FCPO Related News

KUALA LUMPUR, Oct 11 (Reuters) - Malaysia has approved a plan to cut crude palm oil (CPO) export taxes from 23 percent per tonne, a government official said on Thursday, as the world's No.2 producer tries to grab market share from top producer Indonesia. Malaysia's cabinet will discuss the size of the cut in CPO export taxes on Friday, the commodities ministry official said. Commodities Minister Bernard Dompok has proposed for duties to be cut to 8-10 percent.

"There may or may not be a decision but the government is actively working on it. It will be a key focus of discussion for tomorrow," said the official, who declined to be named because he is not authorised to speak to the media. The cut may boost Malaysia's crude palm oil exports and give short-term support to prices that have lost 22 percent so far this year as a slowdown in shipments has led to a rise in inventories.

Malaysia's palm oil stocks hit a record of nearly 2.5 million tonnes last month as output reached an all time high and export growth slowed considerably, piling pressure on the government to act to prop up prices. Slower Malaysian exports were due mostly to competing Indonesian processors offering cheaper refined palm oil cargoes after Jakarta cut its own export taxes for processed grade last year to boost margins and lure investment.

Overnight weakness in CBOT soyoil futures amid expectations the USDA will raise its soy harvest estimate may weigh on BMD CPO futures. "We think October inventory should be higher, rising to another record of 2.6 million to 2.8 million tons before declining in November," when peak production cycle tapers off, says Kenanga Investment plantation analyst Alan Lim Seong Chun; but he notes palm oil's wide price discount to rival soyoil could lend support and underpin prices.

Crude palm oil futures on Malaysia’s derivatives exchange on Wednesday continued to rally from a two-year low hit a week ago, mirroring gains in CBOT soyoil. The benchmark December contract at Bursa Malaysia Derivatives ended up 0.8% at 2,457 ringgit a metric ton after rising as much as 1.8% to MYR2,483/ton, the highest level since Oct. 1.

The benchmark has risen in five of the last six trading days after bottoming out at MYR2,230/ton last Wednesday. Palm oil plunged to a three-year low last week of MYR2,230 a metric ton, weighed by concern about contract renegotiations and cargo defaults at a time when global vegetable oil supplies are rising due to seasonally higher production in Southeast Asia and the fast pace of the harvest of the U.S. Midwest soy crop.

Last week’s decline reflected tepid export demand amid rising global vegetable oil supplies due to seasonally higher production in Southeast Asia and fast-paced harvesting of soybeans in the U.S. Midwest. The rally has been on the back of technical-driven buying interest and expectations of a revision to Malaysia’s system of export taxes on CPO. 

[ Dow Jones Newswire ]

Palm oil stock levels at the end of September rose 17% from the previous month to a record high of 2.48 million tons, the Malaysian Palm Oil Board said Wednesday in a monthly report. This was on the high end of estimates ranging from 2.43 million to 2.50 million tons by industry executives and analysts. As the forecast was "flagged well in advance," prices were relatively resiliant, a trading head at a Kuala Lumpur-based brokerage said. Benchmark December CPO started moving  up yesterday  to reach the day’s high of  2,483 after MPOB data was revealed to be within expectations. A rise in stocks higher than expectation would have added more selling pressure while a lower than expectation stock would likely push palm oil price upward. Investors await a monthly crop report from the U.S. Department of Agriculture, due Thursday.

Palm oil prices will likely edge higher next year, as inventories could be drawn down when the peak production season in Southeast Asia tapers off, analysts at Nomura equity research said. "We don’t believe a significant amount of demand destruction for palm oil will take place," said analyst Tanuj Shori, who expects Chinese and Indian refiners to switch to palm oil due to a wide price gap between palm and soyoil. Technical analysis showed palm oil is expected to end its rebound at or below 2,503 ringgit per tonne, and fall towards 2,230 thereafter, Reuters market analyst Wang Tao said.

Today’s Support and Resistance is located around 2,420 and 2,500 respectively.