Indian palm oil imports are expected to remain firm for the remainder of 2021, despite the Indian government’s decision to impose inventory restrictions.
In October, the Indian government applied a stock limit for domestic inventory wholesalers and retailers in the country to control soaring domestic prices, through the prevention of excessive stock hoarding. The ruling will require state governments to determine stock limits after considering current consumption patterns and available stocks.
Despite a record 1.69 million tonnes imported in September, Indian palm oil stocks were heavily depleted at the end of October as India had festivals such as Diwali and the wedding season, a period of the year with typically high palm oil consumption. Combined with the reduction in import duty on edible oils, this is likely to mean that imports of palm oil into India remain firm throughout the remainder of the year, in an effort to rebuild depleted stocks.
Additionally, several market participants are concerned that if the stock limiting regulations are not calibrated properly to accommodate the current pace of Indian consumption of palm oil, there could be stock shortages in the coming months. This is because consumption is expected to remain high due to the wedding season and as the hospitality sector continues to recovery from the effects of COVID-19, albeit at a slower pace as festival season passes.
The Malaysian benchmark price currently stands at MYR 4,711/MT on 5th November, down 3% m-o-m due to weakness in rival soyabean oil, but up by 13.35% q-o-q on firm demand.