(March 15): Malaysian palm oil futures rose on Tuesday as expectations of lower production and a weaker ringgit underpinned prices, shrugging off an announcement of a 5% tax on crude palm oil (CPO) exports that could hurt demand.
A government circular on the Malaysian Palm Oil Board website showed a CPO export tax will be implemented in April, ending a duty-free policy held since May 2015.
"The tax was expected, the market rose more on weather concerns and the weak ringgit," said a trader from Kuala Lumpur, adding that positive export numbers were also buoying prices.
The palm oil contract for May delivery on the Bursa Malaysia Derivatives Exchange was up 0.7% at RM2,611 (US$632) per tonne at the close of trade. Trade volumes stood at 42,345 lots of 25 tonnes each in the trading day.
The contract touched a one-month high of RM2,632 on Monday.
Palm oil prices are expected to climb to RM2,700–RM3,000 by June as dryness linked to El Nino hurts production, industry experts said last week. They see global output falling by 2 million-3 million tonnes in 2016.
Also, palm oil prices are drawing support from Intertek Testing Services data showing a 10.5% month-on-month rise in exports for the first half of March.
Societe Generale de Surveillance, however, reported a 1.1% export decline over the same time period.
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