Oc­to­ber CPO ex­port tax in­creased to 6.5%

> In­crease ex­pected to hit de­mand but lower out­put could sup­port prices

The Sun (Malaysia) - - SUNBIZ -

KUALA LUMPUR: An in­crease in Malaysia’s crude palm oil ex­port tax for Oc­to­ber is ex­pected to dampen al­ready weak­en­ing de­mand for the trop­i­cal oil, but likely be­low-av­er­age pro­duc­tion in com­ing months could sup­port prices.

Crude palm oil (CPO) prices have risen about 9% since July due to tight sup­plies fol­low­ing last year’s El Nino dry weather pat­tern, which dam­ages crops across South­east Asia and low­ers palm yields.

The price in­crease led the world’s No. 2 pro­ducer af­ter In­done­sia to in­crease its Oc­to­ber CPO ex­port tax to 6.5% from 5% in Septem­ber. The tax kicks in at 4.5% when a cal­cu­lated palm oil ref­er­ence price tops RM2,250 a tonne and stops at 8.5%.

“The main ques­tion now is are we able to ex­port? Ex­ports have al­ready been drop­ping and con­sumers are not buy­ing at these high lev­els,” said a trader from Kuala Lumpur, adding that the higher tax will fur­ther dampen de­mand.

“Fur­ther­more soy is show­ing signs of weak­ness. When you have com­pet­ing oils com­ing down, con­sumers have av­enues to look for al­ter­na­tives,” he added.

A nar­row­ing spread be­tween palm and its ri­val oilseed soy, which could nar­row fur­ther on grow­ing soy­bean sup­plies, makes soy­oil a more at­trac­tive choice for buy­ers.

Palm oil ship­ments for the first half of Septem­ber fell 8.7% on slow­ing de­mand from In­dia, the largest buyer of Malaysian palm oil, ac­cord­ing to cargo sur­veyor In­tertek Test­ing Ser­vices.

Traders said de­mand was ex­pected to slow in the next two months even with­out the ex­port tax hike. – Reuters

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