COMMODITY OUTLOOK AND SITUATION

ANALYSIS

Weekly Report 16 – 22 February, 2020

Palm posts second weekly fall on demand worries,

despite rising exports

Malaysian palm oil futures rose on Friday on gains in rival edible oils and improving

February exports, although worries over Chinese demand due to the coronavirus outbreak

led the commodity to its second straight weekly loss. The benchmark palm oil contract for

May delivery on the Bursa Malaysia Derivatives Exchange closed

up 32 ringgit, or 1.23%, at a settlement price of 2,622 ringgit

($626.25). But palm oil lost 1.4 per cent this week as the

epidemic in No. 2 buyer China disrupted economic activity.

Demand concerns were, however, eased by an improvement in exports, with surveyors

reporting that Malaysia's Feb. 1-20 exports increased by 8.7-10.9 per cent from the month

before. Sentiment was also supported by India's resumption of purchases of refined

palmolein from Indonesia, a move that surprised the industry as just last month New Delhi

had restricted imports of the commodity and informally told traders not to purchase from

Malaysia following a diplomatic row. New Delhi's move would alleviate some concerns over

falling demand from India, the world's largest consumer of edible oils, said Marcello Cultrera,

institutional sales manager at Phillip Futures in Kuala Lumpur. Malaysian refined, bleached

and deodorised (RBD) palm oil is trading at a discount of $7.5 to Indonesian crude palm oil,

Cultrera said, adding that the "discount will surely widen moving forward, giving Malaysian

RBD palm oil and olein a demand opportunity from Bangladesh, Nepal and Indonesia." Palm

also tracked gains in rival edible oils. Dalian's most-active soyoil contract was up 0.9 per cent,

while its palm oil contract rose 1%. Soyoil prices on the Chicago Board of Trade gained

0.07%. Palm oil is affected by price movements in related oils as they compete for a share in

the global vegetable oils market. There might be some buying ahead due to a weakness in

the ringgit, a Kuala Lumpur-based trader said. The ringgit, palm's currency of trade, was 0.17

per cent lower against the dollar, making the tropical oil cheaper for holders of other

currencies. Malaysia expects to implement the B30 palm biodiesel mandate in the transport

sector by 2025, its prime minister said on Friday.

Expert Group to Suggest Ways to Push Agri Exports

New Delhi: The fifteenth Finance Commission has set up a high-level expert group to

recommend measurable performance incentives for states to encourage agriculture exports

and promote crops to enable high import substitution. The seven-member expert group on

agriculture exports, headed by ITC chairman Sanjiv Puri, has three months to submit its

report to the commission. The group has been set up to assess export and import substitution

opportunities for Indian agricultural products including commodities, and semi processed

and processed food items in the changing international trade scenario and suggest ways to

step up exports sustainably and reduce import dependence, the commission said in a

statement on Monday. Its members include former agriculture secretary Radha Singh, Nestle

India chairman Suresh Narayanan, agriculture technology firm UPL Ltd CEO Jay Shroff, Olam

Agro India Ltd country head Sanjay Sacheti, New Delhi-based think tank Research and

Information Systems for Developing Countries (RIS) director general Sachin Chaturvedi, and

the chairman of Agricultural and Processed Food Products Export Development Authority

(Apeda). It is mandated to suggest appropriate performance-based incentives to state

governments for the period 2021-22 to 2025-26 to accelerate reforms in the agriculture

sector as well as implement other policy measures in this regard. The group will recommend

strategies and measures to increase farm productivity, enable higher value addition, ensure

waste reduction, strengthen logistics infrastructure, etc. to improve the sector’s global

competitiveness. It needs to identify the impediments for private sector investments along

the agricultural value chain.

West Asia emerges as major market for Indian oranges

For the first time, West Asia has emerged as a prospective major market for Indian oranges

as growers began to treat the citrus fruit with a wax coating, officials of the Maharashtra

State Agriculture Marketing Board (MSAMB) said. Till now, India exports oranges to

Bangladesh only. Last week, the first consignment of 15.5 tonne

of oranges from Amravati were sent via the sea route to Dubai

from the Vashi facility of MSAMB. A total of 1,500 crates were

loaded in the refrigerated container from Vanguard Health Care

(VHT) facility. According to the ministry of commerce, production of the Nagpur mandarin

fruit crop in central and western part of India is increasing every year. Mrig crop (monsoon

blossom), which matures from February to March, has great potential for export since

arrivals of the fruit in international market decrease during this period. Sunil Pawar, MD,

MSAMB, said the wax coating or layer of wax on the fruit not only lends it a gloss but also

increases its shelf life by another month. Since respiration of the fruit stops due to the

coating, the weight loss of the fruit is also prevented, he said. Although Indian oranges are

known for their flavour, these often rot in transit due to loose jacket and exporters therefore

often end up losing. Orange is an major horticultural crop in Wardha, Nagpur, Amravati and

other districts of the Vidarbha region of the state. The citrus fruit is exported to Bangladesh

with nearly 100-200 tonne by road. The short shelf life of the fruit has affected its exports. A

pilot conducted last year, however, led to an interest from the West Asia and MSAMB decided

to take special efforts to promote exports. The marketing board began orange-waxing as part

of its export promotion and the treatment was done at the packing house of MSAMB in Navi

Mumbai. Oranges were transported in open crates, weighing 10 tonne each, in refrigerated

vans. At the Navi Mumbai facility,it was graded, washed, waxed and sent in reefer containers

to Dubai. Pawar said the board expected around 40 tonne of exports from its facility. Sudhir

Thakre, president, MahaOrange, said so far Indian oranges were only sent to Bangladesh but

the decision of the government to set up clusters for encouraging exports was slowly

reaching farmers and for the first time, a list of orchard owners with fruit for export have

been registered under OrangeNet, as on the lines of GrapeNet by Agricultural and Processed

Food Products Export Development Authority (Apeda). MahaOrange plays the role of a

facilitator. With some efforts, at least 11 projects for grading and sorting and packing have

come up in Vidarbha, he said. Thakre said fruit growers expect to export around 30 tonne to

Qatar, Bahrain and Dubai. For the implementation of the Agriculture Export Policy, Nagpur

district is being developed as a cluster for nagpur orange by Apeda. Around 150 farmers

from Nagpur district, farmer producers companies and seven exporters attended a meet-

cum-training programme for buyers and sellers. Training was held during December at

Vanamati, Nagpur. The main focus of the training programme was to increase the exports of

Nagpur orange to West Asia countries.

Farmers irked as prices of pulses fall below MSP ahead

of rabi harvesting

With rabi harvesting a few weeks away, prices of pulses in select mandis have slipped to

trade below their minimum support price (MSP) — the threshold at which the government

procures the kitchen staple. While chana (Bengal gram) in Gadag (Karnataka) is selling at Rs

4,122 a quintal — 11 per cent below its MSP of Rs 4,620 a quintal — prices of moong (green

gram) in Nasrullaganj (Madhya Pradesh) slipped to Rs 5,201 a quintal — a staggering 26 per

cent below its MSP of Rs 7,050 a quintal. Similarly, tur (red gram), masur (lentil), and black

gram (urad bean) are also selling at substantially subpar MSPs. The fall in prices of pulses

ahead of the rabi harvesting season could prove to be a major blow to farmers anticipating

better realisations on lower acreage this year. Experts, however, have divergent views on

the price collapse. “A huge quantity of peas is being smuggled into India by road from Nepal,

Bangladesh, and Myanmar. None of these countries cultivates peas. These are imported from

Canada and other countries. Since the smuggled quantity evades a massive tax of 50 per cent,

importers have room to sell their goods dirt cheap. This is pulling down the prices of pulses

in India,” said Bimal Kothari, managing director, Pancham International. The National

Collateral Management Services forecast India’s rabi pulses output to decline by 2.1 per cent

to 14.48 million tonnes (mt) this year, compared to 14.8 mt reported in the same season the

previous year. Rabi season contributes nearly 60 per cent to India’s pulses output, kharif

season contributes the rest. In its latest report, chana output is forecast to decline by 5.4 per

cent to 9.58 mt during the ensuing rabi harvesting season, compared to 10.13 mt of output

reported in the previous year. To discourage the import of peas and making India self-reliant

in pulses production, the government has levied 50 per cent

import duty on peas, in addition to fixing Rs 200 a kilogram

(kg) as the minimum import price. Thus, the landed cost of

peas — either from Canada, Russia or Ukraine — works out

to Rs 325 a kg. With some profit for traders factored in, the

ideal retail price should be at a minimum of Rs 350-375 a kg.

“Chana is a substitute for peas and hence, traders are

working to increase its supply from overseas through the illegal route. Such illegal trade

needs to be curbed straight away,” said Kothari. Meanwhile, Babulal Goyal, president of

Rajasthan Dal Mill Association, has a different explanation for the diminishing prices. “Dabba

traders (who take prevailing prices on commodity exchanges as a reference point to quote

for bilateral deals) are purposefully quoting chana prices lower to build their stock during

the current harvesting season and make profits in futures when its price moves up. Normally,

a lean season or farm month price quotes are higher than near month in the harvesting

season. So, dabba traders need to be curbed,” said Goyal. According Goyal, the government

needs to intervene and procure the entire quantity of pulses available for trade, especially

when their prices decline below the earmarked MSP. “The government had procured around

2 mt of pulses last year at the MSP for selling in the lean season. But, selling is done when the

prices have fallen below the MSP, thereby triggering huge losses for the government,” said

Goyal. Pulses price fall during the harvesting season is set to lower farm income,

encourage farmers to sell in distress and compound their debt levels, said Goyal.

Grain output to hit record high in 2019-20 crop year

New Delhi: Backed by above normal monsoon rainfall last year, India’s total foodgrain

production is estimated at an all-time record high of nearly 292 million tonnes (MT) in 2019-

20 crop year, which is over 2.3% higher than the foodgrain production previous year. Among

all crops, output of wheat too is estimated at an all-time record level of 106 MT whereas the

production of other crops is estimated to be higher than their normal production. Agriculture

ministry on Tuesday released its second advanced estimates for the current year, showing it

as the fourth consecutive yearon-year of higher output of foodgrains since 2016-17 crop year

(July-June). The ministry’s figures show that the estimated output of foodgrain this year has

even crossed its target (291 MT) which it had set before the beginning of the 2019-20 sowing

season. Though this estimate may be revised after harvest of rabi (winter sown) crops,

officials said the final output figures may not be less than what is estimated now. The

ministry releases four advance estimates followed by final estimates of production of major

agricultural crops every crop year. The fourth advance estimates are considered as good as

final estimates. India’s foodgrain basket comprises of rice, wheat, coarse cereals (millets and

maize) and pulses. “The cumulative rainfall in the country during the monsoon season (June-

September, 2019) had been 10% higher than the Long Period Average. Accordingly, the

production of most of the crops for the agricultural year 2019-20 has been estimated higher

than their normal production,” the report said.

BUMPER HARVEST: The figures released by the agriculture ministry show that the

estimated output this year has crossed the target of 291 million tonnes set before the

beginning of the sowing season.

Record wheat output expected, arranging storage for

harvest a worry

India is expected to produce record 106.21 million tonnes (mt) of wheat in the crop year

2019-20, according to the second Advance Estimates released on Tuesday.

Managing wheat stocks in warehouses and arranging storage for this bumper harvest, which

is set to far exceed demand, could be one of the many

challenges the government might encounter in 2020-21

unless quick measures are taken to liquidate a big portion of

the stock in the coming months, said experts. The data

released on Tuesday showed estimated wheat production in

the 2019-20 crop year, which started in July 2019, is 2.61 mt

more than the 2018-19 harvest and 5.71 mt more than the target for this year. Assuming that

almost 30-35 per cent of this huge production has to be purchased by state-run Food

Corporation of India (FCI) and state agencies from April 2020, as has been the norm, almost

28-37 mt will be added on to the existing inventories. In the 2019-20 marketing year (April

to March), FCI and state agencies together purchased around 34.12 mt of wheat from

farmers. This could further stretch the already precarious financial position of FCI, which,

according to the 2020-21 (FY21) Budget document, is projected to borrow 24 per cent more

in FY21 at Rs 1.36 trillion from the National Small Savings Fund. The data showed that total

foodgrain stock (wheat+rice) in the central pool as of February 7, 2020, was estimated to be

around 57.81 mt, of which wheat stock was estimated to be 30.36 mt, a whopping 124 per

cent more than the requirement. Rice stock was estimated to be 27.41 mt, a staggering 260

per cent more than the required stock position on January 1 each year.

As of January 1, FCI, along with state agencies, had around

75.81 mt of storage space available with them, of which

62.64 mt is covered storage space, while another 13.20 mt is

covered area plinth (CAP). In 2019-20 (FY20), the Centre is

projected to allocate 60.39 mt for targeted public

distribution system (PDS) and other welfare schemes, far less than the quantity procured.

Meanwhile, the second Advance Estimates show that among other major rabi crops,

production of gram is estimated to be 11.22 mt, up 12.80 per cent from last year. Output of

mustard, the biggest oilseed crop grown during the rabi season, is projected to fall marginally

to 9.11 mt, down 1.54 per cent from last year. Total rabi foodgrain that also includes pulses

and coarse grains, according to the second Advance Estimates, was projected at 149.60 mt,

up 4.10 per cent than last year. Together with kharif foodgrain production, India is expected

to harvest 291.95 mt of foodgrain in FY20, which is 2.36 per cent more than 2018-19. The

government has also marginally lowered its kharif production estimates for FY20 for pulses

in the second Advance Estimates, from the first Advance Estimates released in September

last year. According to the latest data, the production of pulses in the FY20 kharif season is

estimated at 7.92 mt, down from 8.23 mt in the first Advance Estimates as urad production

is now estimated at 1.72 mt, down from 2.43 mt in the earlier data.

Bumper again

Pulses farmers are set to harvest a record chana crop, but their party could be spoiled by

imports. “Why is the government still allowing imports? Why don’t they come and see the

crop here?,” asks Kalyan Hake, pointing to the chana (chickpea) on his six acres, of which the

grain on two acres has already been harvested. As the 32-

year-old farmer from Takali Bardpur in Latur taluka and

district of Maharashtra’s Marathwada region prepares to

harvest the remaining crop, Hake is visibly nervous about

his prospective realisations. “The government’s minimum

support price (MSP) for this year’s chana is Rs 4,875 per

quintal, whereas it is already trading at Rs 4,200 now in

Latur APMC (agricultural produce market committee)

mandi. If rates are so low before even the marketing season has actually begun, imagine how

much they will slide once the crop arrivals happen after Holi,” exclaims Hake, who expects

his average grain yield at 8 quintals/acre this time, as against 6 quintals for the 2018-19 crop.

The Union Agriculture Ministry, on Tuesday, estimated India’s chana production for 2019-

20 at 11.22 million tonnes (mt), up from last year’s 9.94 mt and marginally short of the

record 11.38 mt of 2017-18. Farmers have, moreover, planted an all-time-high 107.21 lakh

hectares (lh) area under this rabi (winter-spring) pulses crop, compared to 96.19 lh in 2018-

19 and 107.08 lh in 2017-18. While the acreage in Madhya Pradesh has dropped from 34.32

lh to 27.38 lh — the abundant water in reservoirs and recharged aquifers from surplus rains

have prompted farmers there to sow more wheat instead of chana — it has significantly gone

up in states such as Maharashtra (from 13.14 lh to 21.79 lh), Rajasthan (15.03 lh to 21.38 lh),

Chhattisgarh (3.71 lh to 4.11 lh) and Gujarat (1.74 lh to 3.78 lh). At the MSP procurement

centre in Takali Bardpur run by Vikas Agro Producer Company Ltd, a farmers’ cooperative,

over 5,000 pulses growers have already registered their crop for sale. “I don’t know when

they will start procurement and when the payment will be made into my bank account. But

there is no other place I can sell today. The APMC prices are below MSP and traders say they

will fall further if imports aren’t halted. Why can’t the government just do that, rather than

spending money for procurement and making us stand in lines?” points out Hake. Tur

procurement has started at Vikas Agro’s Takli centre. (Express photo by Partha Sarathi

Biswas) For farmers in the relatively dry Marathwada and Vidarbha region, chana is an ideal

rabi crop to grow after their kharif soyabean, which is planted from mid-June (after the

monsoon rains) and harvested by October. Cultivated mostly on the residual soil moisture,

it requires hardly one round of irrigation, as opposed to three or more for wheat. This time,

bountiful rains, especially during the second half of the monsoon (August-September) and

extending till early November, has resulted in higher sowings and farmers like Hake even

reporting a one-third jump in yields. In Latur, a major chana-growing district of Maharashtra

that also houses one of India’s biggest wholesale market for pulses, many farmers could not

take their kharif crop due to poor rains in the first half of the monsoon (June-June). Hake is

among those who was forced to skip his soyabean crop and, instead, went in for early sowing

of chana towards the end of October. With harvesting going on at full swing, the not-so-great

price outlook for the legume is a major worry. At the Latur APMC, traders identify two main

reasons for the current weak sentiment. The first is imports. Since March 2018, the Narendra

Modi government has clamped a 60% import duty on chana, while pegging it lower, at 40%,

for the larger kabuli or garbanzo bean varieties. Earlier to that, it imposed a 50% customs

duty on white/yellow peas (which are a cheap substitute for chana and even used for

adulteration of besan flour made from the latter) in November 2017 and 30% on masur

(lentil) in December 2017. Further, imports of tur/arhar (pigeon-pea), moong (green gram)

and urad (black gram) were, in August 2017, moved from the “free” to the “restricted” list,

subject to annual quantitative caps. These measures have helped stem the flow of imports

from their 2016-17 and 2017-18 peaks. The current fiscal has, nevertheless, witnessed an

increase, particularly of masur and chana imports (see accompanying table). Both happen to

be rabi pulses crops. Masur and white/yellow peas are imported mainly from Canada, while

chana is mostly supplied by Australia, tur/arhar by Myanmar, Mozambique and Tanzania,

and moong and urad by Myanmar. A second reason is the huge unsold stock of chana lying

with the government from last year’s MSP-procured crop. The National Agricultural

Cooperative Marketing Federation of India (Nafed) was, as on February 17, holding 21.03

lakh tonnes (lt) of pulses in its godowns, of which chana alone comprised 15.83 lt. According

to Nitin Kalantari, a leading Latur-based dal miller and pulses trader, Nafed’s stocks alone

are weighing down prices in the mandis. “They should have offloaded this grain during the

Dussehra and Diwali season, when demand for besan (used in many sweet preparations) is

high. Nafed is now floating tenders to sell, right at the start of the new crop’s arrivals. How

can prices, then, look up?,” he notes. At the Takali Bardpur procurement centre, Vilas Uphade,

director of Vikas Agro, is having a tough time convincing all growers not to come with their

crop now. The farmer producer company — part of the MAHA-FPC, a state-wide consortium

of producer organisations/companies that is a sub-agent of Nafed for undertaking MSP

procurement operations — began purchase of tur/arhar on February 18. “Tur (which is

harvested in December-January) is also selling at Rs 4,900 per quintal (below the MSP of Rs

5,800), but our real concern is chana. Not only is the crop much bigger this year, but many

farmers have not done any kharif sowing and gone directly for chana. They need a good price

for what is clearly a bumper crop,” explains Uphade. Severe water scarcity last year led Ali

Mohammed Sheikh to skip his chana crop in 2018-19. The delayed onset of monsoon this

time meant that he couldn’t also plant the 2019 kharif soyabean. But the monsoon’s magic

revival from August enabled this 10-acre farmer from Takali Bardpur to go for chana on eight

out of his 10-acre holding. “If the government procurement centres are not opened in time, I

may have to settle for a price of Rs 3,500 or even lower,” sighs Sheikh, who also grows

sugarcane and wheat on one acre each of his balance land that has irrigation facility.

India's tea exports up 2% by value on whole-leaf

shipments to Iran

A lucrative market in Iran for the whole-leaf variety helped Indian tea exports grow by 2.05

per cent by value even as overall shipment volumes dipped by 3.03 per cent due to volatility

elsewhere. In absolute terms, total export value last year

stood at $796.36 as against $780.34 in 2018 and the volume

stood at 248.29 million kg (mkg) as compared to 256.06 mkg

in 2018. Both, exporters and planters attributed the rise in

export income to higher production of whole-leaf or

orthodox tea, which fetches much better prices than the

crush, tear, curl (CTC) variety. Data sourced from the Tea Board showed that while

production of CTC tea rose by 2.06 per cent last year to 1,233.73 mkg, orthodox tea

production grew by 25.9 per cent to 138.83 mkg. “Higher orthodox production is good for

the sector as nearly the entire quantity of this tea variant is exported,” Vivek Goenka,

chairman, Indian Tea Association told Business Standard. While the average price for CTC

teas is $2.25-3 per kilo, orthodox teas fetch $4-5 a kilo in the international market. “The

improvement in prices is primarily on account of higher volume of whole-leaf exports.

Quality of CTC has also improved in some growing areas, leading to better prices,” Arun

Kumar Ray, deputy chairman at the Tea Board told this newspaper. Exports of whole-leaf tea

to Iran were up around 74 per cent at 53.45 mkg while in Germany, they stagnated at 10

mkg. On the other hand, exports of Darjeeling tea to Japan rose to 4.97 mkg from 3.69 mkg

earlier. In the US, another orthodox and premium CTC market, exports increased to 12.22

mkg from 11.03 mkg earlier. Iran, a pure whole-leaf market, outpaced Russia, an otherwise

dominant CTC market, last year to become the top export destination for Indian teas. Tea

producing firms have been focussing on shifting more towards orthodox tea given that it is

more remunerative and the export market for CTC tea has been volatile. In fact, last year

both, prices and shipment volumes to most major CTC destinations fell. Exporters from

Kolkata said that owing to the uncertainty around Brexit, volumes to the UK fell by over 25

per cent, at 11.74 mkg while the geopolitical situation in West Asia brought dowm Indian

exports to the UAE by 40 per cent and to Egypt by 70 per cent. Both of these are re-export

markets as well for Indian tea. Exports were hit in the SAARC region as well with Pakistan,

Bangladesh and Sri Lanka drastically demanding lower quantities of Indian tea. Realising the

changed global dynamics of the tea trade, the Tea Board has been stressing on producing

more orthodox and quality CTC teas to boost exports and is also encouraging tea firms to

explore online platforms and portals to ship whole-leaf and green tea primarily in global

markets.

Poultry, Egg Prices Fall on Covid-19 Rumours

Chandigarh:Wholesale prices of poultry and egg in the country have plunged by 15-30%

since the outbreak of the novel coronavirus disease, or Covid-19, in China, and poultry

farmers blame it on fearmongering on social media platforms such as WhatsApp and

Facebook. “The misinformation passed on through social

media about spread of the virus through poultry and egg has

reduced prices drastically in the last four-months,” said the

director of leading poultry company in Haryana, who didn’t

wish to be identified. It’s a double whammy for poultry farmers as birdfeed prices are up by

35-45% compared to the last winter season, he said. The egg industry has taken maximum

hit as wholesale prices have slipped below the breakeven level as rising inventories force

farmers to push sales. “The supply of egg has swelled against shrinking demand and poultry

owners are struck with inventories,” said Sukjinder Singh, a poultry farmer based in Punjab.

“We are incurring loss per egg as the input cost is 40-50% higher than a year ago.” He said

poultry farmers are not able to pass on the input cost to wholesalers and are incurring loss

on birds and eggs. Egg prices are down about 15% year on year. As per data from National

Egg Coordination Committee (NECC), egg prices in Ahmedabad are down 14% vis a vis

February 2019, while it’s down 13% in Mumbai, 12% in Chennai and 16% in Warangal. Egg

prices stood at ₹358 for 100 units in Delhi this week, down from ₹441 last year. The price of

broiler chicken in Delhi has come down to ₹78 per kg this week from ₹86 in the third week

of January 2020. In Andhra Pradesh, broiler prices have fallen by ₹10 to ₹87 per kg since the

outbreak of Covid-19. Winter months generally see higher demand for poultry and egg.

Poultry owners in Haryana alleged that traders were minting margins as retail prices are

unchanged and the slide in prices was not being passed on to consumers. Poultry feed mainly

consists of maize, bajra, soya extracts, groundnut extracts, rapeseed extracts, de oiled rice

bran and rice bran. The prices of all these commodities have gone through the roof in the

current financial year.

India’s curbs on Malaysian palm imports stir up edible

oil trade

India’s halt on Malaysian palm oil imports has disrupted global edible oil trade flows, with

Indonesia diverting supplies to feed India, Malaysia rushing to tap markets left behind by

Jakarta, and India substituting palm with other oils. India, the top global palm oil buyer,

imposed restrictions on imports of refined palm oil last month, a move sources said was

retaliation against Malaysia’s criticism of New Delhi’s actions

in Kashmir and a new citizenship law. Traders had also held

off buying crude palm oil from Malaysia. Malaysia’s latest

palm export data revealed the impact of India’s restrictions,

with shipments to India in January falling 85% from a year

earlier to 46,876 tonnes, the lowest since 2011. India accounted for nearly a quarter of

Malaysia’s total palm oil exports last year, and has been the biggest buyer of Malaysian palm

oil for five years. To compensate, Malaysia dialed up shipments to other destinations, with

exports to Pakistan, Saudi Arabia and Ghana – markets that have traditionally bought heavily

from Indonesia – all increasing in January by more than 100% from the same month in 2019.

“A rebalancing is happening in the palm oil market,” said a Mumbai-based dealer with a

global trading firm. “European and price-sensitive Asian buyers are switching to Malaysia

from Indonesia due to lower prices.” Indonesian prices have climbed to a rare premium to

Malaysian levels this year, on expectations of higher Indian purchases. Lee Yeow Chor,

chairman of state agency and industry body the Malaysian Palm Oil Council (MPOC), said

lower stockpiles in Malaysia have so far cushioned producers from the full impact of India’s

drop off. “Right now, the situation for Malaysia is not critical. We are still tight on stocks…

(India) may buy more from Indonesia. But that will open up a vacuum somewhere in the

market elsewhere,” Lee said. Malaysian stockpiles are at a two-year low. Lee said Malaysia

was looking to expand market share in the Middle East, Africa and Southeast Asia. Data from

the Malaysia Palm Oil Board shows Malaysia sold 170,802 tonnes of palm oil to Pakistan last

month compared to 80,660 tonnes a year earlier. It also sold 12,527 tonnes to Bangladesh,

up from 575 tonnes the year before. Indonesia was the biggest supplier to these markets last

year.

INDIA SHIFTING FROM PALM

Benchmark palm oil prices rose by 60% from July to December last year, though they have

fallen recently on concerns over Indian demand and the coronavirus outbreak in China.

India, a price sensitive market, had slowed palm purchases in the last three months because

of the rising prices. A narrowing spread between the price of palm oil and that of other oils

has also encouraged substitution. India’s imports of palm oil in January fell 27% from a year

ago to 594,804 tonnes, while soyoil and sunflower oil imports jumped 40% and 51%,

respectively, data from the Solvent Extractors’ Association of India (SEA) showed. That

pushed palm oil’s share in India’s edible oil import basket to 51% in January, the lowest since

June 2018. B.V. Mehta, executive director of the SEA, said Indonesian suppliers could lower

prices to retain buyers or India would continue to buy more rival oils. “It can’t charge a hefty

premium consistently over Malaysian supplies. Whenever a gap between palm oil and soft

oils narrows, Indian buyers shift to soft oils,” he said.

Source: Verbatim reproduced from different sources