaysian fund manager OSK-UOB said plantation stocks in South-East Asia predicted a bearish scenario for the vegetable oils counter.

On the soyabean front, the Chicago Board of Trade benchmark August contract dropped 8-1/2 cents to $10.36-1/4 a bushel in electronic trade, while September and November are quoted around $9 a bushel.

The difference between soya and palm oil has to shrink and, therefore, there is more downside in the near term.

In the medium and long term, vegetable oils could gain on festival demand, behaviour of Indian monsoon as also crude prices.

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