Palm oil falls to over six-week low on India tax hike

Malaysian palm oil futures declined on Wednesday evening, as traders feared the prospect of cancelled shipments to India and after forecasts made at an industry conference in Kuala Lumpur. The benchmark palm oil contract for May delivery on the Bursa Malaysia Derivatives Exchange was down 1.4 percent at 2,443 ringgit ($625.93) per tonne by the close of trade.
Trading volumes stood at 33,814 lots of 25 tonnes each at the end of the trading day. The vegetable oil earlier traded within a narrow price range, with industry participants eyeing forecasts from a two-day palm industry conference, a trader in Kuala Lumpur said. Leading industry analyst Dorab Mistry said on Tuesday he expects Malaysian palm oil futures to climb to 2,700 ringgit a tonne by June, up nearly 10 percent from now.
Malaysian crude palm oil futures are seen rising to 2,600 ringgit a tonne before falling back to 2,300 ringgit by July, said analyst James Fry. Meanwhile, analyst Thomas Mielke said on Wednesday he expects Indonesian crude palm oil prices to average $630 a tonne from April to September, below current levels.
The two countries count for nearly 90 percent of global palm oil output. Malaysia's benchmark contract in Malaysia was hovering not far off Monday's one-month low, which followed India's decision to raise the import tax on palm oil to the highest level in more than a decade. Buyers in India, the world's top vegetable oil importer, are now seeking to cancel up to 100,000 tonnes of crude palm oil cargoes due to the higher costs of imports, according to three trade sources.
India tax import policy would have big short-term impact on palm demand, the Kuala Lumpur-based trader said, but he expected demand to be supported by China. "China is pointing toward higher demand for soyabeans, which would benefit our palm oil," the trader said. Another trader added overall market sentiment was weak, and which weighed on prices in the second half of trade.
Palm oil prices are affected by movements in rival edible oils as they compete for a share in the global vegetable oils market. The Chicago Board of Trade's May soyabean oil contract was down 0.5 percent, while the May soyabean oil on China's Dalian Commodity Exchange fell 1.5 percent. From a technical viewpoint, a break below 2,471 ringgit could cause a loss to 2,418-2,448 ringgit, said Wang Tao, a Reuters market analyst for commodities and energy technicals.