Asian palm oil prices seen firming on weak currencies

Asian palm oil prices seen firming on weak currencies

KUALA LUMPUR (Reuters): Asian palm oil prices are expected to be firm this week on increased buying due to weak regional currencies and anticipation of bullish Malaysian official crop data for June, traders said.

Malaysia's Palm Oil Registration and Licensing Authority (PORLA) would release the June crop data on Wednesday and traders expect output and stocks to be low amid high exports.

Indonesian prices were expected be stable at current levels, but traders warned of possible smuggling after the government raised taxes on exports of crude palm oil (CPO) and its by- products.

Prices should be firmly supported by a weakening Malaysian ringgit as well as export tax hikes in Indonesia, Singapore traders said.

They also expect the ringgit to remain soft this week. "With a weak ringgit, people are optimistic that prices are likely to rise further to test the all-time high for third month," one trader said.

At 0518 GMT, the ringgit was quoted around 4.26 to the dollar.

Malaysia's benchmark, September futures contract closed on Friday at 2,508 ringgit a ton. The record high for the third month contract was 2,562 ringgit set on May 18.

India, which last week reduced its import duty on edible oil to 15 percent from 25 percent, is likely to buy more ahead of a Hindu festival.

A trader in Singapore said Indonesia had oversold in the past few months but the latest tax hikes might not stop exporters who are desperate for U.S. dollars.

Indonesian palm oil prices finished last week at 6,000 to 6,100 rupiah/kg in Jakarta.

"I tend to say that prices will remain stable. But if prices do not fall in the near future, then it means there is something wrong. Smuggling must have taken place," said one trader in Jakarta.

"If the government is really serious in preventing smuggling, then prices will fall to as low as 5,500 rupiah/kg soon," said the trader.

The export tax for CPO was raised last week to 60 percent from 40 percent, crude olein to 60 percent from 40 percent, refined, bleached, deodorized (RBD) palm oil and RBD olein to 55 percent from 35 percent, and crude palm kernel oil to 50 percent from 35 percent.

Indonesian traders said at least 400,000 tonnes of crude palm oil was exported from January through May.

Yesterday, Indonesian palm olein prices softened in early trading after the imposition of higher export taxes on crude palm oil (CPO) last week, but traders renewed their warnings on smuggling.

They said olein fell to 5,700 rupiah/kg against last week's 6,000-6,100 rupiah/kg. Traders said export prices hovered at around 4,900 rupiah/kg.