India is increasing purchases of cheap palm oil from Colombia and Guatemala

India bought rapeseed oil for the first time in 5 years with delivery in August, as local prices rose to a 3.5-year high, making imports profitable, while its own rapeseed crop will not appear on the market until March next year, Reuters reports.

A consignment of 6,000 tonnes of rapeseed oil from the UAE will arrive at the Kandla port in Gujarat by the end of the month. India usually buys palm oil from Indonesia and Malaysia, and soybean and sunflower oil from Argentina, Brazil, Ukraine and Russia.

In July, spot rapeseed oil prices rose to their highest level since February 2022 at $1,914.02/t, up 34% from a year ago. Some buyers are switching to cheaper soybeans instead of rapeseed oil, which is why its imports to India are also increasing.

For the first time in history, Indian importers purchased palm oil from Colombia and Guatemala as its producers accumulated significant stocks and offered products at deep discounts.

India imported 9 million tonnes of palm oil in 2023/24 MY, mostly from Indonesia and Malaysia, the world’s top producers and exporters. While Colombia and Guatemala (the fourth and sixth largest palm oil producers) typically export their products to Europe and North America. Increased production in these countries and plans to reorient their supplies could put pressure on underlying palm oil futures in Malaysia.

Oil from Colombia and Guatemala was offered at significant discounts on FOB terms to ensure that it would cost less to reach Indian ports than shipments from Malaysia and Indonesia, local dealers said. Indian buyers typically prefer fast delivery, and South American shipments can take up to 45 days, but the size of the discount was decisive. The South American palm oil was priced $10/tonne lower than Indonesian and Malaysian shipments, while South American shipments cost $90/tonne and Southeast Asian shipments cost $45/tonne. The ships will be loaded in September and will arrive at the Indian port of Kandla in October.

Currently, crude palm oil (CPO) in India is being offered at $1,165/t CIF (including freight and insurance) for delivery in October, and sunflower oil is being offered at $1,230-1,240/t CIF.

Latin America produces 5 million tons of palm oil annually, half of which is exported. Therefore, supplies to India will contribute to a significant increase in exports. Especially since demand for palm oil in India is increasing ahead of the holiday season.

India’s festive season begins in September, when demand for edible oils for sweets and fried foods increases, before falling again in the winter months. Exporters are trying to increase supplies to India by lowering prices amid fierce competition in the global vegetable oil market during this season.