Palm hits near 2-month low as India raises import tax on edible oils

SINGAPORE: Malaysian palm oil futures on Monday fell to their lowest in nearly two months as sentiment took a hit from India's move to raise import tax of edible oils to the highest in over a decade.

India, the world's largest importer of edible oils, said it would raise its import tax on crude palm oil to 30 percent from 15 percent, and increase the import tax on refined palm oil imports to 40 percent from 25 percent.

Weaker export data from a cargo surveyor and a stronger ringgit, palm's currency of trade, also weighed on the market, added traders.

Gains in the ringgit usually make the edible oil more expensive for foreign buyers. The ringgit rose to 4.1530 against the dollar in early trade on Monday, its strongest levels in over a year. It was last up 0.1 percent at 4.1550 per dollar.

The benchmark palm oil contract for February delivery on the Bursa Malaysia Derivatives Exchange dropped 1.9 percent at 2,662 ringgit ($640.67) a tonne at the midday break.

Earlier in the session, it touched 2,660 ringgit, its weakest since Oct. 3.

Traded volume stood at 22,121 lots of 25 tonnes each at noon.

"The market reacted largely to India's import tax hike, which is quite steep, and then the ringgit also caused a downside," said a futures trader from Kuala Lumpur.

Palm oil shipments from Malaysia between Nov. 1-20 fell 6.2 percent versus the corresponding period last month, according to data from cargo surveyor Intertek Testing Services before the market's midday break.

In other related edible oils, the December soybean oil contract on the Chicago Board of Trade was down as much as 0.9 percent, while the January soybean oil contract on the Dalian Commodity Exchange fell up to 1.6 percent.

The January palm olein contract slid as much as 1.1 percent.

Palm oil prices are impacted by movements in other edible oils as they compete for a share of the global vegetable oils market.