24-06-2005 The Edge Daily - India, the world's top importer of edibleoils, enters a peak buying period over the next three months, but buyersare slowly beginning to turn to South American soyoil instead of Asianpalm oil.

A surplus of palm oil at ports -- as well as tonnes of uncrushed soybeansand rapeseed in warehouses -- also means India will be buying less thanusual from July to September, which precedes a string of religiousfestivals.

"Our edible oil stocks at the ports are huge because importers bought inlarge quantities in the past few months," Atul Chaturvedi, president ofNew Delhi-based oils trading house Adani Exports Ltd, told Reuters.

Importers say India may require only 1.3 million tonnes of oils in thenext three months, compared with the 1.48 million tonnes it took betweenJuly and September 2004.

Palm oil from Malaysia and Indonesia accounted for 78% of last year'sfestive demand. Brazilian and Argentine soyoil made up the balance.

But soyoil could boost its 22% share to 35% this year at the expense ofpalm oil, importers said, because Indian import tariffs on palm oil havebecome increasingly heavy, prompting larger inflows of soyoil.

Crude soyoil from Latin America lands in India at a flat duty of 45%.Crude palm oil and crude palm olein, mainly from Indonesia, are taxed at80%, while RBD palm olein from Malaysia faces a levy of 90%.

Latest export data from Malaysia show the world's top palm oil producerproviding less than 70,000 tonnes a month to India, compared with about200,00 tonnes three years ago.

Palm oil made inroads into India in early 2000 as a cheap alternative tocostlier domestic oils, before New Delhi began revising taxes to protectlocal farmers. It is still a favourite among commercial foodmakers andlow-income earners in India.

"The way Indian taxes have stacked up against palm oil, it's amazing thatit still has a dominant share in that market," said a palm oil exporter inMalaysia's capital Kuala Lumpur.

"But I don't think it'll have stranglehold for long, with the way soyoilis competing."

Soyoil futures on the Chicago Board of Trade have spiked over the lastweek, pulling along Malaysian palm oil futures.

But Argentine soyoil has bucked the uptrend, selling about US$80 (RM304) atonne below US prices, traders said.

Free-on-board (FOB) crude degummed soyoil from Argentina for July throughSeptember was quoted on Friday at US$459-US$464 a tonne. The FOB price forthe nearest competing Malaysian product, RBD palm olein, was US$410 atonne.

"Palm oil used to have a discount of US$80 to US$100 a tonne against soya.Now it's just between US$40 and US$50," said another exporter in KualaLumpur.

Indonesia hopes a recent weakening of its currency will boost exports andkeeps its competitive edge against rival Malaysia.

The rupiah, one of Asia's worst performing currencies this year, hasfallen 3.75% against the dollar this year.

"The rupiah has put extra pressure on us to export palm oil, butunfortunately demand is not strong at the moment," said an oils trader inthe capital, Jakarta.

Indonesian crude palm oil for July through September is offered atUS$377.50 a tonne FOB, against Malaysia's US$380.26.

Indonesia hopes to export 9 million tonnes of palm oil this year, up from8.6 million tonnes in 2004.

"India is slowly smelling around," said a Jakarta trader. "They're sendingmixed signals." - Reuters