Soft oils erode palm oil's Asia market

Soft oils erode palm oil's Asia market

SINGAPORE (Reuters): Growing soft oil imports from Brazil,
Argentina and the United States are slowly but steadily eroding
the share of palm oil in Asia's growing market for vegetable
oils, traders and commodity analysts said on Tuesday.

Imports of soft oils by Asia's three leading edible oil
importers -- India, China and Pakistan -- are on the rise because
the price differential between soft oils and palm oil has
narrowed in recent years, they said.

Traders said surging soybean and sunflower output and a steep
rise in crushing capacity in the U.S., Argentina and Brazil have
badly hit crushing margins, forcing them to sell their produce in
the leading Asian markets.

"With African and European markets being saturated, American
exporters are trying hard to increase their presence in Asia and
take advantage of its growing appetite for edible oils," said a
leading Singapore vegetable oil trader.

"They have to sell their produce somewhere. Their crushing
margins are very bad now," the trader said.

Industry officials said demand for edible oils in India, China
and Pakistan, who together account for more than 70 percent of
Asia's oil imports, is growing at an average rate of about 10
percent a year.

"If you look at the figures, two years ago the ratio of palm
oil to soft oils imports in Asia was about 80:20. Now it is about
65:35 percent," said a leading industry official.

"Soft oils were about $80 per ton costlier than palm olein in
the global markets two years back. Now the price differential is
about $10 to $20 per ton only," the official added.

Currently, refined RBD palm oil is quoted at about $295 per
ton for August and September in the international market while
soft oils are being traded at about $300 to $305 per ton, traders
said.

To add to the woes of Asia's leading palm oil suppliers --
Malaysia and Indonesia -- governments in the importing Asian
nations are encouraging raw material imports.

"Because of this, countries like China are finding it easier
and cheaper to bring in oilseeds from Brazil and Argentina
instead of importing oils," said one Singapore trader.

India, the world's leading importer of edible oils, in June
raised import duties on edible oils, taking the effective duty on
RBD palm olein and refined vegetable oils to 44 percent and for
crude oils to 27.5 percent.

China is importing huge quantities of soybeans and was
expecting its domestic harvest from October, which was keeping a
lid on palm oil imports from Malaysia.

"If you observe these trends, it works out to substantial use
of soft oils. In India, with disposable incomes growing fast,
there is a gradual shift towards soft oils from palm olein as far
as the affluent class is concerned," said one Indian trader.

Commodity analysts said they expected demand for soft oils to
rise. The potential for increased oil seeds production in Asia is
limited and soft oils offer some more flexibility than palm oil.
"As far as business is concerned, soft oils are increasingly
preferred in countries such as India because they do not freeze
during the winter unlike palm olein," said a leading Indian
analyst.

"I will not be surprised if the ratio between palm oil and
soft oils become 50:50 in the next one year," the analyst said.