MUMBAI, May 23 (Reuters) - India's palm oil imports in May are set to fall to their lowest in 27 months as its rare premium over other edible oils prompted buyers to cancel cargoes and replace them with soyoil and sunflower oil, dealers and cargo surveyors said on Tuesday.
The surprising drop in palm oil imports by India, the world's biggest importer of vegetable oils, could bring down palm oil prices . Malaysia and Indonesia, the two largest global producers, may lower their palm oil offers to regain market share from other edible oils.
The benchmark palm oil contract for August delivery on the Bursa Malaysia Derivatives Exchange fell 1.85% to 3,365 ringgit a tonne after Reuters reported the drop in Indian imports.
Around 261,000 tonnes of palm oil was discharged at various Indian ports in the first twenty days of May and another 150,000 tonnes is expected to be discharged in the remaining 11 days, for a total of 411,000 tonnes, according to average estimates from the dealers and cargo surveyors.
India's average monthly palm oil imports in the first six months of the 2022/23 marketing year that started on Nov. 1 were 818,203 tonnes, according to trade body the Solvent Extractors' Association of India (SEA).
"Palm oil has been replaced by sunflower oil in many parts of the country due to the price competitiveness of sunflower oil," said Rajesh Patel, managing partner at GGN Research.
In April, Indian buyers opted to cancel large amounts of palm oil purchases for the first time in many years and the industry was expecting May imports could fall to 700,000 tonnes.
Price-sensitive Asian buyers traditionally rely on palm oil because of the low cost and quick shipping times. But palm oil has moved to a premium to other edible oils at the same time that soft oil prices have dropped, partly because of a record rapeseed crop.
Palm oil's discount to rival oils was as much as $500 per tonne in the December quarter, but it started trading at a premium earlier this year as output from Indonesia and Malaysia was curtailed by excessive rains.
Palm oil traditionally makes up about two-thirds of India's vegetable oil imports by offering competitive prices, but its share is down to about 40% in May, said a New-Delhi-based dealer with a global trading house.
Sunoil imports in May are set to jump 28% from a month ago to 319,00 tonnes, while soyoil imports could rise 16% to 305,000 tonnes, according to the average estimate from dealers.
India buys palm oil mainly from Indonesia, Malaysia and Thailand, while it imports soyoil and sunflower oil from Argentina, Brazil, Russia and Ukraine.
"Palm oil prices will fall more than soft oils in coming months to attract buyers," the dealer said.
(This story has been refiled to add dropped word in paragraph 1)
Reporting by Rajendra Jadhav; Editing by Christian Schmollinger
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