Palm oil rises after Indonesia raises export tax, biodiesel use
29/08/2022 (The Edge Markets), Jakarta - Palm oil advanced after Indonesia, the world’s biggest grower, raised its export tax for the first half of September and announced an increased allocation for local biodiesel use this year.
Futures for November delivery rose as much as 2.3% to RM4,266 (US$951) a tonne before closing at RM4,176. Soybean oil, palm’s closest substitute, retreated, while Brent crude climbed for a second day on supply concerns.
Indonesia raised the export tax to US$124 a tonne, up from US$74 for the last two weeks of August, said Musdhalifah Machmud, deputy for food and agriculture at the Coordinating Ministry for Economic Affairs. It increased the crude palm oil reference price for Sept 1 to 15 to US$930.02 a tonne.
The higher export tax is supportive for palm, as it gives scope for Malaysian prices to rise as well, said Sathia Varqa, owner of Palm Oil Analytics in Singapore.
However, the gains will likely be short-lived as there’s a lack of bullish drivers, he added.
Indonesia also announced a target to lift palm-based biodiesel use to 11.03 million kiloliters, from 10.15 million kiloliters previously. The government said the increase is needed to maintain its B30 mandate, as diesel consumption will rise in the fourth quarter as the economy recovers.
The move by Indonesia aided palm prices in Kuala Lumpur, said Gnanasekar Thiagarajan, head of trading and hedging strategies at Kaleesuwari Intercontinental. Investors are also waiting for Malaysian August export data due this week, with shipments likely to climb 5% to 10% or even more, he said.