KUALA LUMPUR, March 4 (Reuters) -
India and China, the world's top two edible oil importers, will buy more of the
commodity this year despite record stocks as cheap palm oil cargoes and low
import tariffs help meet rising food consumption and temper food-driven
inflation.
Resilient demand from the two Asian
giants whose populations are growing in size and wealth is likely to bring down
near-record palm oil stocks in Indonesia and Malaysia, the world's top
producers.
While this will support benchmark
Malaysian palm futures , which fell 23 percent last year, higher
stocks at ports in China and India are bound to pressure domestic prices,
offering some relief to their governments fretting over inflation.
Indian edible oil stocks are
expected to have hit a record 1.875 million tonnes in February, an Indian
industry official told Reuters on the sidelines of an industry conference.
China's palm oil stocks at ports were also anticipated at a record 1.4 million
tonnes last month, a Reuters survey showed.
India's overall imports of palm oil
and soyoil is expected to be 10.5 million to 11 million tonnes in the marketing
year ending October 2013 against a record 10.2 million tonnes in the previous
year, according to B.V. Mehta, executive director of the Solvent Extractors'
Association.
"Imports for India are still
going up. Palm oil prices are still low and people don't want to lose an
opportunity," Mehta said, adding that demand for the commodity will keep
rising as long as the government does not raise import tariffs for crude and
refined edible oils.
China's palm oil imports for the
marketing year to September 2013 are likely to rise by 18 percent to 6.65
million tonnes, Hamburg-based oilseeds analyst Oil World said in a recent note.
STOCK BUILD
Stocks in India and China likely
rose to a record in February as traders stocked up mostly on palm oil ahead of
changes in policy by the respective governments.
China, the world's No.2 consumer of
palm oil, imported 954,087 tonnes of the vegetable oil in December, customs
data showed, almost double the average 490,000 tonnes, as traders sought to
avoid new quality standards that came into force on Jan 1.
"Stocks in China have been
hovering near the one-million-tonne mark for a prolonged period and increased
buying before the stricter regulation pushed inventory level to a record
high," Xu Jian Fei, chief economist at Chinatex Grains & Oils Import
& Export Ltd, one of China's largest edible oil trading companies, told
Reuters.
It turned out to be business as
usual after China's quarantine authorities allowed discharge of the first two
palm oil cargoes from top exporter Malaysia in late January, easing previous
worries that the new standards may hamper shipments.
In India, buyers snapped up cargoes
on expectations the government would use its budget in late February to
announce a hike in import tariffs.
"It didn't happen as they were
worried about food inflation and now we are stuck with huge stocks,"
Solvent Extractors' Mehta said. "It does not bode well for the
industry."
The Indian oilseed crushing industry
was expecting import taxes for crude edible oils to rise to 10 percent from 2.5
percent to stem the flow of cheap imports and boost domestic prices so farmers
would continue to plant oilseeds.
Refined oils had been expected to
rise to 20 percent from 7.5 percent now.
For the Indian government, keeping
the taxes unchanged means keeping prices of soyoil ,
which are down 2 percent so far this year, under control. Headline inflation in
January slowed to a more than three-year low thanks to a slower rise in fuel
although there are upside risks to food inflation, analysts say.
China's inflation is expected to
touch 3 percent this year, compared to 2.6 percent last year, a central bank
official said on Sunday, signalling a growing focus on rising food prices.
