By Rajendra Jadhav

MUMBAI, (Reuters) – Indian traders contracted to import a record 100,000 tons of soybean oil from the United States due to limited supply from South America. This was at a moment when rival palm oils are climbing record highs, according three dealers.

The increased purchases by the United States will likely support U.S. oil prices. These have shot up nearly 20% to near their highest level in 10 years, fuelling fears about inflation.

They said that the United States was the largest importer of edible oils in the world. But, due to lower production from Brazil and Argentina, New Delhi had to look to the United States.

Indian buyers bought U.S. soyoil vessels. The prices were very attractive, and there were insufficient supplies in South America,” stated the India Head of a global trading company. He requested anonymity due to the policy of his firm.

“Buying two more vessels is possible in the near future.”

India gets about two-thirds its soyoil from Argentina while Brazil supplies the remaining third.

However, Argentina’s soyoil supplies have been reduced in the last soybean season. This has forced Indian buyers to search for sunoil products from the Black Sea.

Sunflower oil is more affordable than soyoil and palm oil, however, some buyers remain skeptical about the delivery of sunflower oil due to geopolitical tensions (in Russia),” stated Sandeep Bajoria chief executive at Sunvin Group, an oil brokerage and consulting firm.

They’re going to soyoil

Crude palm oil (CPO), is currently being sold in India at $1,575 per tonne (includes cost insurance and freight) for March shipment. This compares with crude soybean oil of $1,620 and crude sunflower oil of $1,515, according to traders.

Although soybean oil was less expensive than sunflower and palm oils last month, the unexpected rise in demand for soyoil has pushed prices up by 16% per month, to their highest level in over 14 years, traders stated.

SUPPLY QUEEZE

India imports nearly two-thirds (mainly from Indonesia and Malaysia) of its edible oil requirements.

However, Indonesia’s decision not to export palm oil has pushed the prices to record heights and caused scarcity on the edible oil markets. This was according to a Mumbai-based trader with a global brokerage firm.

According to the dealer, edible oil exporters sought an alternative form of soyoil. But massive production reductions are taking place in South America for soybean crops.

Conab in Brazil, the statistics agency for Brazil, reduced by 15,000,000 tonnes its estimated soy output for the 2021/2022 cycle, and Paraguay may see a drop of up to 50% in soybean harvest.

Argentina is a top soyoil exporter and faces 5 million tonnes of soybean production decline in 2021/22.

A lower level of water in Argentina’s Parana river has made it difficult to load soybean vessels fully. This means that the cargo size reductions have reached up to 30%.

The United States could have a surplus of soybean oil, however, after the Biden Administration proposed reducing the mandate for biofuel blending, according to another trading company dealer.

According to him, India could be able to import from the United States upto 160,000 tonnes in 2021/22, compared with 36,000 tonnes a decade ago.

Indian traders signed agreements to import 30,000 tonnes from the Black Sea Region. However, port congestion delays shipments, according to the India head for a global trading company.