Palm oil rises

Malaysian palm oil futures rose in light trade on Friday to post their first weekly gain in three as the ringgit continued to retreat, but caution over Indonesia's new palm export levies kept prices in a tight trading band. The September palm oil contract on the Bursa Malaysia Derivatives exchange was up 0.6 percent at 2,278 ringgit ($604.89) a tonne by the close after trading in a range between 2,254 and 2,280 ringgit.
Weakness in the ringgit, which benchmark palm is priced in, has helped to lift the tropical oil 1.8 percent this week. "Investors are still looking at the ringgit factor, as well as how the US soybean planting is progressing - it's an important period now," said a trader with a foreign commodities brokerage in Malaysia. "People are waiting ... That's why the market is heading nowhere. It's trying to play around 2,250-2,300 ringgit," the trader added.
Soybean planting is behind in several key areas in the United States' main grain belt. A drop in the volume of soybeans available for crushing into soyoil could channel demand into palm oil, a common food and fuel substitute. Total traded volume on Friday was thin at only 21,463 lots of 25 tonnes each, compared to the usual 35,000 lots. Indonesia, the top global palm producer, released a report on Thursday detailing levy rates for a range of palm products, including biodiesel, expected to take effect from July.
A levy of between $10 and $50 per tonne will be collected if palm prices fall below an export tax threshold of $750 a tonne, government officials have said. The levy will not be payable if prices rise above $750, at which point export taxes of 7.5 to 22.5 percent kick in. Further details are expected next month. "We are of the view that the lower levy for refined palm products and biodiesel ($20-30 per tonne) against the CPO export levy of $50 per tonne will improve the processing margins for downstream processors," said Ivy Ng, regional head of plantations research at CIMB Investment Bank.
But palm oil producers may be hurt in the short term as Indonesian CPO prices may fall to reflect the levy, Ng said. In other vegetable oil markets, the US July soyoil contract was flat in late Asian trade, while the most active January soybean oil contract on the Dalian Commodity Exchange was down 1.3 percent.