Malaysian palm oil prices hit record high on supply woes

Business Times 6 Feb 08;

(KUALA LUMPUR) Malaysian crude palm oil prices surged to a record high of RM3,458 (S$1,515) a tonne yesterday after Indonesia said it could increase export taxes, raising concerns about supplies.

The market also took a cue from a buoyant US soyoil market, which rose to a record high in the previous session. But late profit-taking in the soyoil market during Asian trade spilled over to palm oil, eroding gains made earlier in the day.

Indonesia said on Monday that Jakarta would would impose a 20 or 25 per cent export tax on crude palm oil and by-products if international prices climbed to US$1,200 or US$1,300 a tonne.

'If prices go on as they do, the new export taxes will definitely kick in and impact the market then,' said one Kuala Lumpur- based trader.

Palm oil prices, up 10 per cent this year, have risen on expectations of higher Chinese demand in coming months and bullish energy prices.

The benchmark April contract on the Bursa Malaysia Derivatives Exchange jumped as much as RM113, or 3.4 per cent, to RM3,458 a tonne. The contract settled up RM4 at RM3,349. 'Malaysian stockpiles have been rising because of a lack of demand, but the situation will change as China will be forced to buy. And the new Indonesia export measures will leave little palm oil available,' said a local broker.

US soybean futures on the Chicago Board of Trade surged on Monday on fund buying, Brazilian crop concerns and spillover buying from soybean oil. But they fell during Asian trading.

'Traders had a change of heart. They realise that soyoil cannot always prop up palm oil and it's best to cash in since soyoil has wiped out all its gains and more,' said a trader with a foreign commodities brokerage.

Spot palm oil is still relatively cheaper at US$1,066 per tonne, roughly 14 per cent lower than spot Argentine soyoil at US$1,240 a tonne, traders said.

Shares of Malaysian palm planters have been boosted by strong palm oil prices with local broker TA Research raising its call on shares in firms like Sime Darby , IOI Corp and Kuala Lumpur Kepong to 'buy'.

Sime shares were flat at RM12, KL Kepong was up 0.6 per cent at RM18.40 and IOI rose 0.5 per cent to RM7.75. The plantation index was up 4.3 per cent. -- Reuters