India will buy 6 million tonnes of edible oils in the year to October 2008, more than a downwardly revised forecast of 5.5 million tonnes this year, a top industry analyst said on Saturday. "Next year there will be a normal growth in consumption," Dorab Mistry, director of London-based Godrej International, told Reuters in an interview.
"Normal growth in consumption in India is about half a million tonnes or 600,000 tonnes annually." India is the world's second-biggest edible oil importer. Mistry said India's edible oils imports were likely to be about 5.5 million tonnes in the oil year ending October 2007, lower than expected as high global prices have trimmed demand.
Palm oil, mostly imported from Malaysia and Indonesia, was at a record high of 2,764 ringgit in June, and rival soyoil touched a 23-year high on the Chicago Board of Trade early this year. The use of palm and soy for producing biofuels has been fuelling a sharp rally in prices globally.
"Originally, we thought India will import 6.4-6.5 million tonnes this year, but now imports will turn to be less than that, mainly because of high prices," Mistry said. "Consumption has come down slightly. It has not expanded as much as we expected."
But in the long-term, Indian demand will rise at a quicker pace as income levels go up and the economy expands, he said, forcing the country to import more each year with annual domestic output unlikely to see any major improvement.
"India's oilseed production will remain stagnant. We have seen oilseeds in India is stagnating for the last 10 years. It is either much lower than average or just average," Mistry said.
A leading oilseeds trader said on Friday that summer-sown output this year would rise by nearly 400,000 tonnes to 15.52 million tonnes due to good rains. That would surpass earlier industry estimates of 15.15 million tonnes, and substantially exceed the 13.15 million tonnes produced a year ago.
But Mistry said there could be problems ahead. "We believe oilseed output from the winter-harvested crop may be lower as farmers will be lured to grow more wheat instead of oilseeds due to higher prices of the grain," he said, while saying it was too early to make accurate predictions.
India buys almost half of its total consumption of 11 million tonnes of edible oils annually. The country imports palm oil from Malaysia and Indonesia and soyoil from Brazil and Argentina.
London-based Mistry, whose forecasts are closely watched by the industry, said edible oil prices would remain firm next year due to buoyant demand for alternative fuels. He said palm would remain the cheapest among cooking oils. "Overall, it appears that palm will continue to be at discount to soybean oil. Palm is at a discount of $50-$60 a tonne and even could go up to $80-$90 a tonne," Mistry said.