06/10/2008 (Bloomberg) - Palm oil importers in India, the biggest buyer of vegetable oils after China, are seeking to renegotiate contracts after prices plunged to the lowest in almost two years, a processors' group said.

Palm oil futures in Malaysia fell to 1,820 ringgit ($522) a ton, the lowest since Dec. 5, 2006, amid concern that a global economic slowdown will cool demand for resources. Prices dropped 14 percent last week, the biggest drop in almost eight years.

``Edible oil industry is facing a crisis-like situation,'' said B.V. Mehta, executive director of the Solvent Extractors' Association of India, in a phone interview from Mumbai. ``Some importers are trying to renegotiate contracts, while some others may defaults on earlier agreements.''

Defaults by Indian importers may add to record inventories of the tropical oil in Indonesia and Malaysia, the top producers, and weigh on prices that have plunged 60 percent from a peak in March. Malaysia's palm oil stockpiles were 1.85 million tons at the end of August, the sixth highest on record.

Slumping palm oil prices may prompt India's government to raise import duty and protect oilseed growers, who will harvest the monsoon-sown crop this month, said Dinesh Shahra, managing director of Ruchi Soya Industries Ltd., the nation's biggest importer of edible oils.

`Predicting Bottom'
``Nobody is predicting the bottom for any markets as the credit crisis hasn't spared commodities,'' he said. ``Palm oil could decline further if crude oil slips to $80 a barrel.''

Commodities markets are heading for the biggest annual drop since 2001 as investors exit leveraged bets and slowing economic growth erodes demand for raw materials. Crude oil today slipped below $90 a barrel in New York for the first time since February.

India relies on purchases abroad to meet almost half its edible oil demand. It buys palm oil from Indonesia and Malaysia and soybean oil from Argentina and Brazil.

Purchases in the year to October may reach 6 million tons, 7 percent more than a year earlier, according to the processors.