Malaysian crude palm oil leapt as much as 9 percent on Wednesday as oil prices held some of the previous day's surge while financial markets perked up. India's move to defer reimposing import duties on crude vegetable oil and Malaysia scrapping duties on imported fertiliser helped keep the palm market buoyant although fears of a deepening global recession later swept away some gains.
"The market realises that palm oil is getting significantly undervalued," said Morgan Stanley analyst Fordyanto Widjaja. "Even though it may take a year or so for palm to recover, production is likely to slow, going forward, and the replanting schemes by Malaysian planters should help."
Prices have plummeted nearly two-thirds from a peak in March of 4,486 ringgit on ballooning stocks and slow shipments. The benchmark January contract rose as much as 145 ringgit to 1,723 ringgit ($489) per tonne before settling up 62 ringgit at 1,640 ringgit. Over the past week Malaysia, the world's second largest producer, has announced initiatives to spur the palm industry, which include imposing biofuel mandates, reinforcing replanting scheme and scrapping fertiliser import duties.
Shares of IOI Corp, Malaysia's second largest planter, soared 5.8 percent while KL Kepong jumped 3.7 percent. Singapore-listed Wilmar jumped 4.3 percent while Indonesia's largest palm producer Astro Agra Lestari gained 2.5 percent. Affin Investment Bank said Malaysian planters may boost their net profits by 0.5 percent to 2.0 percent after the government announced plans to scrap a 5 percent import duty for 7 types of fertilisers, which account for a huge chunk of input costs.
INDONESIAN PALM TRADE: In Indonesia, world's largest crude palm oil producer, palm prices surged, boosted by sharp increase in Malaysian palm future earlier in the day. In Jakarta, the state marketing centre, which sells palm oil from state plantations, said it sold palm oil at 5,072 rupiah ($0.47) per kg, up from 4,900 rupiah per kg on Monday.
The centre did not sell the entire 11,500 tonnes of crude palm oil it offered at an auction on Tuesday. Producers in Medan - home to Belawan port, Indonesia's key port for palm oil exports - sold palm oil at 5,030 rupiah per kg, up from 4,700 rupiah-4,800 rupiah per kg on Tuesday. "Apart from the futures rise, rupiah weakness supported price," a trader in Medan said.