Malaysian crude palm oil prices surged to a record high of 3,458 ringgit on Tuesday after Indonesia said it could increase export taxes, raising concerns about supplies. The market also took a cue from a buoyant US soyoil market, which rose to a record high in the previous session.
But late profit-taking in the soyoil market during Asian trade spilled over to palm oil, eroding gains made earlier in the day. Indonesia said on Monday that Jakarka would impose a 20 or 25 percent export tax on crude palm oil and by-products if international prices climbed to $1,200 and $1,300 a tonne.
"If prices go on as they do, the new export taxes will definitely kick in and impact the market then," said one Kuala Lumpur-based trader. Palm oil prices, up 10 percent this year, have risen on expectations of higher Chinese demand in coming months and bullish energy prices.
The benchmark April contract on the Bursa Malaysia Derivatives Exchange jumped as much as 113 ringgit, or 3.4 percent, to 3,458 ringgit ($1,072) a tonne. The contract settled up 4 ringgit at 3,349 ringgit. "Malaysian stockpiles have been rising because of a lack of demand, but the situation will change as China will be forced to buy. And the new Indonesia export measures will leave little palm oil available," said a local broker.
US soybean futures on the Chicago Board of Trade surged on Monday on fund buying, Brazilian crop concerns and spillover buying from soybean oil. But they fell during Asian trading. "Traders had a change of heart. They realise that soyoil cannot always prop up palm oil and it's best to cash in since soyoil has wiped out all its gains and more," said a trader with a foreign commodities brokerage. Spot palm oil is still relatively cheaper at $1,066 per tonne, roughly 14 percent lower than spot Argentine soyoil at $1,240 a tonne, traders said.
Shares of Malaysian palm planters have been boosted by strong palm oil prices with local broker TA Research raising its call on shares in firms like Sime Darby, IOI Corp and Kuala Lumpur Kepong to "buy".
Sime shares were flat at 12 ringgit, KL Kepong was up 0.6 percent at 18.40 ringgit and IOI rose 0.5 percent to 7.75 ringgit. The plantation index was up 4.3 percent. Traders added China had slowed its purchases recently but a looming stock drawdown after the Lunar New Year would force the world's largest edible oil consumer to buy.
Exports dwindled last month, with Intertek Testing Services and Societe Generale de Surveillance reporting declines of as much as a third to roughly 1 million tonnes. And Malaysia's January palm oil stocks are likely to rise 8.2 percent to 1.82 million tonnes, the highest in at least 25 years as exports fall sharply on record high prices, a Reuters poll showed last week.
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