KUALA LUMPUR (Reuters) - India, the world's top edible oil consumer, islikely to reduce palm oil imports in October and may turn to rival soyoilfor supply following a sharp cut in base prices, industry sources said onWednesday.
India booked around 500,000 tonnes of palm oil from the main producers ofMalaysia and Indonesia and up to 150,000 tonnes of South American soyoilfor September consumption, said freight brokers.
But palm oil imports may fall from next month because India had boughtenough cooking oils ahead of the Diwali festival this year. Rumours thatIndia may raise edible oil import duties also sparked heavy buying inprevious months.
"Freight agents say that India is already packed with oils. Palm oilexports to India may not hit 250,000 tonnes in October. Everybody isbearish and declines in the palm oil market reflect this," said onefreight broker in Kuala Lumpur.
Malaysia's crude palm oil futures fell on Wednesday and could hittwo-month lows of 1,386 ringgit a tonne due to persistent worries aboutrising stocks and falling demand.
By the midday break, the benchmark December crude palm oil contract on theMalaysia Derivatives Exchange had lost 7 ringgit to 1,391 ringgit($366.05) a tonne. The contract had touched a low of 1,387 ringgit.
"The talk is that India could be shifting to soyoil when it buys edibleoil again because refining margin for crude palm oil is quite bad since acut in base prices," said the freight broker.
India cut the base import price of palm oils and crude soyoil in early inSeptember to check rising inflation but government officials ruled out anychange in existing import duties on palm oil.
It cut the base import price of crude palm oil to $454 from $504 but crudesoyoil saw a greater reduction, to $565 a tonne from $628.
India normally buys around 500,000 tonnes of edible oils a month andimports nearly half of its annual edible oil needs of more than 10 milliontonnes.
The government taxes base prices to check revenue losses due tounder-pricing of invoices by some importers. Traders pay import duties onbase values regardless of the price they pay for the oils.
"We've been hearing rumours that India is already buying more soyoilbecause of the base price cuts. This worries the market. I think priceswill be going down fast to 1,350 ringgit," said one broker in KualaLumpur.
Dealers said the market could test 1,386 ringgit, a level last seen inearly August, and fall further to a July low of 1,368 ringgit.
Dealers in Indonesia also expect India to slow down imports after buyingheavily from the world's second-largest producer after Malaysia.Indonesian palm oil products are normally $5 a tonne cheaper than theMalaysian products.
Out out the 500,000 tonnes of palm oil purchased by India in September,350,000 tonnes came from Indonesia.