1. India Edible Oil Markets Rajini Panicker rpanicker@phillipcapital.in 26 May, 2016 Increasing Import Dependence…Falling Palm Oil Imports !!!

2. 2 India Edible Oil Market Scenario For the 2015-16 oil year (Nov-Oct), India edibleoil production is estimated to decline by 4% to 5.95 Mln Mt. The total edible oil supply (production + beginning stock) for the year, however is estimated at 8.3 Mln Mt up 3% on the year as beginning stock this season is 26% higher on the year. But the India edible oil supply will continue to undershoot demand. We estimate edible oil demand to grow by 8% on the year at 21.71 Mln Mt after demand increased by 10% on the year in 2014-15. To meet the edible oil demand, we estimate imports to grow by 11% on the year in 2015-16 to 15.94 Mln Mt thereby increasing the country’s dependence on imported edible oil to 73% from 72% in 2014-15. Growing per capita income levels and below global average oilseed yields could keep India amongst the world’s largest importers of edible oil for the foreseeable future. country’s dependence on imported edibleoil estimated to increases to 73% in 2015-16 Phillip Commodity Research

3. India Edible Oil Import Composition-Changing Trends 3 The 18% decline in India’ s 2015-16 soybean crop to 7 Mln Mt, along with positive soyoil refining margins and trading margins, resulted in India importing a record 2.23 Mln Mt of soyoil, during Nov-Apr 2016. The reduced price premium for soft oils over palm oil to USD 80-125 this season compared to the historically high USD 200 also supported the increased share of softoils over palmoil in India’s edibleoil imports. The lagged effects of El-Nino could keep Malaysia and Indonesia production of palmoil stable this season and reduce exports by an estimated 0.3 Mln Mt for Jan/Sept 2016. While, soft oil producing countries of South America and CIS are harvesting large crops this year and will increase global exports by an estimated 13.5 Mln Mt for Oct/Sept 2016. Evidently, share of palmoil in India’s edible oil import mix to decline as soft oil prices to remain attractively priced compared to palmoil. The small Mustardseed crop this season of 5.8 mln mt, will also support softoil imports. Share of Palmoil in India’s imports during Nov-Apr has declined to 58% from 66% last year. While share of Softoil in India’s imports during Nov-Apr has increased to 42% from 34% last year. Solvent Extractors Association

4. Share of Palmoil in India Imports Estimated to Decline, for this season ! 4 Palmoil’s loss will be softoil’s gain this season. Palmoil share in India’s edible oil import estimated to decline to 60% from 66% last year. Softoil import share to increase to 40% from 34% last year. Phillip Commodity Research Estimates for Yr 2016 Solvent Extractors Association Import data for Yr 2015, Nov-Jan 2016 India’s imports of Edible oils estimated to increase 11% y-o-y to 15.94 Mln Mt

5. Summary 5 The Union Budget of India, announced on Feb 29 th for FY 2016-17, did not increase the country’s import duty on ediblie oils as widely represented and anticipated by the country’s industry body. In the absence of import duty hike, India to continue to rely on imports to meet domestic demand. Low production of key summer oilseed crop of Soybean and winter oilseed crop of Mustardseed has increased India’s dependence on softoil imports. Additionally, global price of softoils are forecasted to remain attractive compared to palmoil, which will result in softoil share of India’s imports to increase and that of palmoil to decline. We estimate the composition of India’s edible oil imports this season at 60:40 for palmoil:softoils v/s 66: 34 last year.

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