According to traders, there have been huge defaults by several edible oil traders in India, Pakistan and China causing massive payment crisis and the resultant panic in the edible oils trade. Some importers have dishonoured their commitments using technicalities like objection on letters of credit.

Payments for over 70,000 tonnes of contracted edible oils in these countries, valued for over Rs 150 crore, are said to be hanging fire, traders said. In the global markets, soyabean price fell to its 23-year low of $450 per tonne. Soya oil prices fell to 17 cents per pound, a nine year low. These had a tremendous impact in the domestic market. Groundnut oil prices plunged by around 32 per cent to Rs 400 per 10 kg from around Rs 590 in September last year. Palmolein prices have pierced the Rs300 per 10 kg mark and are currently quoting at Rs 290. In June last palmolein was quoted at Rs 380 per kg a decline of 28-30%.

The cotton wash oil fell to Rs 275 per 10 kg from the season's peak of Rs 430 per 10 kg. Rapeseed oil is down to Rs 275 per 10 kg from the peak of Rs 365 in January last. It was quoted at Rs 460 per 10 kg in the October 1998.Oilseed arrivals are expected to increase in the coming months. Mustard oil prices could fall below Rs 250 per 10 kg. Among imported edible oils, soya oil fell to Rs 275 from Rs 395, imported rapeseed oil has lost over Rs 100 to to Rs 280 per 10 kg, sunflower oil fell to Rs 265 from Rs 350 per 10 kg.

Brazil's depreciating currency, real, however, holds the key. It was quoted at $2.07-09 on last Friday. If it depreciates further, it will add to the woes of the edible oil traders, feel analysts. "There are defaults for around 30,000 tonne of palm oil shipments of February-March from Indian importers," said a leading edible oil trader. "Their Pakistanicounterparts too have defaulted on payments for around 15,000-tonnes" Some Chinese traders too have defaulted but they are said to be in soft oils. More defaults could be in store as prices in global markets are still falling. Since the buyers have defaulted in contracts, the sellers have no choice but to sell back to the markets.

According to trade sources, a leading Swiss commodities trading firm (having its Indian trading arm in Mumbai) has suffered sizable loss in edible oils in Indian operations, following the deferment/defaults of some of its clients, including one for 4,000 tonnes of soft oils.

The firm is said to have sought arbitration with a leading Ahmedabad based importer. Several similar disputes are likely to follow. Traders say the crisis could have been avoided if futures and hedging facilities were available for the importers. According to Bombay Oilseeds and Oils Exchange president Navinchandra Shah, there is an urgent need for futures for palmolein which is a major edible oil imported."If permitted, it will help them to hedge their price risk,'' he added. Lastly, said the Solvent Extractors' Association (SEA) of India executive director BV Mehta: ``In the past years, the imports of palm oil and soft oils were in the ratio of 70:30.