Malaysian palm oil futures rose for a third day on Wednesday to touch their highest level in a month, following a jump in soy markets, and as investors covered short positions after Indonesia set a palm export levy to fund biodiesel subsidies. Indonesian President Joko Widodo has signed a regulation requiring exporters to pay a levy of $50 per tonne of crude palm oil and $30 for processed palm oil product shipments, an energy ministry official said on Wednesday.
The regulation will take effect by the third week of May at the latest, the chief economic minister said. "It's a rally towards 2,200 ringgit - Indonesia has just signed the levy," said a palm trader with a local commodities brokerage in Kuala Lumpur. "There's a technical buy up ... All this is poised to push prices further to test the 2,200 ringgit."
The benchmark July contract on the Bursa Malaysia Derivatives exchange inched up 1.2 percent to 2,183 ringgit ($611.48) a tonne by the day's close. Prices briefly touched 2,200 ringgit in morning trade, their highest since April 8. Total traded volume stood at 43,791 lots of 25 tonnes each, well above the usual 35,000 lots.
Palm typically tracks soyoil, a common food and fuel substitute. The US July soyoil contract rose 0.9 percent in late Asian trade, while the most active September soybean oil contract on the Dalian Commodity Exchange gained 1.3 percent. "The market is flying - look at how soybean oil is rallying," said a second palm trader in Malaysia. "We're trying to move according to the Dalian which is very strong," the trader said, adding that a rally in Chinese palm olein prices also underpinned benchmark prices. The September contract for palm olein on the Dalian exchange had surged 2.5 percent to 5,162 yuan ($832.57) by 1010 GMT.
But rising supplies in Malaysia, the world's second-largest grower, may dent palm's rally. Inventories at end-April likely rose to a five-month high of 2.13 million tonnes, a Reuters poll showed on Wednesday, as crude palm output continued to climb and outpaced export demand.
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