KUALA LUMPUR, May 6 (Reuters) - Malaysian palm oil traders see apossible payoff from political uncertainty in Argentina, the world's thirdlargest producer of soybeans, a direct competitor of palm oil.Soybean harvests are expected to gain pace in Argentina this month. ButArgentina's financial chaos - including default on the national debt,devaluation of the peso and the threat of insolvency in its banking system- may restrict exports, Kuala Lumpur palm oil traders said on Monday."The peso is still floating against the dollar, which means farmerswill not sell forward. No-one is sending full cargoes from Argentina,"said one trader in Kuala Lumpur.Argentina has harvested a little more than a third of its projected29.5 million tonne crop but traders said farmers may continue to retainmore merchandise in the absence of a clear economic recovery plan.Kuala Lumpur palm oil traders are closely watching progress of soybeanharvests throughout South America.Brazil, the second largest global soy producer after the United States,has nearly completed harvesting its soy crop, forecast by United StatesDepartment of Agriculture (USDA) at a record 43.5 million tonnes.

LOWER PALM OIL CROPSome traders said the Malaysian market was generally bullish on priceprospects due to talk of lower production in April and prospects of goodexports in May and June.Private forecaster Ivan Wong has forecast April palm oil output at860,000-865,000 tonnes, down from the official forecast of 892,629 tonnesin March.Other traders said they were less optimistic on the price."There was a two-month delay in harvest because of the crisis inArgentina. They would start harvesting properly in May," said one trader."Once they start harvesting, there's no place for them to keep thebeans. They will either have to crush the beans or export them. That's thebearish news," he added.Argentina was likely to speed up exports later in May before thesoybean harvest started in the United States in October, he said.

INDIA'S STEADY DEMANDBut some traders said steady demand by India, the world's largestedible oil importer, would eventually support the market.India buys palm oil from Malaysia and Indonesia, the world's largestproducers.India, which is suffering from a seasonal decline in oilseed supplies,was expected to import 450,000 tonnes of palm oil from Malaysia andIndonesia in May, about the same as in April. India would still prefer tobuy palm oil because of a shorter shipping distance, said traders.India buys around 70,000 tonnes of soy oil from Argentina, Brazil andthe United States in March for April arrivals, they said.Traders said exports from Indonesia could slow in May because of astronger rupiah , giving room for arch rival Malaysia to sell moreoil.Indonesia exported around 600,000 tonnes of palm oil in April, up fromthe normal 500,000 tonnes a month.Of this, Indonesia shipped close to 450,000 tonnes to China in April,one trader said."It shipped 250,000 tonnes to India in April, but I don't think theyare still aggressive these days because of a stronger rupiah," he said.Traders said Pakistan may purchase up to 170,000 tonnes of palm oilfrom Malaysia and Indonesia in May, up from a normal 80,0000 tonnes amonth because of falling local stocks.

(The informations and opinions expressed in this article represent theviews of the author only. They should not be seen as necessarilyreflecting the views of Palm News)