Slow demand limits palm gains from US tariff exemptions for Indonesia

Malaysian palm futures rose Wednesday, recovering after a two day drop. 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 midday break, the benchmark palm oil contract on Bursa Derivatives Exchange for November delivery gained 40 ringgit or 0.89% to 4,510 Ringgit ($1,072.53) per metric ton. The price had fallen by 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, gained 0.04% while soyoil prices fell by 0.89%. The Chicago Board of Trade's (CBOT), which trades soyoil, saw a 0.11% decline in prices.

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

The oil prices stabilized on Wednesday after a sharp drop on Tuesday as investors watched for new developments in the Ukraine war and weighed the impact of the U.S.'s new tariffs on India, the third largest crude consumer in the world.

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 0.28%, making the commodity more affordable for buyers who hold foreign currencies.

(source: Reuters)