KUALA LUMPUR, July 22: Malaysia’s crude palm oil futures prices stayed strong on Monday, with some traders and refiners saying India may buy heavily in the market as its domestic crop gets hit by poor rainfall.
Erratic monsoon rains may cut India’s domestic soybean output and force farmers to re-sow the June crop, regional traders said on Monday, .
India annually produces about 5.5 million tonnes of soyabean, which is sown in mid-June. It typically runs a large domestic vegetable oil output deficit, forcing it to buy palm oil from Malaysia and Indonesia, and soy oil from South America.
It’s true rains have fallen in India, but they are not enough. They are looking at a 20-30 per cent decline in soybean crop for this year, said one regional trader.
India was in the market at the weekend. But sellers were hiding because they know the Indian buying will pick up this week, he added.
Monsoon rains are vital for India’s farm sector, which accounts for 25 per cent for its gross domestic product and provides employment to 70 per cent of its one billion people.
Heavy covering by refiners helped drive Malaysia’s crude palm oil futures to a 38-month high of 1,550 ringgit ($407.89) a ton last week as the market rode high on India’s erratic rains and forecasts of dry weather in the US soyabean hub in the Midwest.
Some traders said palm oil freight bookings to India, the world’s largest edible oil importer, have reached up to 25,000 tons so far this week and are expected to rise further.
Some traders said India’s edible oil imports could reach more than 500,000 tons a month from July onwards, up from 432,606 tons in June, because of the worries over the lack of rains.
The rains are not enough to cover the whole planting areas. I think at the present moment, soybean crop could fall by 15 per cent but I don’t know if the weather will get worse, said another trader.
The Indian government has requested farmers to grow crops which require less rains, he added.
Traders in India said last week the erratic rains are unlikely to hit the country’s groundnut crop as severely as soybean due to its greater resilience to dry weather.
The groundnut and soybean growing regions in central and western India received a good first spell of rains in June but rains have been erratic in July.
The groundnut crop has been sown on 1.95 to 2.0 million hectares compared with 1.75 million hectares in the last season in the largest producing western state of Gujarat.
When the actual monsoon will hit all over India is still a mystery. The present rains have missed most crop areas for oilseeds, said one trader in southeast Asia.
While most refiners were hopeful India would be a big buyer, some Kuala Lumpur traders remained cautious as the weather may improve anytime.
As far as I know the rains have been good in India. We are talking about good rains, not light showers, said one trader.
Another said: It is very unlikely India will suffer drought. This is a weather market. Everything can change easily.—Reuters