India's edible oil imports will rise modestly to 15.5 MMT in 2016/17 May 29, 2016

Report Highlights:

Assuming a normal 2016 monsoon (June-Sept), India's total oilseed production in marketing year (MY) 2016/17 (Oct-Sept) will reach 35.4 million metric tons (MMT), a ten-percent over last year. Oilmeal and edible (vegetable) oil production should reach levels of 15.4 MMT and 6.8 MMT, respectively. Edible oil imports will rise modestly to 15.5 MMT, with 9.8 MMT of palm oil and soft oils making up the balance. Oilmeal exports will be limited to 2.6 MMT.

Executive Summary:

Assuming a normal 2016 southwest monsoon, India's total oilseed production in MY 2016/17 is forecast to reach 35.4 MMT, a ten-percent increase over last year. Indian farmers will likely reclaim planted area lost due to abnormal weather conditions in last two years and yields will rebound as a result. Consequently, oilmeal and vegetable oil production will advance to more conventional levels (based on a five-year average) of 15.4 MMT and 6.8 MMT, respectively.

Although Indian oilmeal exports will double from 1.3 MMT in MY 2015/16 to 2.6 MMT in MY 2016/17, Indian oilmeal exports will be checked by rising domestic consumption, expanding oilseed crushing facilities in Pakistan and Bangladesh, and stiff competition from international oilmeal suppliers. Also during last two years, the Indian oilseed industry operated at very low capacity, or shuttered plants due to availability lack of consistent oilseed supply and high production costs (which are not competitive with cheaper imports), and weak oilmeal sales.

Concurrently, edible oil imports in MY 2016/17 will rise modestly from 15 MMT to 15.5 MMT. Tightening global palm oil supplies will limit palm import to 9.8 MMT, with soft oils rising to fill the gap. Incidentally, during the last four years, palm imports fell by almost 18 percent and now account for 62 percent of India's edible oil imports. India's per capita edible oil consumption is currently estimated at 17.18 kg. Although this represents an increase, Indian vegetable oil consumption remains well under the world average of 24.86 kg.

INDIA: TOTAL OILSEEDS PSD

Assuming a normal 2016 southwest monsoon, oilseed production in MY 2016/17 is forecast to reach 35.4 MMT, a ten-percent increase over last year. Indian farmers are likely to return some acreage which was lost during the last two years due to dry weather to oilseed production. This increase in area planted will essentially return oilseed acres and production levels to more conventional levels (five-year average). Prevailing strong market prices for soybeans, peanuts, rapeseed, and mustard should also support higher planting and production. Deficit precipitation during the last two monsoon seasons resulted in lower than anticipated oilseed production (refer governments second advance estimate for crop year 2015/16 (July-June). Note: The forecast covers soybeans, rapeseed and mustard, peanut, sunflower seed, cottonseed and copra. Minor oilseed crops such as niger, sesamum and safflower are not covered in this report.

The National Mission on Oilseeds and Palm's (NMOOP) latest action plan for Indian fiscal year (IFY) 2016/17 (April-March) proposes to allocate a sum of INR 9 billion as a means to boost oilseed production. For IFY2015/16, the Ministry of Agriculture proposed INR 5.3 billion which covered all three missions (MM-1, MM-II and MM-III, see below). The target proposed for new area to be brought under MM-II and MM-III was 30,000 hectares and 3,236 hectares, respectively. The NMOOP announced in its Twelfth Five-Year Plan (IFY 2012/13 to 2016/17) its intent to increase vegetable oil production by 35 percent over the previous Five-Year Plan's average (of 7.06 MMT) to 9.51 MMT. NMOOP intends that more edible oils be sourced from oilseeds, oil palm, and tree borne oilseeds (TBOs). NMOOP is implemented from Indian fiscal 2014/15 through three Mini Missions with specific target as detailed below:

Additionally, with an aim to boost agricultural growth, the Government of India (GOI) introduced the Rashtriya Krishi Vikas Yojana (RKVY) to subsidize states to bridge gaps in their State Plans above their baseline expenditures. The Union budget for IFY 2016/17 provisionally allocated INR 54 billion for RKVY. Last fiscal year, the GOI allocated INR 39 billion for the same. As agriculture is a state subject, the GOI program is also supplemented by state governments' efforts to enhance oilseed production and productivity.

Consumption:

Food use of oilseeds in MY 2016/17 will increase by five percent to 2.5 MMT, driven by steady demand for value-added food products made from oilseeds, particularly nuggets, snacks, curries, and sauces made from soy, rapeseed, mustard, sesamum, peanuts, and other oilseeds. Additionally, oilseed feed-waste consumption is expected to remain marginally above last year's level of 5.3 MMT, driven by cottonseed and soybean waste, which are forecast at 3.3 and 1.3 MMT, respectively. “Waste" broadly also includes seeds retained for sowing/re-sowing operations, feed and industrial use.

Trade:

Oilseed exports in MY 2016/17 will recover to 760,000 MT, an increase of 11 percent over last year. Exports will include 550,000 MT of peanut, 200,000 MT of non-genetically engineered (GE) soybeans, and 10,000 MT of other oilseeds. Consistent demand for Indian hand-picked select (HPS) peanuts in Indonesia, Vietnam, Malaysia, Philippines, and Thailand will keep exports buoyant, but below last year's level. Additionally, trade sources expect that Indian soybeans will continue to find niche markets in the United States, Canada, France, Belgium, South Korea and Europe. The Agricultural and Processed Food Products Export Development Authority (APEDA) and Indian Oilseeds and Produce Export Promotion Council (IOPEPC) are work jointly to address quality issues and raise awareness of the quality of Indian oilseeds (namely peanuts) among different stakeholders. APEDA had also issued guidelines for exporting peanuts and peanut products, including registration of peanut units and/or warehouse and issuance of certificates of export by IOPEPC.

India annually exports high-value HPS peanuts, soybean, sesame, niger seed, cottonseed, safflower seed, rapeseed, and mustard valued at upwards of $1.5 billion. Non-GE oilseeds can be imported into India without any quantitative restrictions, but typically face high tariffs (30 percent) and complex phytosanitary regulations.

Stocks:

Total oilseed inventory in MY 2016/17 will expand to above normal level (five-year average) at 1.9 MMT amid resumption in local oilseed supplies. Private-held stocks in MY 2015/16 will be relatively low amid tighter oilseed supplies. Even stocks held by the National Agricultural Cooperative Marketing Federation of India (NAFED) will likely remain low, as market prices of oilseeds are ruling above the minimum support price (MSP). The GOI Commission for Agriculture Costs & Prices has recommended an increase in the oilseed minimum support price (MSP) for 2015/16 to boost output and provide a better return to farmers.

INDIA: TOTAL OILMEALS PSD

Production:

Indian oilmeal production in MY 2016/17 is expected to recover to a more normal level of 15.4 MMT. Anticipated resumption in oilseed supply amid moderate growth in oilmeal consumption demand will support rise in meal production. This forecast is in contrast to the meal production scenario, which remained almost static at 14 MMT for the last two years, principally due to strong oilseed prices (due to its limited availability), weaker processing margins, and poor export sales. As a result, most of the processors are either operating at a very low capacity or have closed down their plants. Generally, an estimated 80 percent of India's total oilseed supply is crushed for meal and oil; oil meal is then utilized for feed and food. However, the specific end-use allocation can vary according to available domestic supplies and export demand for Indian oil meal during the marketing year.

Consumption:

Total oilmeal consumption in MY 2016/17 is forecast to rise four percent to 13 MMT, including 4.7 MMT of soybean meal, 4 MMT of cottonseed meal (mostly used for livestock feed), 2.7 MMT of rapeseed meal, 1 MMT million tons of peanut meal, and 600,000 MT of other oil meals. Domestic oilmeal feed use grew at average pace in last two years (11.6 MMT to 11.9 MMT) as the Indian poultry sector struggled with high production costs and thin profit margins. Generally, high feed prices lead to demand compression and prompt feed manufacturers to shift to unconventional feed ingredients besides putting pressure on prices of daily protein supplements such as eggs, milk, meat etc. Although the Indian poultry sector is currently in consolidation mode, the medium to long-term demand prospects continue to remain modest to healthy due to favorable socio-economic indicators.

India's organized feed industry uses soy meal, and also peanut, cottonseed, sunflower seed and rapeseed meal in various formulations. In addition to animal feed use, oil meals like soymeal are increasingly used in processed food products, healthcare products, and also as low-cost high-protein supplements. Soymeal is widely used as texturized protein (chunks, flakes, and nuggets), to fortify other food products (wheat flours, biscuits, etc.), or for the extraction of protein isolates (with a 90 percent or more protein content, it is a good substitute for animal protein).

Trade:

Assuming normal market conditions, Indian oilmeal export in MY 2016/17 is forecast to rise moderately from 1.3 MMT to 2.6 MMT. An uptick in domestic consumption, rapidly expanding oilseed crushing facilities in Pakistan and Bangladesh and stiff competition from international oilmeal suppliers will limit its export sales. During first five months of MY 2015/16, oilmeal exports dropped 92 percent as they have become non-competitive in international markets, for e.g., Indian soymeal is currently out-priced by more than $150/MT. Specifically, cheaper availability of meals from other international destination has eroded opportunity for Indian oilmeals, particularly among traditional buyers. Specifically, South Korea, Vietnam, Thailand, Taiwan and Oman were major buyers of Indian oilmeals albeit in smaller quantities.

India: Oilmeal Exports, In Thousand MTs

Source: Solvent Extractors' Association of India Includes soybean meal surface transport during corresponding period recorded at 406,150 MT

Stocks:

MY 2016/17 oilmeals end stock is forecast at 493,000 MT which is significantly below last five years average of 621,000 MT.

Policy:

• A fifteen percent duty is applicable on import of oilmeals, rice bran and oil bearing materials. While there are no quantitative restrictions on oilmeal imports, the availability of other cheap feed material continues to generally discourage imports, even at zero import duty.
• On July 8, 2006, the Ministry of Commerce and Industries issued a notification specifying that all imports containing GE products must have prior approval from the GEAC. Although the cotton seed meal from domestically produced Bt cotton seed approved by GEAC is allowed as a livestock feed, GEAC has not approved any other GE-derived feed ingredient, to include imported soybean meal.
• While there are no quantitative restrictions on oilmeal imports, the availability of other cheap substitutes continues to generally discourage imports.
• Per public notice No. 27/2015-2020, dated July 14, 2015, Ministry of Commerce, GOI, few oil cakes and meals are removed from Merchandise Export from India Scheme (MEIS) benefits: such as tree borne oils, rice bran oil, wheat bran, oil cake and meal of peanut expeller and solvent extracted varieties.
• n the Union budget for IFY 2016/17 (April-March), the proposed allocation for government welfare program such as Integrated Child Development Services (ICDS) has been reduced to INR 149 billion compared to INR 156 billion allocated in 2015-16. However, allocation for Mid-Day Meal Scheme (MDMS) has been enhanced to INR 97 billion from INR 92.3 billion in Indian fiscal 2015-16. ICDS and MDMS along with National Nutrition Mission, Rashtriya Madhsayamik Shiksa Abhiyaan (RMSA) seeks to promote nutritious protein rich foods. Several state governments are also promoting increased utilization of low-cost high-protein supplements derived from soybeans.

INDIA: TOTAL OILS PSD

Total edible oil production in MY 2016/17 will rise six percent to 6.8 MMT mostly due to anticipated expanded acreage and crushing of rapeseed, mustard and cottonseed. A likely drop in peanut oil production will limit domestic availability of edible oils. Edible oil production during MY 2015/16 will be limited to 6.4 MMT, an incremental rise of 2.3 percent above MY 2014/15. The estimate includes 2.3 MMT of rapeseed oil, 1.3 MMT of cottonseed oil, 1.05 MMT each of soybean oil, 920,000 MT of peanut oil, 590,000 MT of coconut oil, 200,000 MT of palm oil, and 120,000 MT of sunflower oil.

Consumption:

Edible oil consumption in forecast year will rise four percent to 22.4 MMT. The expanding population, rising disposable incomes, growing demand from hotel, restaurants, institutions, households and food-based industries will encourage higher consumption. The per capita edible oil consumption in India is also increasing and is currently estimated 17.18 kg for MY 2015/16. However, this remains below the global average per capita consumption of 24.86 kg.

Edible oil consumption in MY 2015/16 is estimated at 21.5 MMT, which includes 9.8 MMT of palm oil, 4.6 MMT of soy oil, 2.6 MMT of rapeseed and mustard oil, 1.8 MMT of sunflower, 910,000 MT of peanut oil and 1.8 MMT of other available oils. Palm oil will continue to be the largest consumed edible oil because of its competitive prices, versatility in blending with other others, and wide application across food (ingredient for margarines, biscuits, breads, breakfast cereals, instant noodle) and non-food sector (shampoos, lipsticks, candles, detergents, chocolates and ice cream).

Fortified, Blended and Branded Cooking Oils Gaining Acceptance

India's edible oil manufacturers promote fortified refined palmolein, safflower, olive oil, and rice bran oil as more healthful cooking oils. Cottonseed oil finds increasing acceptability due to its light color, neutral odor, and blending characteristics with other oils. Coconut, peanut and sunflower oils continue to be widely consumed in south India, while peanut and cottonseed oils are more prevalent in Gujarat and Maharashtra. Rapeseed oil is preferred in northeast, eastern and northwest India, while soybean oil prevails in central India, and rice bran oil is gaining popularity in eastern India.

Most edible oil is purchased by households or by institutional users (food processors, restaurants and hotels) and is sold in loose form or as vanaspati (partially hydrogenated vegetable oil). Edible oil sold in loose form is often again repacked and resold under different private labels. However, the percentage of refined oils that are directly branded and packaged by the refiners is also growing, as consumers are becoming more aware of health and quality factors in their choice of food products. Almost 35 to 40 percent of the edible oil market is branded. Branded edible oils sold in low-volume, low-priced packages or sachets sell well, a development that indicates a growing consumer preference for branded products.

Trade

Edible oil imports will rise modestly from 15 MMT to 15.5 MMT. Tightening global palm oil supplies will cap surge in its import to 9.8 MMT while share of soft oils will rise to fill the gap. Incidentally, palm oil share in the import basket has fallen by almost 18 percent in last four years to just 62 percent. Since consumption is growing at a faster pace than production, the appetite for imports is also rising in tandem. Incidentally, India is the world's largest importer of edible vegetable oil, followed by the EU-27, China, and the United States.

During first five months of the current marketing year, edible oil imports rose 47 percent to 6.7 MMT). Based on current trends, MY 2015/16 edible oil imports are estimated upwards of 15 MMT, 7 percent above last year. Notably, imports growth between current and forecast year is incremental as higher oilseed production and larger oilseed crush will offset requirement for larger imports. Total imports surged due to large inflow of crude edible oil (mostly palm and soybean). Further, narrowing premium between crude and refined palm oils also encouraged RBD palmolein imports. Sesame seed oil is premium oil, exported in small but significant quantities to cater to niche demand from overseas buyers. According to industry sources, sesame oil export in MY 2014/15 was worth $17 million, five percent above MY 2013/14. Countries such as Mexico, United States, Taiwan, Iran, UAE and China, are among the major buyers of Indian sesame oil.

India: Edible Oil Imports, In Thousand MTs

Source: Solvent Extractors' Association of India

Stocks:

MY 2016/17 edible oil end stock is forecast at 1.3 MMT which is significantly below last five years average of 1.6 MMT.

Policy:

Policy Developments

• In September 2015, the GOI raised the import duty on both crude and refined oils by five percent to 12.5 percent and 20 percent (Customs Notification No. 46/2015), respectively. The last revision on import duty was done in December 2014. Per Customs Notification No. 34/2014 dated December 24, 2014, import tariffs on crude and refined edible oils were raised by five percent, to 7.5 percent and 15 percent, respectively.
• Per Notification No 17/2015-20, Ministry of Commerce, GOI, dated August 6, 2015, rice bran oil is now permitted to be exported in bulk. Also, the ceiling on export of organic edible oils has been removed. Export of edible oils in branded consumer packs of up to five KGs is permitted with a minimum export price of $900 per MT.
• The TRQ on refined rapeseed oil is 150,000 MT, at an in-quota tariff rate of 45 percent. The TRQ on crude sunflower seed oil and safflower seed oil is also 150,000 MT, with an in-quota tariff rate of 50 percent.
• The only biotech food product currently authorized for import into India is soybean oil derived from glyphosate-tolerant soybeans. On June 22, 2007, the GEAC gave a permanent approval for importation of soybean oil derived from Roundup Ready soybeans for consumption after refining. Also, as Bt cotton now accounts for over 90 percent of the total cotton produced in India, almost all of the cottonseed oil produced and consumed in India is derived from GM cotton.

Source: Department of Revenue, Ministry of Finance, Government of India

India: Vegetable Oil Reference Price as on February 15, 2016

Note: Tariff values are revised from time to time by the GOI to reflect changes in international prices. The import duty is applied to the current tariff value rather than to the actual invoice value.