Palm slides due to uncertainty over biofuel allocation in Indonesia, export tax

Malaysian palm oil futures declined for a third consecutive session on Thursday. This was due to the continued uncertainty regarding Indonesia's allocation of biodiesel and expectations that export taxes would be lowered.

By midday, the benchmark palm oil contract on Bursa Derivatives Exchange for July delivery had fallen 29 ringgit (0.65%) to $4,409 ringgit (1,123.03 USD) per metric ton. Anilkumar bagani, commodity researcher at Sunvin Group in Mumbai, said that several key issues related to the biofuel blend programme, which included 50% palm oil-based fuel, announced?in?April and scheduled to be launched July 1, remained unclear.

The total volume of palm oil consumed for biofuels will be determined by the allocations made for both subsidised and unsubsidised participants.

Bagani also said that the?likelihood that Indonesian palm oil export tax rates would ease in June also 'pressured prices.

He said that "there is also talk about India raising its import taxes on edible oil to stop the flow of U.S. dollars." Indian Prime Minister Narendra Modi called last week on Indian families to reduce their cooking oil consumption as the rise in global energy prices following the Iran War puts pressure on India's foreign currency reserves.

Dalian's most active soyoil contract dropped 0.08% while its palm oil contract lost 0.98%. Prices of soyoil on the Chicago Board?of?Trade?were up 0.16%.

Palm oil follows the price movement of other edible oils as it competes to gain a share of the global vegetable oil market. Oil prices rose, as markets focused on the high-stakes summit between U.S. president Donald Trump and Chinese president Xi Jinping.

The?palm is a better option as a feedstock for biodiesel due to the stronger crude oil futures.

The palm ringgit's trade currency strengthened by 0.05% versus the dollar. This made the commodity more costly for buyers who hold foreign currencies.

(source: Reuters)