KUALA LUMPUR: Malaysian palm oil futures reversed early losses on Wednesday due to continued uncertainty around Indonesia’s export policy, with expectations of lower stockpiles underpinning prices.

The benchmark palm oil contract for August delivery on the Bursa Malaysia Derivatives Exchange lost 41 ringgit, or 0.63%, to 6,464 ringgit ($1,471.77) a tonne, down for a second in three sessions.

Indonesia said on Tuesday the government would bring down its combined maximum crude palm oil export and levy rate to $488 per tonne from $575 per tonne to encourage shipments.

Flip-flopping of top producer Indonesia’s export policy has resulted in supply uncertainties, leading to high volatility in the palm oil market, Refinitiv Commodities Research said in a note.

The country’s palm oil association GAPKI expects this year’s exports of palm oil to be lower than the 34 million tonnes recorded in 2021 due to various policy changes, while production is expected to be “at least similar”.

In Malaysia, the palm oil board MPOB is due to release May supply and demand data on Friday. Inventories at May end are expected to drop 6% from the month before, as exports jumped while output shrank, according to a Reuters survey last week.

Indonesia’s move last week to cancel a plan to send its citizens to work in Malaysian estates due to procedural issues imply that labour tensions may drag on longer than expected, according to Refinitiv.

“Consequently, crop losses due to labour shortages will persist, and Malaysia might miss its opportunity to get optimum yields from the high crop season in the third quarter,” Refinitiv said.

Dalian’s most-active soyoil contract jumped 1.7%, while its palm oil contract rose 0.5%. Soyoil prices on the Chicago Board of Trade gained 1.3%.