India, the world's top importer of edible oils, enters a peak buying period over the next three months, but buyers are slowly beginning to turn to South American soyaoil instead of Asian palm oil. A surplus of palm oil at ports as well as tonnes of uncrushed soyabeans and repaired in warehouses also means India will be buying less than usual from July to September, which precedes a string of religious festivals.
"Our edible oil stocks at the ports are huge because importers bought in large quantities in the past few months," Atoll Chaturvedi, president of New Delhi-based oils trading house Aden Exports Ltd, told Reuters.
Importers say India may require only 1.3 million tonnes of oils in the next three months, compared with the 1.48 million tonnes it took between July and September 2004. Palm oil from Malaysia and Indonesia accounted for 78 percent of last year's festive demand.
Brazilian and Argentine soyaoil made up the balance. But soyaoil could boost its 22 percent share to 35 percent this year at the expense of palm oil, importers said, because Indian import tariffs on palm oil have become increasingly heavy, prompting larger inflows of soyaoil.
Crude soyaoil from Latin America lands in India at a flat duty of 45 percent. Crude palm oil and crude palm olein, mainly from Indonesia, are taxed at 80 percent, while RBD palm olein from Malaysia faces a levy of 90 percent.
Latest export data from Malaysia show the world's top palm oil producer providing less than 70,000 tonnes a month to India, compared with about 200,00 tonnes three years ago. Palm oil made inroads into India in 2000 as a cheap alternative to costlier domestic oils, before New Delhi began revising taxes to protect local farmers.
It is still a favourite among commercial foodmakers and low-income earners in India. "The way Indian taxes have stacked up against palm oil, it's amazing that it still has a dominant share in that market," said a palm oil exporter in Malaysia's capital Kuala Lumpur.
"But I don't think it'll have stranglehold for long, with the way soyaoil is competing."
NEIGHBOURLY RIVALRY: Soyaoil futures on the Chicago Board of Trade have spiked over the last week, pulling along Malaysian palm oil futures. But Argentine soyaoil has bucked the upturned, selling about $80 a tonne below US prices, traders said.
Free-on-board (FOB) crude degummed soyaoil from Argentina for July through September was quoted on Friday at $459-$464 a tonne. The FOB price for the nearest competing Malaysian product, RBD palm olein, was $410 a tonne.
"Palm oil used to have a discount of $80 to $100 a tonne against Soya. Now it's just between $40 and $50," said another exporter in Kuala Lumpur. Indonesia hopes a recent weakening of its currency will boost exports and keeps its competitive edge against rival Malaysia.
The rupiah, one of Asia's worst performing currencies this year, has fallen 3.75 percent against the dollar this year. "The rupiah has put extra pressure on us to export palm oil, but unfortunately demand is not strong at the moment," said an oil trader in the capital, Jakarta.
Indonesian crude palm oil for July through September is offered at $377.50 a tonne FOB, against Malaysia's $380.26. Indonesia hopes to export 9 million tonnes of palm oil this year, up from 8.6 million tonnes in 2004.
"India is slowly smelling around," said a Jakarta trader. "They're sending mixed signals."
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