India cancels South American soybean oil imports

India has cancelled soybean oil shipments from South America due to the weakening rupee and the price differential between local and imported oil.

The weakening rupee and rising global prices have driven up import costs, prompting buyers to look to tropical oils, which are trading at attractive discounts.

About 35,000-40,000 tonnes of soybean oil from Brazil and Argentina, booked for delivery in February and April-July, have been cancelled, and the total number of cancelled shipments is likely to exceed 50,000 tonnes, said Aashish Acharya, vice president of Patanjali Foods Ltd., one of India’s largest vegetable oil buyers. Several other traders contacted by Bloomberg confirmed the cancellations.

The latest developments occurred after Indian buyers cancelled more than 100,000 tonnes of deals with Argentinean oil in December, accounting for approximately 20% of the country’s monthly imports. India relies on foreign purchases for nearly 60% of its vegetable oil consumption.

The weakening rupee and rising global prices have led to South American soybean oil trading at $25-$30 per tonne higher than local supplies, Acharya said in an interview. He added that this discrepancy has made imports more expensive and unprofitable, prompting buyers to cut costs and instead look to tropical oils, which are trading at attractive discounts.

According to data compiled by Bloomberg, the premium for soybean oil over palm oil has doubled since the beginning of the year to around $146 per tonne.

Soybean oil inventories from South America have fallen due to increased Chinese purchases of soybeans, reducing their availability for processing into oil. According to analysts, Argentine soybean oil prices are at their highest level in more than a year.

Chicago soybean oil prices have also risen, but Indian prices have not followed suit as the rupee weakened to a record low against the dollar, said Mayur Toshniwal, president and head of trading at Emami Agrotech Ltd., an Indian producer of vegetable oil and biodiesel. He said this discrepancy could lead to more soybean oil deal cancellations and a surge in palm oil imports.

Kuala Lumpur palm oil futures have risen just 2.6% year-to-date, trading at 4,156 ringgit per tonne as of 4:12 PM local time. Meanwhile, Chicago soybean oil prices have jumped 11% over the same period.

Tags: soybean oil, Brazil, prices, India, palm oil, Argentina