17/08/05 NEW DELHI (Reuters) - Soy oil suppliers are making an all outeffort to snatch a part of palm oil's market share in Asia but India'sproximity to palm oil suppliers and China's preference for soybeans willstand in the way.Traders and analysts said for India, the world's largest edible oilsimporter, a shorter distance to palm oil suppliers of Malaysia andIndonesia, compared with soft oil exporters in South America and theUnited States, in addition to lower prices, will more than offset arelatively lower import duty on soft oils.And in China, the preference to increasingly import soybeans to feedits huge crushing capacity is helping the world's second-largest importerof vegetable oils to generate enough soy oil of its own, leaving littlescope for importing soft oils.In India, palm oil has a 70-75 percent share out of nearly five milliontonnes of annual edible oil imports, leaving the remaining 25-30 percentto soft oil.The ratio of soy oil in the import basket in India has been growingbecause of lower duties on it, leaving Asian palm oil producers a worriedlot. But Indian traders say palm oil producers' fears of soy oil capturingthe market were unfounded."Palm oil will continue to be the king, irrespective of the prices orcustoms duties," said B.V. Mehta, executive director of the SolventExtractors' Association of India.Traders say palm oil is 10-15 percent cheaper than soy oil, wellaccepted by the Indian consumer as a cooking medium and is also preferredby industrial users. The landed cost of crude palm olein is around $430 atonne at Indian ports.In China, soy oil imports in the first seven months of 2005 fell by41.5 percent to 940,000 tonnes over the same year-ago period, while palmoil imports during the same period rose 30 percent to 1.6 million tonnes.A boom in soy crushing in China has been pushing down prices ofdomestically produced soy oil, making imports unattractive. And importersin China, like in India, also turn to buy palm oil in small cargoes tomeet immediate needs."This year was pretty good for palm oil because international soybeanprices were pretty expensive," said a market analyst with a Chinesecrusher. "But soy reserves are relatively high and are pressuring soy oilprices, especially because crushers have to keep their plants going forcash flow."

PALM STILL HAS THE EDGE"The ratio between the two oils can undergo a change in India dependingon freight rates and other factors like shipping time but soy can neverovertake palm oil," said Mehta.But some Indian traders say this could alter to some extent, with soyoil boosting its share to 35 percent at the expense of palm oil. Highimport tariffs on palm oils may prompt some buyers to turn to soy oil.Crude soy oil from South America and the U.S. carries a flat 45 percentduty, crude palm oil and crude palm olein, mainly from Indonesia, aretaxed at 80 percent, while RBD palm olein from Malaysia face a levy of 90percent."This fight to capture the market will go on but the bottom line willbe cost," said Atul Chaturvedi, president of Adani Exports Ltd, a leadingedible oils importer.He said soy oil was catching up because of lower duties and itspromotion as a healthy oil.Palm oil made inroads into India in early 2000 as a cheap alternativeto costlier domestic oils, before New Delhi began revising taxes toprotect local farmers.Soy oil and palm together account for more than 80 percent of theannual world edible oil trade of 40 million tonnes.India's oilseeds output has been stagnant for the last 10 years. BothIndia and China have been trying to boost domestic edible oil output buthave achieved little success."India will not be self-sufficient in oils in the next 20 years andtalks of crop diversification to boost oilseeds output have remained onlyon the table," said a commodities analyst."As such the fight to grab a larger share of the edible oil cake willcontinue."