Palm oil boycott latest woe for producers

Palm oil boycott latest woe for producers

NEW DELHI (Dow Jones): Southeast Asian palm oil producers,
faced with record high stock levels and depressed prices, may yet
receive another blow.

An ongoing campaign to boycott imported palm oil in the Indian
state of Kerala is finding popular support.

Kerala consumes predominantly coconut oil, not quite palm
oil's substitute. But the campaign, once spread to other parts of
India will hurt palm oil, in favor of other vegetable oils that
are easily available, industry participants said.

"Kerala is a small state and palm oil consumption there is not
significant because it also has coconut oil. But if the campaign
spreads to other parts, it could have an impact on (palm oil)
prices," said M.R. Chandran, chief executive of the Malaysian
Palm Oil Association in Kuala Lumpur.

Crude palm oil for spot delivery was offered at 840 ringgit
(about US$220) a metric ton in Malaysia Thursday. Malaysian CPO
prices fell to a seven-year low of 785 riggit /ton late last
month, after averaging 1,451 ringgit/ton in 1999.

The "boycott-palm oil" campaign seems to be catching the fancy
of growers, traders and officials keen to support the sagging
domestic vegetable oil prices ahead of the harvesting season
beginning November.

In an opinion poll last week, www.deepika.com, the Internet
edition of a local language daily in Kerala asked its readers if
the state should boycott palm oil to boost demand for locally
produced coconut oil.

About 83 percent of the respondents said yes, while only 14%
were against. The remaining 3 percent didn't have an opinion.

The "boycott-palm oil" campaign is gaining momentum in Kerala.

Late last week, Kerala's provincial government said it was
stopping distribution of palm oil through state-run public
distribution outlets once current stocks are cleared.

Private traders have offered to stop the sale of palm oil if
the state government stopped selling it through its outlets.

A coordination council of private traders in the state has now
asked all its members to boycott palm oil. They have declared
four districts in the states "palm oil-free" from Nov. 1.

India is the largest importer of palm oil from Malaysia and
Indonesia, the two leading producers in the world.

According to cargo surveyor Intertek Testing Services, India
imported 1.66 million tons of palm oil from Malaysia during
January-October, out of Malaysia's total export of 7.63 million
tons. Pakistan, the second largest importer this year, was a
distant number two importing only about 880,000 tons.

Although independent estimates of palm oil imports from
Indonesia aren't available, Indian importers say the quantity
coming in from Indonesia is equally high.

Such large scale imports of palm oil have led to pressures
from the domestic vegetable oil producers. They have lobbied for
import taxes to be raised to help local farmers.

The move to boycott palm oil comes at a time when there is
already speculation that the Indian government is ready to raise
import taxes on vegetable oils, following the end of a long
festival season.

The government's response to demands from the local industry
to raise edible oil import taxes has been "positive," said
Sandeep Bajoria, president of the Solvent Extractors Association
of India.

In the run up to Diwali last week, the government resisted
pressure from vegetable oil farmers and traders to raise taxes as
it feared higher seasonal demand may push up prices and the
already high inflation levels.

"Experience shows that once (ministers) start speaking (in
favor of a tax increase), it happens in a month or two," says
V.K. Mohata, director of Malwa Vanaspati & Chemical Co. in
Bombay.

Indian Agriculture Minister Nitish Kumar recently told the
Parliament that higher taxes on edible oil imports were needed to
protect local oilseed growers.

During a press conference in New Delhi, Indian Food Minister
Shanta Kumar also said his ministry is examining the
effectiveness of the current import taxes on vegetable oils with
a view to raise them.

India raised vegetable oil import taxes twice over the past 12
months, but growers and traders said the current taxes are far
from sufficient.

To "check cheap imports" import taxes on refined vegetable
oils were raised to 38.5 percent from 27.5 percent June 12, 2000.
This followed another increase to 27.5 percent from 16.5 percent
Dec. 30, 1999. Also, the import tax on most crude vegetable oils
was raised to 27.5 percent from 16.5 percent June 12.

If edible oil taxes aren't raised further to support local
prices, India's oilseed output will fall in the coming seasons,
they said.

"Higher taxes are required now. Farmers are not getting
adequate prices for their produce and will become disinterested
in growing oilseeds. If that trend catches on, we will be forced
to import even more," says Bajoria of the Solvent Extractors
Association.

India's oilseed output has already fallen to 19 million metric
tons in the 1999-2000 fiscal year ended March 31, from a peak of
21 million tons in the fiscal year 1994-95, the Association said.