Mustard Output in India May Drop, Boosting Palm Oil

Jan. 11 (Bloomberg) -- The mustard seed harvest in India may be smaller than a year earlier as dry weather reduced the planting area of the winter-sown crop, said an official at the nation’s biggest group of oilseeds processors.

Production may total 5.7-5.8 million metric tons in the March-April harvest, down from 6.2 million tons a year earlier, said Govindlal G. Patel, chairman of the crop committee of the Central Organization for Oil Industry & Trade, or COOIT.

A reduction in winter oilseed production may further strain edible oil supplies, increasing the need to purchase more abroad. Vegetable oil imports will reach a record 9.4 million tons this year after drought damaged peanuts and other monsoon-sown crops, the Solvent Extractors’ Association of India said Jan. 8. Palm oil has gained 30 percent in the past year on demand from China and India, the biggest consumers.

“It is obvious India’s consumption of edible oils will be met through imports,” said Amol Tilak, an analyst with Mumbai- based Kotak Commodity Services Ltd. “Palm will make up a major portion of the import pie as it is the cheapest available.”

Palm oil for March delivery dropped as much as 2 percent to 2,572 ringgit a ton on the Malaysia Derivatives Exchange. It was at 2,590 ringgit at 5:15 p.m. in Kuala Lumpur. The commodity is $106 a ton cheaper than rival soybean oil, according to data on the Bloomberg.

Palm oil sales from Malaysia to India surged six times to 33,500 tons during Jan. 1-10, from 5,500 tons during Dec. 1-10, according to Societe Generale de Surveillance. Monthly vegetable oil purchases may remain high at 700,000 to 800,000 tons over the next few months, Patel said.

South American Crop

“Our prices will depend on international prices which are not going to soften unless the South American crop comes to the market in March-April,” Patel, who’s been trading edible oil for over four decades, said in an interview. “We have to buy at a higher price.”

Mustard seed, planted in October and November, accounts for more than 70 percent of India’s output of winter oilseeds. Its yellow-colored oil is the third-most used cooking oil in India after palm oil and soybean oil.

The oilseed was sown on 6.4 million hectares (15.8 million acres) as of Jan. 7, down from 6.62 million hectares a year ago, the farm ministry said Jan. 8.

“Temperatures were not favorable at the time of planting in November,” said B.V. Mehta, executive director of Solvent Extractors’ Association of India. “It was hot.”

Production may total 5.5 million tons, said Devi Prasad Khandelia, managing director of Khandelia Oil & General Mills Pvt. He has been processing and trading oilseeds for more than two decades and is currently chairman of the mustard committee of the Solvent Extractors’ group.