Cooking oil imports by India, the biggest buyer after China, may remain close to a 15-year high as cheaper foreign products make processing of local soybeans and peanuts unprofitable, a trade body said.

Purchases of edible oils, including palm products, may exceed 2 million
metric tons in the three months ending Jan. 31, compared with 2.1
million tons in the preceding quarter, B.V. Mehta, executive director
of the Solvent Extractor’s Association, said today in an interview.

Imports
of vegetable oils have soared to the highest since 1994 after the
government ended duties on palm and soybean oils, depressing domestic
prices and forcing mills to slow processing of the monsoon-sown crop.
Higher shipments have helped fuel palm oil’s 37 percent gain this year.

“People are not running their plants fully because the operational
profitability is not there,” Rajesh Agrawal, spokesman for the Soybean
Processors Association of India, said in a phone interview from Indore.
“Either the seed prices have to come down or the oil and meal prices
need to go up to make processing profitable.”

Soybean processors
are running their plants at about 50 percent of their capacity, Agrawal
said. Refined soybean oil prices for immediate delivery have fallen 10
percent in the last six months in Indore, the nation’s benchmark.

Palm
oil jumped to an 11-week high on anticipation of an increase in
purchases by India. January-delivery futures gained as much as 3.1
percent to 2,340 ringgit ($695) a metric ton, the highest since Aug.
28. Futures ended at 2,325 ringgit at 6 p.m. close on the Malaysia
Derivatives Exchange in Kuala Lumpur.

India imported 8.66 million
tons of vegetable oils in the year ended Oct. 30, 2009, the Solvent
Extractors’s said in an e- mailed statement today. Palm oil accounts
for 80 percent of the total purchases.

‘No Decrease’

“In spite
of our peak crushing season, imports will not decrease because people
are losing money on processing,” the solvent association’s Mehta said.
“There is a negative margin of 1,000 rupees a ton while processing
soybeans,” he said.

About 2 million tons of mustard seed, double
the normal quantity and equivalent to 800,000 tons of oil, was
uncrushed in the year ended October, Mehta said. The yellow-colored oil
is the third-most used fat in India after palm and soybean oils.

India’s
government March 24 scrapped a 20 percent duty on imports of crude
soybean oil, four months after it was imposed to shield oilseed
growers. The decision brings soybean oil back in line with palm oil, a
main substitute product, which had been exempted from the tax.

The country buys palm oil from Indonesia and Malaysia, and soybean oil from Argentina and Brazil.

Source: Bloomberg

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