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.