Bloomberg cited the Financial Express as saying that edible oil refiners in India have urged Prime Minister Narendra Modi to raise the import duty on refined palm imports from Malaysia. The Solvent Extractors Association has appealed to the government to scrap the Comprehensive Economic Cooperation Agreement with Malaysia with immediate effect and impose higher duties on refined palm olein.
Under the agreement, import duties on refined palm oil from Malaysia were reduced to 45% from 54% on 1 January 2019. This prompted a surge in India’s palm imports from Malaysia. We believe that an increase in the import duty on palm products would be negative for Malaysia as it would reduce the demand from the country. Nevertheless, long-term demand outlook for India is positive due to the country’s huge population and daily use of ghee in their dietary needs.
In a related development, the Hindu Business Line said that the edible oil industry in India is facing the challenge of “Make abroad and sell in India” phenomenon. Edible oil crushers have to do this due to the economic unviability in processing crude oils and then selling them domestically. Total palm refining capacity is about 15mil tonnes per year in India and utilisation rate is about 40%. An industry source was quoted as saying that a large number of oil processors such as Adani Wilmar has turned to packaging business by importing refined oil and then selling them in India.
According to Bloomberg, China’s cold storage is almost full as the country scrambles to import as much meat as possible to compensate for the drop in domestic pork production. An industry player said that importers have stockpiled mainly pork and beef, and chilled storage at the ports including Tianjin, Shanghai and Dalian are almost full. Another industry player said that large meat shipments to China may need to wait until domestic meat prices rise further or until September or October when some of the stored meat have been sold.
Bloomberg also reported that US corn farmers have launched an advertising campaign onFox News to appeal to President Trump to stop exempting oil refineries from biofuel requirements. The mandate requires crude oil processors to blend biofuels such as corn ethanol with petroleum. However, there are exemptions for small oil refineries. In the US, ethanol is mainly made from corn.
Reuters said that monsoon rains have covered most parts of cane, cotton and soybean fields inwest India and some parts of rice-sowing areas in central and north India. Monsoon rains are crucial for farmers as nearly half of India’s farmland lacks irrigation. We believe that a good harvest for domestic oilseeds in India may result in lower vegetable imports. Hence, this may affect India’s imports of palm oil in the coming year. India is the largest buyer of Malaysia’s palm oil, accounting for 15.2% of exports in 2018.
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