MARKET DEVELOPMENT
09-10-2001
Ivan Wong comments on Malaysian palm oil
KUALA LUMPUR, Oct 5 (Reuters) - Partial actual data available indicatesCPO output rose 113,000 tonnes or 11.6 percent to an estimated 1.09million tonnes in September. Weather conditions were beneficial for bothcrop development and harvesting operations. Output continued to be strongin East Malaysia but appeared to be tapering off in most producing areasin Peninsular Malaysia. On a year-on-year basis, production declined twopercent. This represents a trend reversal after 12 consecutive months ofexpansion. In the 12 months to August this year, production surged 25percent to a record 13.3 million tonnes.Palm oil exports, in sharp contrast, plunged 215,000 tonnes to anestimated 665,000 tonnes in September from 880,000 tonnes in the previousmonth. They also fell considerably by 126,000 tonnes from a year earlier,a sharp turnaround from 11 consecutive months of growth since October lastyear. The dismal month-on-month performance reflected significant cutbacksin offtake by several major buyers, namely Pakistan, India and theEuropean Union (EU). Malaysia's palm oil export performance to India hasdeteriorated rapidly in recent months. Shipments to India this yearreached a high of 243,000 tonnes in March. The following six monthsshipments averaged around 143,000 tonnes a month. The estimated shipmentof 80,000 tonnes in September to India is the lowest recorded this yearand 56 percent lower than the same month last year. On an annual basis,shipments to India had contracted 31,000 tonnes in the second-quarter andaround 35,000 tonnes in the third-quarter.The outlook for the last three months is likely to be much lower than the666,000 tonnes taken in the last quarter of last year. While palm oilexporters can contend with a 1.2 million tonnes rise in Indian oilseedharvest in the next two months, they are frustrated in their efforts tocompete on an equal footing with soybean oil (SBO) imports which hadsurged sharply to 312,000 tonnes in August from an average of 130,000tonnes a month in the preceding four months and 126,000 tonnes a yearearlier. India created a tough barrier for palm oil in March when itraised import duties steeply on CPO to 75 percent and RBD Olein to 92.4percent but favoured SBO with much lower duties of 45 percent for crudeand 50.8 percent for refined. This barrier was further raised on August 3when it introduced "tariff values" for the computation of import duties.This apply only to palm oil and not other oils which continue to payduties on the basis of "invoice or transected value". Soon afterannouncing tariff values of $335 for CPO, $372 for RBD Olein and $351 forRBD palm oil, officials from the Central Board of Excise and Customsclarified that the values were determined on the basis of averageinternational price in recent weeks and that they would be revisedaccordingly should there be any marked or significant changes in price.From what we can establish, the tariff values on August 3 were based onprice during July 16-27. Nearby price for CPO (CIF Rotterdam) and RBFD Oln(FOB Peninsular Malaysia) hit a high of $390 and $380 respectively inearly August. Since then they had fallen sharply by 30-35 percent to aslow as $272.5 and $245 respectively this week. We tried to determine thetariff values on the basis of sellers price during September 17-28 andcame out with $268 for CPO and $297 for RBD Oln. They representsignificant declines of $67 (20 percent) and $76 (20 percent) respectivelyfrom the August 3 values. These latest values would effectively lower theduties payable on CPO and RBD Oln by some $50 and $69 per tonrespectively. By ignoring the market changes in price and maintaining theAugust 3 values, the Indian government has effectively raised importduties on CPO and RBD Oln to 94 percent and 116 percent respetively. Suchintransigence or utter disregard on the part of the Indian authorities canbe construed as the adoption of minimum customes values targeted solely atpalm oil to make it near impossible for its importantion. India is amajor factor in the contraction of Malaysia's palm oil exports and theresulting jump in palm oil stocks form 878,000 tonnes at end August to1.17 million tonnes at end September and possibly above 1.3 million tonnesat the end of this month.
