Malaysian palm oil futures closed higher on Tuesday. Indonesia plans to revise the procedure for setting export duties

Malaysian palm oil futures closed higher on Tuesday, helped by favorable buying and recovery in the Dalian palm olein market.

According to Anilkumar Bagani, head of research at Sunvin Group, the palm oil contract market rose amid favorable buying and an upbeat recovery in Chinese palm olein futures during Asian trading.

“The bullish rebound is also driven by energy prices and a general shortage of palm oil supply ahead of Indonesia’s B40 biodiesel production requirement and Ramadan holidays,” Bagani said.

Last week, the Indonesian government confirmed to lawmakers a plan to introduce a mandatory 40 percent blend of biodiesel with palm oil-based fuels, known as B40, from January 2025.

Indonesia also plans to review how it sets export duties on palm oil to keep it competitive with rival edible oils, an official said Monday, calling it a routine move to evaluate its trade policy.

Malaysian palm oil futures rose last week as traders anticipated a possible change in Indonesia’s export duty or tax structure, although prices fell in early trading Monday following weakness in rival oils from Dalian and under pressure from a strong ringgit.

Indonesia, the world’s biggest palm oil exporter, last reviewed its duties in September this year.

“We must regularly evaluate export duties to improve farmers’ welfare and keep them globally competitive,” said Dida Gardera, who is in charge of food and agribusiness at the coordinating economy ministry.

Dida was responding to a question from reporters about a possible policy review during a conference on palm oil.

Dida said authorities would evaluate the policy every three to six months, emphasizing that they could decide to leave the policy unchanged.

Indonesia sets export duty and levy rates for palm oil on a monthly basis based on a government-determined benchmark price for edible oil.

The benchmark FCPO palm oil contract for February delivery on the Bursa Malaysia Derivatives Exchange closed 23 ringgit, or 0.47% higher, at 4,922 ringgit ($1100.87) per metric ton. The contract fell 3.71% in the previous session.

Traders are expecting a market correction and with the winter season approaching, demand from India is expected to decline, a Mumbai-based trader said.

“Given that India is also price sensitive, exports are projected to decline in November,” the trader added.

The most active soybean oil contract in Dalian rose 0.46%, while the CPO palm oil contract fell 0.26%. Soybean oil prices on the Chicago Mercantile Exchange were down 0.37%.

Palm oil follows the price movements of rival edible oils as they compete for a share of the global vegetable oil market.

Freight experts are expected to release their estimates for Malaysian palm oil exports for the Nov. 1-20 period on Wednesday.

Crude oil prices fell due to the resumption of production at Norway’s Johan Sverdrup oil field, although investor caution stemming from fears of an escalation in the Russia-Ukraine conflict.

Weaker crude oil futures make palm oil a less attractive feedstock option for biodiesel.

Ringgit, strengthened 0.16% against the dollar, making the commodity more expensive for buyers holding foreign currency.

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Tags: Indonesia, prices, palm oil