Kuala Lumpur (Reuters)12/18/2001 - Palm oil may get a boost as globalsunflower seed shortage tightens the edible oils complex, Asian traderssaid today.

Consumers are likely to prefer buying soyoil a substitute for the highlypriced sunflower oil. And as soyoil prices rise owing to the extra demand,palm oil is likely to find support too.

Hamburg-based Oil World said a last week it may cut its 2001/02 sunflowercrop estimate to 21.0 million tonnes from its early November forecast of21.4 million tonnes.

"It’s not necessarily a bearish scenario for palm oil. Soyoil prices willgo up when people are buying more. This will help boost palm oil becausethe two types of oil are competing against each other," said one KualaLumpur trader. Sunflower oil, prized as a top quality edible oil, is atraditional ingredient in European and Middle Eastern cooking, whereconsumers buy little soyoil expect in blends.

Europe is also a major palm oil market for Malaysia and Indonesia.Malaysia exported 1.03 million tonnes of palm oil to European Union lastyear, down from 1.09 million tonnes in 1999.

While palm oil prices might firm off the back of a strong soyoil market,traders said they expected palm oil to remain at discount to soyoil, whichis in tight supply anyhow.

Last week, spot crude sunflower oil was quoted at US$ 600 a tonne FOBArgentina, up from US$ 500 in late November.

Crude soyoil was offered at US$ 372 a tonne, up from US$ 350 in earlyDecember. Refined, Bleached, Deodorised (RBD) palm oil was much cheaper atUS$ 327 a tonne FOB Malaysia.

"We no longer sell palm oil at a discount to Malaysian prices because ofthe strong demand from Europe, China and India ahead of the new year,"said one trader in Jakarta.

"I think it is possible for more buyers in Europe to shift to palm oil ifsoyoil becomes too expensive. Sunflower oil shortage has given a boost tomarket sentiment in general," he said.

Indonesia normally sells palm oil mart at discount of between $5 to$10/tonne to Malaysian products.

Traders in Asia said sunflower seed output in key producers Russia andUkraine were expected to drop by almost 2.5 million tonnes this year intotal, leaving a shortage of around one million tonnes in the globalmarket.

Argentina’s crop was also expected to decline this year.

"We’re already seen in the market Russia id buying soyoil regularly.Russia is also buying palm oil much more than it used to," said aLondon-based trader. "I think the chance for Europe to but palm oil/soyoilis 50:50," he said.

Less price sensitive customers in Western Europe were likely to favour themore expensive soyoil compared with palm oil was a substitute forsunflower oil, but those in Eastern Europe were likely to look to thecheaper palm oil, trader said.

"I think it’s nonsense to say soyoil is the only substitute to sunfloweroil. Price-sensitive consumers will buy palm oil especially because pricesare more competitive," said a trader.

Some traders in Europe said Ukraine may increase imports of palm oil andother tropical oils to 20,000 - 30,000 tonnes per month because ofdeclines in the country’s sunflower seed output.