CHINA SHY ON PALM OIL QUOTA DESPITE DROUGHT

KUALA LUMPUR, July 9 (Reuters) - China's surging soybean imports arelikely to limit the country's demand for palm oil this year which maydelay the release of a new batch of import quota, traders said on Monday.China's soybean imports reached 4.5 million tonnes in January-May thisyear, compared with 2.5 million tonnes in the same period last yearbecause of the drought, they said. China crushes some of the beans intosoyoil for domestic use."China is not under pressure to buy more palm oil. It's been buyingplenty of soybean because of the drought," said one dealer at a tradinghouse dealing with Chinese buyers."The absence of an import quota is also a reason why China's soybeanimporters are quite aggressive. That's why I haven't heard anything fromour office in Beijing about the new palm oil quota," he added.Soyoil is a direct competitor to palm oil, which is mostly used in theinstant noodle industry in China.Talk of a possible release of China's palm oil import quota circulatedin the Malaysian market again last week, and together with anticipation ofmore purchases by India, had pushed palm oil futures prices back to 900ringgit a tonne, a level last seen in March.By 0925 GMT, benchmark third-month September contract was up 10 ringgitat 926 ringgit ($243.68) a tonne.Players speculated that China's next palm oil import quota will reach800,000 tonnes in the second half of 2001, up from 700,000 tonnes in thefirst half.But ample soybean stocks may kill off hopes the country could soonrelease quota despite expectations among Chinese traders Beijing wouldmake a decision this week.Analysts in China expect soybean output for this crop year to stay flator fall slightly below last year's output of 15 million tonnes due toreduced acreage.China's monthly requirements for palm oil stood at around 80,000tonnes, traders said.China bought 1.02 million tonnes of palm oil from Malaysia, the world'slargest producer, in 2000, up from 800,135 tonnes in 1999. Total palm oilimports this year are expected to stay roughly the same as 2000's 1.4million tonnes.China also buys palm oil from the world's second largest producer,Indonesia.In Jakarta, Trade and Industry Minister Luhut Pandjaitan said on MondayIndonesia hopes to boost its share of China's palm oil market to 45percent this year from between 30 and 35 percent currently."We are targeting a 45 percent market share in China this year... Chinahas pledged to increase its import quota this year. We want to grab themarket," Pandjaitan told reporters.Malaysia held 65 percent of China's market share, said Pandjaitan,adding that Indonesia planned to launch a marketing campaign in China inSeptember/October.Traders in Malaysia said Indonesia's plan barely affected the palm oilfutures market."The news is not negative. I have doubt that Indonesia will be able todo it. It always has problems with shipment because of congestion inBelawan," said one trader, referring to the main palm oil export port inNorth Sumatra."That means buyers will always come to Malaysia," he added.