KUALA LUMPUR: Malaysia, the world's second-largest palm producer, on Friday said it will extend tax exemptions on crude palm oil (CPO) exports to a fourth straight month in April, a move aimed at cutting inventories and propping up prices.
"The export duty exemption will be lifted earlier if palm oil stocks fall to 1.6 million tonnes," the ministry of plantation industries and commodities said in a statement.
Benchmark palm oil prices rose more than 1 percent to a five-week high following the announcement.
Continuing the tax exemption should shore up support from palm oil smallholders, also known as settlers, in the lead-up to the national elections, traders said.
"March exports were good, and the government may want to do it again to reduce stocks," said a Kuala Lumpur-based trader. "This will increase prices before the elections and gain confidence from settlers."
Prime Minister Najib Razak earlier on Friday announced the dissolution of parliament, paving the way for an election which will see him face off against his old mentor former prime minister Mahathir Mohamad.
Malaysia's election commission is expected to meet in the coming days to decide on the candidate nomination and polling dates. Polling must be held within 60 days of the dissolution of parliament.
Palm oil smallholders are a key vote bank for Najib, accounting for the majority of voters in nearly a quarter of the national assembly's 222 seats.
The ministry first suspended export taxes at the start of the year for three months to support CPO prices by boosting demand and reducing stockpiles.
It was expected to have ended on Saturday and the Malaysian government said last month that it was setting its April CPO export tax at 5 percent.
Malaysian palm oil stockpiles stood at 2.48 million tonnes at end-February, down 2.9 percent from the previous month and are forecast to slip further to 2.27 million tonnes at end-March, the lowest in five months.
The Malaysian Palm Oil Board, the industry regulator, will release the next inventory data on April 10.
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