Indonesian palm oil softened on Wednesday, mirroring losses in Malaysia's crude palm oil futures and on vigorous government efforts to control cooking oil prices. At the state marketing centre, which sells crude palm oil from state plantations in Jakarta, crude palm oil traded at 7,001 rupiah ($0.771) a kilo, down from 7,205 rupiah on Tuesday.
In North Sumatra's Medan, the leading port for palm oil exports, crude palm oil traded at 6,920 rupiah, down more than 4 percent from 7,251 on Tuesday, with 500 tonnes changing hands. "The fall in Malaysian palm oil futures had a great impact on our prices besides the government pressure to lower crude palm oil prices," said a trader in Medan.
Malaysian crude palm oil futures tumbled more than 6 percent by the midday break, pulled down by the exchange regulator's new measures to curb speculative trading. Bursa Malaysia Derivatives Exchange raised gross margin rates on all contracts, prompting concern among traders that new measures will make hedging more expensive.
The Indonesian government has mulled various plans to curb rising cooking oil prices, which have been boosted by sky-rocketing global crude palm oil prices.
It is considering raising the export tax to 6.5 percent and making it mandatory for palm oil producers to sell part of their output in the domestic market as a condition for export permits. Cooking oil in Jakarta traded at 7,800 rupiah, against 7,800-7,850 on Tuesday. Cooking oil is a staple and rising prices would be likely to ignite inflationary pressure.
In the export market, the plunge in the neighbouring country's palm oil market deterred players as they waited for steady prices. "Prices are falling and, to avoid losses, buyers prefer to retreat," said a trader in Jakarta.
Sellers offered crude palm oil for June shipment at $710 a tonne free on board Belawan, down nearly 6 percent from $755 a tonne on Tuesday, but buyers did not make bids. Shipments in July were offered at $700, down nearly 7 percent from $752.5 on Tuesday, but buyers did not make bids.
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