Imports of cooking oil likely to increase 15%

Oilseed acreage drops 10% to 8.55 million hectares.

The country's cooking oil imports may surge this year as dry weather curbs oilseed planting and some farmers shift to wheat and barley to benefit from soaring prices, analysts and traders said.

Overseas purchases by the world's second-biggest buyer of edible oils may gain 15 per cent in the 12 months ending October 31, compared with a year earlier, according to the median estimate in a survey of six traders and analysts by Bloomberg News.

An increase in imports may further deplete global stockpiles of palm oil, supporting prices that have risen 64 per cent in the past year. Soybean oil has jumped 72 per cent in the same period on concern that supplies, reduced by a shift in the US acreage from soybeans to corn, will trail demand.

"Palm oil will get support as that's the cheapest commodity available,'' Amol Tilak, an analyst at Kotak Commodity Services, said yesterday. The country's cooking oil imports may rise to 5.4 million tonnes this year from 4.7 million tonne last year, the survey showed.

The imports, second only to those of China, are increasing at a time when there's going to be a shortage in supplies of oilseeds globally, Tilak said. Rising incomes are boosting demand for fried food and snacks in China and India, while vegetable oils are also sought for biofuels.

Palm oil futures rose 0.6 per cent to 3,134 ringgit ($959) a tonne on the Malaysia Derivatives Exchange in Kuala Lumpur at the end of morning trading on Thursday. Stockpiles in Malaysia dropped 7 per cent in December from November after production slumped.

Farmers reduced sowing of oilseeds mainly because of depleted soil moisture in Rajasthan as rain-fed fields suffer from a prolonged dry spell, the agriculture ministry said on January 18.

The area under winter-sown oilseeds declined 10 per cent to 8.55 million hectares (21 million acres) from 9.5 million hectares a year earlier. Barley was sown on 7.25 million hectares, 12 per cent more than a year earlier, the ministry said.

"It's all market-driven and at the time of sowing, barley looked more lucrative to grow than mustard and that's why farmers shifted,'' Unupom Kausik, head of research at Anagram Commodities, said yesterday.

Mustard oil is the third-most used cooking oil in India and accounts for more than 70 per cent of the nation's output of winter-sown oilseeds. Mustard output may fall as low as 5 million tonNes from 6.22 million tonnes, Govindlal G Patel, director of Dipak Enterprises, said on January 22.

Patel has been trading cooking oils for more than three decades.

Beer Consumption
Farmers in Rajasthan, the country's biggest mustard seed grower, produce an average of 1.25 tonnes of the oilseed per hectare, compared with 2.42 tonnes of barley, according to government data.

Higher grain prices in the country have also prompted some farmers to switch to wheat and barley at the expense of mustard seed.

"It's market driven and farmers are shifting as they are getting better prices from private companies for barley,'' H B Yadav, an additional director for agriculture with the government of Rajasthan, said on January 18.

As Indians become more affluent, consumption of beer has risen, boosting barley prices by 48 per cent in the past year on the National Commodity & Derivatives Exchange in Mumbai.

Wholesale wheat prices in New Delhi last week reached their highest since November 2006, helped by a growing appetite for bread, cakes and biscuits among the 1.1-billion population.

Barley Prices
Barley prices may rise 16 per cent to Rs 1,400 a quintal by September on the NCDEX on rising demand from the drinks industry, Harish Galipelli, head of research at Karvy Comtrade, said by phone from the southern city of Hyderabad.

"Given the huge demand from within the brewing industry for malted barley and additional demand from the pharmaceutical and food industries, prices of barley have risen sharply,'' United Breweries Holdings, a unit of the country's biggest brewer UB Group, said in a share-sale document to investors on December 13.

Beer sales in India are estimated to rise 51 per cent to 1.36 billion litres by 2011 from 907.2 million litres in 2006, United Breweries said in the document, citing statistics by Euromonitor.

"With around 565 million people under the age of 25, the potential for growth is huge.'' the document said. "Higher income levels, changing lifestyle and consumption patterns are all expected to drive this growth.''