ASIA OILS-MALAYSIA PALM OIL PRICE RISE OIL PRICES - MARCH 30

KUALA LUMPUR, March 30 (Reuters) - Plans by top world palm oil producerMalaysia to cut stocks and raise prices will benefit rival vegetable oilsproducers Indonesia, Brazil and Argentina, industry sources said onFriday.Indonesia, the world's number two producer of palm oil, will offerdiscounts to grab market share, while Brazil and Argentina, exporters ofcompeting soybeanoil, will target the Indian market where import dutiesfavour soybeanoil over palm oil.Brazil and Argentina are slated to produce a huge soybean crop thisyear and will aggressively seek new markets."(Indonesia) will take advantage of its low production cost and fallingcurrency, and thanks to high prices in Malaysia, they will offer agenerous discount to buyers to dispose of their large production," saidone trader in Kuala Lumpur.Indonesia normally sells palm oil at discount of up to $10 a tonne toMalaysian product. Traders said the country aims to export more palm oilthis year due to a weakening rupiah.Malaysia plans to eliminate at least one million tonnes of palm oilfrom the market this year through replanting ageing trees and using atleast 500,000 tonnes of (CPO) as fuel.Prices of crude palm oil three months forward have risen by 18 percentsince late February on expectations the palm oil for fuel project wouldmaterialise. The government aims to lift prices to 950 ringgit ($250) atonne.By midday on Friday, benchmark third-month June crude palm oil futureswere up seven ringgit to 887 ringgit ($233.42) a tonne.

LATIN AMERICA WANTS A BIGGER SHARE OF THE PIETraders say low palm oil prices had ensured tough competition withSouth American soybean oil. But when Malaysian palm oil prices rise,Brazil and Argentina will quickly try to grab market share.Crude palm oil is at a discount of up to $70 a tonne to soybean oil,according to Malaysian government officials."South America will seize this opportunity to try to capture India,Pakistan, China and other palm oil markets by cutting their prices," saidthe Kuala Lumpur trader."They will be greatly helped by the Indian import duties which favoursoyoil compared with palm oil," he added.India was Malaysia's biggest palm oil buyer in 2000, taking 2.03million tonnes. It recently hiked the import duties for refined edibleoils to 85 percent. Import duty for soyabean oil was unchanged at 45percent.Malaysian government officials said replanting and using crude palm oilas industrial fuel could reduce stocks to a healthier level of 1.2 milliontonnes soon.They said crude palm oil in the country's main port, Port Klang, was ataround 60 ringgit ($15.78) a tonne cheaper compared with oil coming fromIndonesia's Belawan port in Sumatra because of the high domestic stocks.Indonesian exporters denied this."That's impossible. I've never heard such thing. We can offer palm oilat a $5 discount because the rupiah enables us to do so," said one traderin Medan, capital of North Sumatra.End-March palm oil stocks are forecast to reach 1.32 million tonnes inMalaysia.Indonesian exporters also doubted that Jakarta would follow Malaysia'sproject to burn crude palm oil to improve prices as stated by Malaysia'sPrimary Industries Minister Lim Keng Yaik recently."They hope to do the same thing together," Lim told reporters onThursday.But later at the same day, Indonesian Trade and Industry Minister LuhutPandjaitan said Jakarta had no funds to start using CPO as fuel. "It's agood move to lift prices, but we don't have money right now. Malaysiaunderstands our problem," he said.Malaysia produced 10.84 million tonnes of palm oil in 2000, up from10.55 million tonnes in 1999, according to the official Malaysian Palm OilBoard (MPOB). Traders expect output to reach up to 11.6 million tonnesthis year.Indonesia is expected to produce 7.2 million tonnes of palm oil thisyear, up from 6.52 million tonnes in 2000, according to the IndonesianPalm Oil Producers Association (Gapki).But some traders expect production up to eight milion tonnes this year.Additional reporting by Grace Nirang in Jakarta.(US$1 = 3.8 ringgit)