Published August 19, 2008

India asks to defer 100,000t crude palm oil trade

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(KUALA LUMPUR) Indian palm oil importers have asked Malaysian and Indonesian producers to defer up to 100,000 tonnes of crude palm oil meant for August delivery to September and October, Indian traders said yesterday.

India, the second largest vegetable oil buyer in the world, has been defaulting on purchases in the last two to three weeks as a result of plummeting prices and traders warn there may be more defaults or deferments in the days to come.

'Refiners will suffer significant cash-flow problems if they take delivery of the crude palm oil shipments at higher prices agreed earlier especially when current market rates are so much lower,' a leading trader from Mumbai told Reuters by telephone. Another Mumbai trader said that deferring shipments of palm oil will give Indian refiners more breathing space as prices of the vegetable oil are widely expected to recover in the next few months.

Malaysian crude palm oil futures fell 1.8 per cent by midday yesterday to hit a one-year low, despite firmer commodity prices, on talk that Asia buyers will continue to default on cargoes.

Palm oil prices have slid 20.2 per cent this year and have nearly halved from their March peak on a knock-out combination of high stocks, news of defaults from China and India as well as weak commodity markets.



Some traders said that deferments were more likely than defaults in the South Asian nation in the coming days as palm oil cargoes could still be locked in while refiners take immediate advantage of cheaper domestic oilseed prices and better crops.

'The festival season is coming up but it will not be such a strain because of the rising domestic soybean crop and cheap prices,' said an Indian trader.

Solvent Extractors' Association of India President Ashok Sethia earlier told Reuters that soybean output will be 10 million tonnes in 2008, from 9.3 million tonnes in 2007.

India imports almost half of its annual consumption of about 11 million tonnes of vegetable oils in the form of palm oil from Malaysia and Indonesia and soyoil from Brazil and Argentina. -- Reuters