Mumbai: Cooking oil imports by India, the biggest user after China, may drop this month and in February after a jump in futures to a more than two-year peak made overseas supplies more expensive.

Purchases may decline 16 per cent to 1.25 million metric tonnes in the two months ending February 28, from 1.49 million tonnes a year earlier, Govindlal G. Patel, managing partner at GG Patel and Nikhil Research Co, said in an interview. The country is the largest buyer of palm oil, which represents almost 80 per cent of edible-oil shipments.

Declining imports by India for a fourth month may boost palm oil stockpiles in Malaysia, the world's second-biggest producer, likely curbing a rally in prices. Palm oil futures reached 3,905 ringgit (Dh4689.42) on January 4, the highest price since March 2008, and soybean oil rose to 59.10 cents a pound in Chicago on January 3, the highest since August 2008.

Domestic supplies

"There is disparity in prices and imports are not profitable," Patel said by phone. Domestic supplies are also expected to increase as "mustard production is likely to be higher than last year."

Imported palm and soybean oils are 1,500 rupees to 2,000 rupees (Dh160.85) a tonne more expensive than local prices, Patel said.

"India may end up buying less palm oil this month compared with December partly because of high prices," said Ben Santoso, an analyst at DBS Vickers Securities (Singapore) Pte.

Palm oil for April delivery rose as much as 2.4 per cent to 3,836 ringgit a ton before ending at 3,751 ringgit, the highest level since January 7.

Stockpiles in Malaysia fell 1.3 per cent in December to 1.61 million tonnes from a month earlier, the nation's palm oil board said January 10.

Prices of the commodity jumped 42 per cent in 2010, a second year of gains, on concern that cooking-oil supplies may tighten as dry weather in Argentina curbed soybean crops and rains damaged oil-palm harvests in Indonesia and Malaysia.

India's winter-sown mustard output may exceed last year's 5.9 million tonnes as higher prices encouraged farmers to increase planting and as favourable weather boosts yields, Patel said.

Mustard seed, planted in October and November, accounts for more than 70 per cent of India's output of winter oilseeds.

Its yellow-coloured oil is the third-most used cooking oil in India after palm oil and soybean oil.

Winter-sown oilseeds, including mustard and peanuts, were planted in 9.33 million hectares (23 million acres) as of January 21, compared with 8.9 million hectares at the same time in 2010, the farm ministry said last week.