India's move to raise palm oil tariffs will boost imports of rival soyaoil, and will not slow overall purchases by the world's top edible buyer, traders said on Wednesday. On Tuesday, the government increased the import duty on palm oils by 15 percent, and reduced their base prices by a similar margin, in a move that analysts said was aimed to protect local farmers against a fall in world prices. The government sets base prices to prevent under-invoicing by some importers, and duties are collected on the base prices irrespective of what importers had paid for the oil.
Following the changes, the duty on crude palm oil, mainly bought from Indonesia and Malaysia, climbed by about $25 a tonne, traders said.
This will not immediately boost soyaoil imports because of heavy purchases made in the past few weeks, and the start of domestic oilseeds crops harvest this month, they said.
Soy and palm compete for similar export destinations. March soyaoil on the Chicago Board of Trade settled 0.35 cent lower at 19.62 cents per lb on Tuesday, with deferred contracts down 0.19 at 0.44 cent.
World prices of crude palm oil are likely to fall by about $10 tonne because of the tariff change, said Sandeep Bajoria, president of the Central Organisation for Oil Industry and Trade.
Malaysian palm oil futures fell 1 percent by midday, settling below the psychological support of 1,300 ringgit a tonne. The new benchmark third-month crude palm oil contract on Bursa Malaysia Derivatives, May, was off 15 ringgit at 1,294 ringgit ($340.53) a tonne. The low for the morning was 1,290.
Dealers had earlier expected Malaysian palm oil prices to be supported at 1,300 ringgit.
Bajoria said the cut in base prices was because of a 10 percent fall in world prices, but the government had to raise tariffs to protect farmers who were set to begin their harvest of summer oilseeds crop.
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