\Palm oil imports by India will probably slump year-on-year for a sixth month in April as a nationwide lockdown in the world’s biggest buyer to combat the spread of the coronavirus hurts operations at ports and factories.
Purchases may plummet 29% from a year earlier to 500,000 tons next month even as the Ramadan festival, which generally boosts demand for the world’s most-consumed edible oil, is around the corner, according to the median of five estimates in a Bloomberg survey of processors, brokers, traders and analysts. Palm oil accounts for about 60% of India’s cooking oil purchases.
A three-week lockdown in India is hurting logistics at ports and mills and disrupting movement of trucks. Processors are also facing labor shortage as many workers have left for their hometowns. Lower purchases by the south Asian nation will potentially pressure benchmark palm oil prices, which have declined about 22% so far this quarter.
“Port restrictions, import curbs on refined palm oil and seriously-low edible oil stocks are culminating to be a disaster for oil supply,” said Sathia Varqa, owner of Palm Oil Analytics in Singapore. “In addition, the lockdown will sharply reduce the use of palm oil in the food and hospitality industry as a vast population goes into hibernation and the teeming cities go silent.”
The survey may disappoint those who are betting on a recovery in demand ahead of Ramadan. Consumption of palm oil typically rises during the Muslim festival, when it’s used to make treats such as biryani, deep fried pancakes and sweets such as halwa and jalebi. This year, it will begin in late April, followed by Eid al-Fitr.
Although edible oil reserves in India have fallen due to slower purchases in the past weeks amid weaker demand, importers have become cautious in signing new trade deals due to uncertainty about the duration of virus-related disruptions.
There is a possibility that the lockdown may be extended, said Gnanasekar Thiagarajan, head of trading and hedging strategies at Kaleesuwari Intercontinental. But once the restrictions end, “massive buying to restock is expected.”
According to the Solvent Extractors’ Association of India, cooking oil stockpiles totaled 1.53 million tons as of March 1, compared with the country’s monthly requirement of about 1.9 million tons.
The processors’ group has asked its members to continue running their factories to maintain supply of edible oils, which fall under essential commodities allowed by the government to freely move during the lockdown. The association urged the mills to ensure workers are protected from being infected with the virus, according to a statement.
Benchmark palm oil futures headed for their worst quarter in more than 11 years. Prices in Malaysia have dropped about 24% from their January peak on escalating fears that the pandemic will reduce demand for commodities across the world.
Soybean oil imports by India in April may fall 4.6% from a year earlier to 237,500 tons, according to the median of four estimates in the survey. Sunflower oil purchases may drop 7.2% to 225,000 tons in April, it showed.