INTERVIEW: India's vegetable oil imports may hit 4-year high, says industry head

India's vegetable oil imports could range between 14.5 million mt–15 million mt in the marketing year 2022-23 (November-October), the highest since 2019-20, amid rising demand, said B.V. Mehta, executive director of the Solvent Extractors' Association of India.

Vegetable oil demand has gone back to pre-COVID levels, Mehta told S&P Global Commodity Insights Feb. 25 on the sidelines of the Global Castor Conference 2023 held in Gujarat, India.

"This marketing year imports are already up 30% in the first quarter (November-January), which is surprising as normally we have the lowest import during the [domestic] crushing season."

India is the world's largest buyer of vegetable oils and relies on imports for about 60% of its annual consumption of 23-24 million mt.

Breaking down the numbers, Mehta forecast that India's palm oil imports would range between 8.5 million mt to 9 million mt for MY 2022-23. Soft oils such as soybean oil and sunflower oil imports are expected to around 3.5 million mt and 2.5 million mt respectively.

In MY 2021-22, India's vegetable oil imports rose to 14.03 million mt after two years of low imports, as lesser COVID-19 restrictions in the year drove up consumption. However, high prices right after the breakout of the Russia-Ukraine war had led to some demand destruction in the past year.

Enough stocks to weather supply bumps

Rising tensions in the Black Sea are a cause for concern, Mehta said but added that the renewal of the Black Sea Grain Initiative would be a non-issue for India's importers of sunflower oil.

"Last year when the supply of sunflower oil from Ukraine – typically India's largest supplier – stopped due to the war, we got plenty of supply from Russia," Mehta said.

"The oil that used to go to the EU is now getting diverted to India and China. So there was no long term shortage of sunflower oil last year. So now if the corridor closes, we will still be getting oil from Russia," Mehta said.

The UN-brokered deal between Russia, Ukraine and Turkey which has kept Ukraine's ports in the Black Sea open is set to expire in March from its 120-day extension in November 2022.

Right now, vegetable oil stocks at India's ports are close to 3.5 million mt, almost double the 1.8 million mt at this time last year. So, there is no concern that supply will be lacking, Mehta said.

In Q1 MY 2022-23 India imported 4.75 million mt of vegetable oils compared to 3.61 million mt in the same period a year ago, data from the SEA showed Feb. 15.

From India, Mehta expects domestic vegetable oil production for MY 2022-23 to be around 10 million mt.

In 2021-22, India's vegetable oil production was pegged at 8.77 million mt by the US Foreign Agricultural Service.

Price, policy outlook

"I think current prices are pretty reasonable and stable and will hold for the next few months unless some major international event disrupts the global economy," Mehta said.

In domestic markets, oilseeds are close to the minimum support price, or MSP, so government may have to step in to support farmers and increase the import duty on palm olein, according to Mehta.

Currently, Refined Bleached and Deodorized palm oil imports from Malaysia and Indonesia are the cheapest edible oil in the Indian market, after New Delhi removed restrictions on its imports in 2021 to ease food inflation.

While the current rate of import duty tax on RBD palm olein is 12.5%, the trade body has been petitioning the government to increase this to 20% as Indian refiners are suffering from low-capacity utilization.

"The Tariff Rate Quota on sunflower oil is going to end soon so it will be taxed at 5.5% from April. And when oilseed prices go below MSP there are chances that the govt will be tempted to raise duties. So lets wait and watch for another 20 days," Mehta told S&P Global.

Meal exports to surge

For the marketing year 2022-23 (April-March), Mehta forecast rapeseed meal exports from India to reach 2 million mt, helped by competitive prices and larger sowing acreage, Mehta said.

India is currently the most competitive supplier of rapeseed meal to South Korea, Vietnam, Thailand and other Far East countries. India's rapeseed meal is priced around $250/mt FOB India, while rapeseed meal Hamburg ex-mill is quoted at $428/mt, according to SEA data in February.

"We have parity in soybean meal as well and we have a lot of stock to sell as well. We are estimating soybean meal export of about 600,000 mt in 2022-23," Mehta said.

India is a major provider of oil meals to Southeast Asia where it has logistics advantage. The ability to send small lots, rupee depreciation as well as a lower soybean crop from Argentina will also support meal exports this year, Mehta added.