RI palm oil tax cut set to press prices lower<\/p>\n
SINGAPORE (Dow Jones): Indonesia finally cut the export tax on
\npalm oil Monday, in a move which is set to pressure prices lower
\nin a market already awash with supply in the face of anemic
\ndemand, according to industry experts.<\/p>\n
The move comes after several months of lofty export taxes,
\nintended to curb rising domestic cooking oil prices in Indonesia,
\nwhich caused a huge build-up in inventories as producers and
\nrefiners awaited the opportunity to sell into the world market.<\/p>\n
The key export tax on crude palm oil has been cut to 40
\npercent from 60 percent, while the tax on refined, bleached,
\ndeodorized palm oil and RBD palm olein has been reduced to 32
\npercent from 55 percent.<\/p>\n
The impact on prices has already been felt, although analysts
\nsay the true impact won't be seen until Indonesia abolishes the
\ntax altogether. The spot February CPO futures contract on the
\nCommodity and Monetary Exchange of Malaysia slumped 612 ringgit a
\nmetric ton to close at 1,930 ringgit a ton Friday from a week
\nearlier, its lowest closing price since December 1997.<\/p>\n
In the world market, spot offer prices for processed palm
\nolein have fallen 8.4 percent to $595 a ton Friday from $650 a
\nton at the start of the year.<\/p>\n
Palm oil trading was slow Monday due to a public holiday in
\nMalaysia, the world's largest producer.<\/p>\n
\"Indonesia is overloaded with oil,\" said a Jakarta-based
\ntrader with a major Indonesian palm oil trading company. \"All my
\ntanks are full. I have been looking for tank space, and I just
\ncan't get that.\"<\/p>\n
Indonesia's crude palm oil production for marketing year 1998-
\n99 is forecast at 5.7 million tons, up from 5.0 million tons in
\n1997-98, according to the U.S. Department of Agriculture. Of the
\n5.0 million tons, total domestic use for 1998-99 is estimated at
\n2.9 million tons. The marketing year runs from October to
\nSeptember.<\/p>\n
However, one industry official countered that prices in the
\ndomestic market will remain marginally more attractive than in
\nthe overseas market, unless the rupiah weakens.<\/p>\n
At the current exchange rate of Rp 9,000 to the dollar, the
\ncut in export tax \"would not boost export trade too much,\" said
\nTarmidzi Rangkuti, vice-chairman of the Federation of Indonesian
\nVegetable Oils and Fats Associations.<\/p>\n
The Indonesian palm oil sector is, by all accounts,
\nextraordinarily profitable, said a Jakarta-based economist and
\ntrade advisor. The cost of CPO production, on an ex-mill basis,
\nin Indonesia is about $182 a ton, while CPO is sold as much as
\n$585 a ton in the world market.<\/p>\n
Profitable as it might be, the steep export tax has
\ndiscouraged exports. To date, the 60 percent tax paid by
\nexporters, which is included in a government-imposed fixed export
\nprice of $535 a ton for crude palm oil, has effectively
\neliminated any incentive to sell abroad. It has meant that, at
\nthe current price, exporters earned only $32 for every ton sold
\noverseas instead of a possible $400 a ton had there been no
\nexport tax.<\/p>\n
Under the new 40 percent tax, exporters stand to make $139 a
\nton. The government's fixed price, meanwhile, is due to be
\nrevised effective Feb. 8.<\/p>\n
Some market watchers and economists said the priority on palm
\noil shouldn't be on consumers because average household budget
\nfor cooking oil is less than 5 percent, compared with another
\nessential food item, rice, which takes up as much as 50 percent
\nof household expenditure.<\/p>\n
\"They should contain rice prices, which are on par with world
\nlevels,\" said H.S. Dillon, executive director of Jakarta's Center
\nfor Agricultural Policy Studies. Dillon is a former official with
\nthe Indonesian Ministry of Agriculture.<\/p>\n
Some commentators say the government should scrap the tax
\naltogether. Theoretically, it's supposed to progressively reduce
\nthe tax to around 10 percent by the end of the year in accordance
\nwith the country's agreement with the International Monetary
\nFund, although many analysts feel pending elections in Indonesia
\nwill stop the current government from making too many more policy
\nmoves.<\/p>\n
\"The export tax is the wrong policy for Indonesia,\" said Pande
\nSilalahi, head of economics at Center for Strategic and
\nInternational Studies in Jakarta.<\/p>\n
However, the fact that the government lowered the export tax
\non cooking oil, or RBD palm olein, to 32 percent from 55 percent
\n-- eight percentage points lower than the crude palm oil tax --
\ncould create some instability in the domestic market, producers
\nsay. Previously the differential was only five percentage points.<\/p>\n
Following are Indonesia's new export tax rates for crude and
\nprocessed palm and coconut oils effective Feb. 1:<\/p>\n
Products New Rate Old Rate<\/p>\n
(%) (%)<\/p>\n
Crude palm oil 40 60<\/p>\n
RBD palm oil 32 55<\/p>\n
Crude palm olein 40 65<\/p>\n
RDB palm olein 32 55<\/p>\n
Crude palm stearin 20 25<\/p>\n
RBD stearin 10 20<\/p>\n
Crude palm kernel oil 30 50<\/p>\n
RBD palm kernel oil 20 45<\/p>\n
Crude coconut oil 15 20<\/p>\n
RBD coconut 10 15<\/p>\n
Notes:<\/p>\n
CPO = Crude palm oil<\/p>\n
RBD = Refined, bleached and deodorized<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/ri-palm-oil-tax-cut-set-to-press-prices-lower-1447893297", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }