06/03/2008 (The Economic Times), Kuala Lumpur - The sharp reversal in Asian vegetable oil prices moved into a second day on Wednesday as rumours of Chinese action to cool runaway edible oil prices were given credence by official comments.

China’s Dalian soybean oil futures were limit down soon after opening for trade and Chicago Board of Trade soya oil dropped on talk that China, the world’s largest edible oil buyer, could take steps to curb prices.

Malaysian palm oil futures, the global benchmark for the product, fell more than 4%, extending its fall from Tuesday’s high to more than 12%, and Indian soya oil also weakened.

“Talk of China keeping a lid on prices is getting pretty credible with the government stating that it will improve price controls for essential items,” said an official with a leading plantation firm in Kuala Lumpur.

China’s supply of grains and other agricultural goods took centre stage during the opening session of the National People’s Congress on Wednesday, as the government battles inflation and an increasingly acute shortage of arable land.

China will extend the 1% import tax on the oilseed by another six months to September 30 in an effort to curb rising food prices, the ministry of finance said on Wednesday.

Traders said palm planters in Malaysia sitting on an all-time-high stock of 1.9 million tonnes at end-January were getting jittery after prices of the tropical oil fell more than 12% from record highs in just two days.

But the benchmark May contract on the Bursa Malaysia Derivatives Exchange finished just 4 ringgit down at 4,095 ringgit a tonne as fresh buying towards the close helped the market cut losses. The contract fell to an intraday low of 3,928 ringgit a tonne.

Now the market should find a reasonable level and the reasonable level is slightly lower than today’s market,” said Govindbhai Patel, a leading oilseeds trader in Gujarat.