Malaysia has raised the amount of crude palm oil (CPO) that can be exported tax-free this year in a bid to reduce mounting stocks and support domestic prices, its commodities minister said on Thursday.
Malaysia, the world's largest palm oil producer, normally allows 10 percent of its annual production to be exported tax-free.
The new figure was not disclosed but sources close to the government said the increase was minimal.
It is projected to produce 13.45 million tonnes of palm oil this year, up 0.7 percent from 13.36 million tonnes in 2003. "I have just approved additional (allocation)," Commodities Minister Peter Chin said on the sidelines of an edible oil conference.
Chin declined to elaborate but sources close to the government said the rise was minimal. "It's not that much. It won't go beyond 1.5 million tonnes," said one source. Break, the third-month palm oil contract on the Malaysia Derivatives Exchange, December, was two ringgit higher at 1,408 ringgit ($370.53) a tonne.
The contract has fallen from a high of 1,420 ringgit seen this week due to worries over stocks. Malaysia imposes an export tax on CPO to ensure supplies for local refiners, which are heavily dependent on local output.
The tax starts at 10 percent on prices above 650 ringgit ($171) a tonne. Malaysia's palm oil exports are mostly in refined products such as RBD palm oil and palm olein. But dealers said worries of rising stocks and the prospect of slower demand from big consumers in coming months had put pressure on Malaysia's crude palm oil futures.
Private forecaster Ivan Wong has estimated palm oil production of up to 1.42 million tonnes in September, up from 1.32 million tonnes in August.