AVOC contract on palm oil approved
AVOC contract on palm oil approved
MANILA (Reuter): The ASEAN Vegetable Oil Club's (AVOC) common contract in the trading of palm, palm kernel and coconut oil is slowly winning acceptance in the world market, the group's chairman said yesterday.
AVOC, which groups Indonesia, Malaysia and the Philippines, introduced the contract last November and fueled fears among U.S. and European buyers that it was the first step toward forming a suppliers' bloc in the sale and trade of vegetable oils.
"They may have been alarmed at first, but they saw there was nothing wrong about it. The buyers have accepted the contract," Jesus Arranza, the chairman of AVOC, told Reuters in an interview.
"There are some who resist the contract, but the complaints have been minimal," he said. Most buyers were more concerned about a reliable supply of high-quality vegetable oil and stable prices, he said.
Most trading in palmoil and coconut oil is currently conducted under uniform contracts drafted by the London-based Federation of Oils, Seeds and Fats Association Ltd. (FOSFA) and the U.S. National Institute of Oilseeds Products (NIOP).
Arranza said FOSFA had proposed a meeting with AVOC on some objections it has raised over the contract, but AVOC declined the offer for the moment, he said.
FOSFA objections include questions about the quality of the oils, the shipping terms, the loading rates, release of bills of lading, and the payment clause among others.
"The contract is concerned with the requirements of the seller which are paramount and in many respects does not address the practical problems of the buyer and the ship. It gives sellers an unfair advantage over buyers," FOSFA chief executive Derick Reffold said in a letter to Arranza last year.
But AVOC dismissed the objections in a meeting last year and proceeded with implementation of the contract.
AVOC is also poised to expand shortly by accepting Vietnam as its newest member, which has expanded the areas it plants to both palm and coconut trees, Arranza said.
"We understand Vietnam is contemplating coming in. With the coming in of Vietnam, you have 90 plus percent of the supply of palm oil and coconut oil in the world," he said.
The trade and sale of palm, palm kernel and coconut oil is a multibillion dollar industry. The two products are used extensively in items like soap, cooking oil, detergent and as additives to food.
Demand for vegetable oils is predicted to surge because of strong demand from China and India, traders said.
AVOC's work in promoting joint marketing and research is aimed at ensuring that the group would benefit from the expansion of the vegetable oil market.
"AVOC is shaping up. We are pursuing cooperative marketing to come up with common vessels and the standardization of our products," Arranza said.