Palm slides on Indonesia biofuel allocation uncertainty, export tax

KUALA LUMPUR: Malaysian palm oil futures fell for a third session on Thursday, weighed by continued uncertainty surrounding Indonesia’s biodiesel mandate allocation details and expectations of lower export taxes.

The benchmark palm oil contract for July delivery on the Bursa Malaysia Derivatives Exchange slid 29 ringgit, or 0.65%, to 4,409 ringgit ($1,123.03) a metric ton by the midday break.

Several key issues under the biofuel blending programme, which includes 50% palm oil-based fuel announced in April and set to be launched on July 1, have remained unclear, said Anilkumar Bagani, commodity research head at Sunvin Group, a Mumbai-based brokerage.

This includes allocations for subsidised and unsubsidized participants and the total volume involved, which will determine the additional palm oil consumption for biofuels.

The likelihood of Indonesian palm oil export taxes easing in June also pressured prices, Bagani said.

“There is also talk of India raising its edible oil import taxes to curb the outflow of the U.S dollar,” he said.

Indian Prime Minister Narendra Modi last week called on families to reduce cooking oil consumption, as a surge in global energy prices in the wake of the Iran war puts pressure on the country’s foreign exchange reserves.

Dalian’s most-active soyoil contract fell 0.08%, while its palm oil contract shed 0.98%. Soyoil prices on the Chicago Board of Trade were up 0.16%.

Palm oil tracks the price movements of rival edible oils, as it competes for a share of the global vegetable oils market.

Oil prices rose, with markets focusing on the high-stakes meeting between U.S. President Donald Trump and Chinese President Xi Jinping.

Stronger crude oil futures make palm a more attractive option for biodiesel feedstock.

The ringgit, palm’s currency of trade, strengthened 0.05% against the dollar, making the commodity more expensive for buyers holding foreign currencies.