India's edible oil industry welcomes RI CPO ban lift

India's edible oil industry welcomes RI CPO ban lift

JAIPUR, India (Reuters): India's edible oil industry on Saturday welcomed Indonesia's decision to lift a ban on crude palm oil exports because it would mean lower prices but they said the cheaper imports would not last long.

"I expect Malaysian prices to come down by at least US$20 to $30 a ton immediately after the ban is lifted," Govindlal Patel, chairman of the Central Organization for Oil Industry and Trade (COOIT), told Reuters. "But it will be a short-term phenomenon."

"Addition of a new source to the global supplies is a very big factor. Certainly, it will ease the situation," said K.M.L. Chabbra, COOIT executive director. who is attending a two-day oil seeds seminar to forecast the summer oil seeds output.

Indonesia said on Thursday it would lift the export ban on crude palm oil by April 22 and replace it with an export tax of not more than 40 percent.

Indonesia had banned crude palm oil exports in January to stabilize domestic prices which have been soaring because of the tumbling rupiah currency.

The ban has pushed up Malaysian palm oil prices because it is the only global palm olein oil supplier after Indonesia.

Malaysian palm olein oil is currently quoted at $700 per ton (C & F) at Indian ports.

Indonesia has also said the export tax would be reviewed regularly for possible reduction based on market prices and the exchange rate, and cut to 10 percent by the end of December 1999.

Indian trade officials said the 40 percent duty imposed by Indonesia would not be a disincentive to Indonesian exporters because they would be able to export at a lower price since their stocks had accumulated after the ban.

"With stocks having piled up, Indonesian traders might reduce their prices and export," Patel said.

But industry officials said global edible oil prices would remain supported for at least six months as Malaysian palm oil output was expected to fall in 1998.

Argentina's sunflower oil output was also expected to be less because of poor weather.

"With demand growing by about 3 percent annually, a shortfall in international production will keep upward pressure on prices," Patel said.

Siva Ram Prasad, chairman of the All India Cotton Seed Crushers' Association said: "We are hearing reports the Malaysian crop will be less. If that happens, the pressure on prices will remain for a very long time. India will definitely be affected."

Indian domestic edible oil prices have risen about 22 percent since the Indonesian ban. Traders expect palm olein oil prices to ease at least 1,000 rupees ($25.30) a ton in the coming week from 32,200 at present.

India imported about 1.7 million tons of edible oil in the 1996/97 (November-October) season, out of which nearly 1.2 million tons came from Malaysia and 400,000 tons from Indonesia.

Trade officials said India's edible oil demand was constantly growing but high prices in the current season would reduce consumption and as a result, imports would fall.

"Keeping in view the trend over the past few years, import demand in the current oil season would have risen to 2.3 million tons. "But high prices will cut imports to a large extent," Patel said.

Trade officials said high Malaysian palm olein prices was forcing some Indian importers to try sunflower oil from Brazil and Argentina.

"We have contracted to import about 20,000 tons of sunflower oil from Argentina in the past few days," Patel said.