Indonesian palm oil prices were higher on Wednesday, tracking gains in the Malaysian market, but a government move to lower local cooking oil prices continued to dampen trading interest. In Jakarta, the state marketing centre sold 2,000 tonnes of crude palm oil at 6,727 rupiah ($0.764) a kg, up from 6,642 rupiah last week on demand from refiners.
The centre, which sells palm oil from state plantations, failed to sell 1,500 tonnes of crude palm oil on Tuesday due to low bids. The centre will close for the rest of the week because of national holidays. Auctions will resume on May 21. At a local auction in North Sumatra's median, crude palm oil sold at 6,787 rupiah a kg, slightly up from 6,778 on Tuesday.
Some 750 tonnes of crude palm oil were sold in the auction. Traders said refiners have reduced crude palm oil consumption in line with government instructions to lower local cooking oil prices. "Prices are still within range because demand from refiners has been slowing in the past days," said a trader in Median, the main for port for palm oil exports.
"Crude palm oil is currently more expensive than cooking oil. So market operation for cooking oil is not profitable," he said. Malaysian crude palm oil futures closed 1.2 percent higher
on Wednesday, supported by strong soyaoil prices and fresh buying. Cooking oil was unchanged at 6,100 rupiah from the previous day in line with the government's instructions for producers to lower domestic cooking oil prices. "We can't go into full production because we may suffer losses. The amount of cooking oil purchased is also limited," said a trader in Jakarta.
The government is reviewing the possibility of raising export duty for palm oil products as a last resort if the current programme fails to lower cooking oil prices.
Cooking oil is a staple and any rise in its price is politically sensitive. Crude palm oil producers had committed to releasing up to 150,000 tonnes of cooking oil to the market to lower the soaring retail prices to a range of 6,500 to 6,800 rupiah.
Crude palm oil is currently subject to a 1.5- percent export tax while other palm oil products, including cooking oil, are subject to 0.3 percent export tax. In the export market, crude palm oil for June shipment was offered at $735 a tonne, up from $725 on Tuesday, free on board Begawan. Buyers did not bid.
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