Palm oil prices sink as India turns to soyoil

Palm oil prices sink as India turns to soyoil

KUALA LUMPUR (Reuter): Palm oil prices, which surged to nine- year highs this week on talk of Indian demand, tumbled after New Delhi turned to soybean oil imports for the first time in many years, regional traders said yesterday.

The drop came after traders in Buenos Aires said on Thursday that Argentina had shipped 15,000 tons of soybean oil to India, priced at $679 a ton.

"This is bad news for palm oil," one Singapore trader said. "I think India may continue buying soybean oil, which is cheaper than palm oil."

Malaysia is the world's top grower of palm oil, which along with soybean oil, is a major component of the world's multi- billion dollar edible oils and fats market.

Traders said the Indian buyer for the Argentine oil was the National Dairy Development Board (NDDB), which has yet to utilize some 50,000 tons of palm oil import quota.

Another trader said: "The NDDB has been instructed by the government to import soybean oil mainly for two reasons.

"Firstly, it needs to bring local edible oil prices down to help cap inflation, and secondly, it wants to send a message to the palm oil market that India doesn't have to buy palm oil."

The trader said he heard the NDDB took up to 30,000 tons of soybean oil.

By midday yesterday, local palm oil futures prices fell by up to 22 ringgit (US$8.60) with November futures falling 14 ringgit ($5.47) to 1,378 ringgit ($539) a ton from Thursday's close.

Overnight prices had reached their highest levels since 1985 on talk of fresh buying interest by India and other major consumers.

Origin

A trader in Singapore said he heard the Indian-bound soybean oil was of U.S. origin and not Argentine origin.

Depending on the origin, palm olein, a product of palm oil used in frying and other cooking purposes, is trading at between $55 and $75 a ton less than soybean oil.

Until recently, India was a major palm oil importer because of low domestic output and rising demand for the Dussehra and Diwali festivals, which are in mid-October and early November.

But soaring palm oil prices prompted New Delhi to allow imports of edible oils other than palm oil. India mainly produces soybean, groundnut, mustard and sunflower oils.

Traders said New Delhi recently agreed to allow imports of 200,000 tons of edible oils such as soybean oil and rapeseed oil.

A palm oil trader at a major Singapore firm said the Indian soybean oil imports also coincided with the Indian winter.

"The Indians can use soyoil during winter as it does not easily cloud compared to palm olein," the trader said.

But some traders said last week they doubt whether India would actually import soybean oil.

"India is unlikely to buy more palm olein but it won't buy soybean oil either," said a trader at a U.S. firm.