30/11/2011 (AgriMoney.com) - Tightened lending practices at some banks may be making themselves felt on agricultural commodity markets, with Oil World blaming them for a slowdown in oilseed purchases.

Buyers of vegetable oils, fats and meals have been "very reserved buyers in recent weeks", depressing their inventories to levels which could worrisome if markets turn.

"Low coverage of many consumers could become rather risky once prices start appreciating," the influential analysis group said, adding that supplies could struggle to satisfy demand if "a buying wave is triggered".

However, while much of this reluctance to stock up has been down to macro-economic uncertainties, it also reflects troubles among buyers gaining their "normal" credit facilities from banks in some countries, Oil World said.

Credit drought?

Commentators in other commodity sectors have already voiced concerns over the impact of the European debt crisis, in particular, drying up credit, as banks seek to bolster capital by tightening up on loans.

Marius Kloppers, the chief executive of mining giant BHP Billiton, on Monday said that the group "started seeing the European conditions impacting, for example, trade finance, availability of LCs [letters of credit] and so on".

On Friday, Stemcor, the metals heavyweight, warned that the deteriorating credit conditions were placing pressure on smaller trading houses.

"The worry that we have is that the bank crisis will feed into a much larger industrial crisis as confidence falls," Colin Heritage, head of the group's Stemcor Trade Finance division, said.

European banks are seen as particular actors in the credit squeeze, notably French lenders, which have historically been large players in trade finance, and also have large exposure to Greece, the epicentre of eurozone debt concerns.

'At best stagnate'

Oil World's comments came as it forecast a revival in prices of oilseed products which, like other agricultural commodities, have set multi-month lows.

On futures markets, Chicago soymeal for December hit $280.60 a short ton on Friday, a 17-month low for a spot contract.

The group was particularly upbeat over prices of palm oil, which also face a threat to supplies from the La Nina weather pattern, linked to poor weather in the major producing countries of Indonesia and Malaysia.

Oil World forecast Malaysian output will "at best stagnate" at 18.9m tonnes in 2012, compared with 18.8m tonnes this year.

The comments come ahead of a key industry conference in Bali, starting on Wednesday, but follow a rash of upbeat comments on palm oil prices.

Last week, Australia & New Zealand Bank analyst Victor Thianpiriya forecast that palm oil prices, which in September traded at a discount of nearly $300 a tonne to soyoil, could reach parity in March, when South East Asian palm supplies will be at a seasonal low while South American soy availability will be enriched by a new harvest.