About 35,000 to 40,000 tons of the commodity from Brazil and Argentina, booked for delivery in February and the April-July period, have been scrapped, with total cancellations likely to exceed 50,000 tons, said Aashish Acharya, vice president at Patanjali Foods Ltd., one of India’s top vegetable oil buyers. Several other traders contacted by Bloomberg confirmed the action.
The latest development comes after Indian buyers backed out of more than 100,000 tons of Argentinian deals in December, equivalent to roughly 20% of what the country imports in a month. India relies on overseas purchases for nearly 60% of its edible oil consumption.
A weaker rupee and higher global prices have pushed up South American soy oil to trade at $25 to $30 a ton higher than local supplies, Acharya said in an interview. That disparity has made imports more expensive and uneconomical, prompting buyers to cash out, and instead look at the tropical oil which has been trading at attractive discounts, he said.
Soy oil’s premium over palm has doubled from the start of the year to around $145 a ton, according to data compiled by Bloomberg.
Supplies of South American soybean oil have tightened as China ramped up purchases of soybeans, reducing their availability for crushing into oil. Nearby prices for Argentinian soy oil are at the highest in more than a year, according to Commodity3 data.
Soy oil futures in Chicago have also climbed, but Indian prices didn’t follow as the rupee weakened to a record low against the dollar, said Mayur Toshniwal, president and head of trading at Emami Agrotech Ltd., an Indian vegetable oil processor and biodiesel maker. That mismatch may lead to more cancellations of soy oil deals and boost palm oil imports, he said.