Palm prices rise on US tariff relief for Indonesia; slow demand limits gains

Malaysian palm futures rose on Wednesday after recovering from a two-day decline, supported by the news that U.S. exempted Indonesian oil palm from a tariff of 19%, but sluggish market demand outside China limited gains.

At the close, the benchmark palm oil contract on Bursa Derivatives Exchange for November delivery gained 19 ringgit (0.46%) to 4,489 Ringgit ($1,067.54) per metric ton. It had fallen 1.3% over the past two days.

CPO futures traded higher after news broke that the U.S. had exempted Indonesian Palm Oil from a tariff of 19%, according to Anilkumar bagani, research head at Mumbai-based vegetable oils broker Sunvin Group.

Indonesia's chief trade negotiator announced on Tuesday that Washington had agreed in principle to exclude Indonesian exports such as cocoa, rubber and palm oil from the 19% tariff which took effect August 7.

Bagani also added that the growth was limited by the fact that destination purchases from other markets than China were slowing down.

Dalian's palm oil contract, which is the most active contract, fell 0.46% while soyoil prices dropped 1.2%. The Chicago Board of Trade's (CBOT), soyoil price rose by 0.37%.

As palm oil competes to gain a share in the global vegetable oils industry, it tracks the price fluctuations of competing edible oils.

After falling the previous session investors watched for new developments in the Ukraine conflict and weighed a report from the industry that showed a decline in U.S. oil inventories.

Palm oil is a better option as a biodiesel feedstock because crude oil futures are stronger.

Data from the European Commission revealed that the European Union's soybean imports, which began in July, reached 1,96 million metric tonnes by August 24. This was a decline of 8% compared to the previous year, and palm oil imports fell 34%, reaching 352,275 millions tons.

The palm ringgit's trade currency, the dollar, fell by 0.43%, making the commodity more affordable for buyers who hold foreign currencies.

(source: Reuters)