Malaysian palm oil futures defy the odds

Malaysian palm oil futures defy the odds

KUALA LUMPUR (Reuters): Malaysian palm oil futures absorbed a nerve-wracking jump in Indian import duty to end little lower on Wednesday and traders said they were almost sure the government was supporting the market.

The benchmark May futures, after losing 15 ringgit in intra- day trading, pulled back to 751 ($198) a ton by the close, down just seven ringgit.

Traders said certain state institutions were supporting the market to help poor farmers.

The suspicion of government involvement could not be confirmed. But the volume of 3,104 lots, one of the highest in recent times, was a reflection that bids matched offers.

India, unveiling its 2001/02 Budget on Wednesday, stunned palm oil giants Malaysia and Indonesia, who sell most of their produce to that country, with a new 75 percent tax for crude palm oil (CPO) and 85 percent for refined palm oil.

This compares to the previous duty of 35 to 55 percent for CPO and 45 percent to 65 percent for refined oil. Indian vegetable ghee or vanaspati makers with financial woes may pay up to 55 percent for refined oil.

Many said the new taxes will definitely worsen the rivalry between Malaysia and Indonesia in the oils trade.

"Nobody in their dreams or even nightmares would have imagined this," said a trader.

Also on Wednesday, cargo surveyor SGS reported that there were 830,187 tons of Malaysian palm oil exported from February 1 to 28, compared to 835,347 tons between January 1 and 30.

Physical palm oil prices also went up as the futures tried to hold ground.

Physical March (south and central) was offered at 720 ringgit a ton, down from 717.50 on Tuesday.

Bids for south came in at 712.50 and trades were done from 725 to 720. Bids for central emerged at 715 ringgit and were also traded at 725 to 720.