19/02/2011 (Bloomberg) - Palm oil declined for a fourth day as importers deferred purchases on speculation that China, the biggest user, may cut tariffs to help quell inflation.

The May-delivery contract fluctuated between an advance of 1.7 percent and a loss of 1.6 percent before closing 1 percent lower at 3,684 ringgit ($1,214) a metric ton in Kuala Lumpur. The price fell 6.9 percent this week.

There’s speculation that China may cut import tariffs on cooking oils made from palm, soybeans and canola to 5 percent from 9 percent, Chen Baomin, a manager at Jilin Grain Group Co., said yesterday. China’s consumer prices increased 4.9 percent in January from a year earlier.

“People may view this positively in the sense that it may be cheaper now to import,” Ivy Ng, an analyst at CIMB Investment Bank Bhd., said by phone in Kuala Lumpur. Still, “if people think that China is going to lower import duties, then they may not buy, and wait and see what China does next.”

Prices of oils and grains have soared over the past year as global inventories have dropped after adverse weather conditions hurt crops. Global food prices surged in January to a record, according to Food & Agriculture Organization data.

Palm oil has rallied 42 percent in the past year, touching a 35-month high of 3,967 ringgit a ton last week. Excess rain in Southeast Asia and droughts in Argentina and Brazil caused by a La Nina have hurt harvests of palm oil and soybeans, straining global oilseed stockpiles.

India Accord

Malaysia completed an economic agreement with India today that will provide its companies with greater access to the world’s second-fastest growing major economy to invest and sell products including palm oil. The South Asian nation is the top buyer of the tropical oil, which represents almost 80 percent of edible-oil shipments.

Malaysian companies, including Sime Darby Bhd. and Kuala Lumpur Kepong Bhd., will get better concessions for palm oil and palm-oil products. India will bind tariffs on refined palm oil and three related products at 45 percent by the end of 2018, International Trade and Industry Minister Mustapa Mohamed said after signing the deal in Putrajaya, outside Kuala Lumpur.

Some analysts have said that palm oil may be close to peaking. Prices, which may still touch 4,000 ringgit due to weather vagaries, may be unsustainable as they cause to a slowdown in demand, Tan Ting Min and Teddy Oetomo, analysts at Credit Suisse Group AG, said in a report yesterday.

Extreme Poverty

Global food prices have surged to dangerous levels, pushing 44 million more people into extreme poverty since June, according to the World Bank. This may lead nations to make the mistake of imposing curbs on shipments such as export bans or other tax or price controls that could exacerbate the problem, President Robert Zoellick said Feb. 16.

May-delivery soybeans fell as much as 1.7 percent to $13.93 per bushel in Chicago at 6:41 p.m. in Singapore. Soybean oil, a rival product to palm oil, dropped as much as 1.5 percent to 58.01 cents per pound.

September-delivery palm oil on the Dalian Commodity Exchange dropped 0.4 percent to close at 9,654 yuan ($1,468) a ton. Soybean oil for delivery the same month shed 0.2 percent to 10,360 yuan a ton at the close.

CME Group Inc.’s most-active June palm-oil contract, pegged to the Malaysian benchmark price, declined 2.5 percent to $1,203 a ton at 5:07 p.m. in Singapore.