17/09/2008 (The Financial Express) - Indian traders are not likely to default again on palm oil imports, despite falling prices as buyers face strong demand ahead of festivals and have renegotiated deals, a senior trade official said on Tuesday. Palm oil has plummeted by a third so far in 2008, outstripping a 23%-slump in Dalian soyoil and a drop of 8% in US soybean oil, triggering defaults by palm oil byers in India and China, the world’s biggest vegetable oil importers. More or less, people have renegotiated the contracts. Had it not been the case, imports would have reduced in August, which is not the case, said BV Mehta, executive director of the Solvent Extractors’ Association of India.

India’s imports of vegetable oil jumped 21% in August to 622,813 tonne from a year ago, due to higher consumption and dwindling domestic stocks as the end of the oil-year nears. In August, another senior trade official had said that Indian traders were reneging on contracts to import palm oil due to a slump in global prices. But Mehta said that most traders had subsequently renegotiated the contracts at lower prices and did not expect rates to fall that much further. The trade body forecasted that imports over the next two months were likely at around 550,000 tonne to 600,000 tonne a month.

India’s main festival season begins in September and lasts until November, and usually sees a spike in consumption of vegetable oils and other edible commodities. Mehta said that the fall in Malaysian palmoil prices to a 17-month low could hit domestic consumption of some oils such as cottonseed oil and rice bran oil which are usually priced at lower rates than palmoil. Malaysian crude palmoil futures slumped 5% on Tuesday to hit a 17-month low as oil prices slid below $92 a barrel, dragging along vegetable oil markets from China to the US, traders said. The benchmark December contract on the Bursa Malaysia Derivatives Exchange fell as much as 113 ringgit to 2,136 ringgit ($619) per tonne, a level unseen since April 10, 2007.