Palm oil prices increase in nervous trading

Palm oil prices increase in nervous trading

LONDON (Reuters): Palm oil opened with gains of about $5 to $7.50 a ton in an edgy European market yesterday, traders said.

Most sellers were unwilling to show their hands and traders were only able to give quoted prices.

"The market is very nervous this morning owing to the meetings going on in Indonesia," said one trader.

Indonesian ministers met yesterday to discuss food issues, including exports of crude palm oil (CPO), which is currently subject to a 60 percent export tax because of tight domestic supply.

The Indonesian government has three options to ensure adequate domestic supplies of cooking oil: a ban on exports, government purchases of CPO for processing and a continued tax on CPO exports.

But Minister of Industry and Trade Rahardi Ramelan said later on the day that the government has no plan to ban the CPO exports.

Soft oils were lower with soyoil one guilder down and rape oil 0.50 to one guilder lower.

Traders said apart from interest early in the week there was no visible sign of Chinese buying in the European market.

Devastating floods have reduced China's summer grain output.

China's output of oil-bearing seeds has declined by about 1.3 million tonnes in the first half of 1998 compared with the same period last year.

"We have not heard of any Chinese buying, but that is not unusual, it can be two to three weeks before news filters through to the market," said a trader.

Lauric oils were quiet with coconut oil $2.50 to $10 up and palmkernel oil unchanged.

In Jakarta, Indonesian palm olein prices were stable in evening trade despite continued tight supply.

Ex-factory olein prices in Jakarta and Medan remained unchanged at 6,000 rupiah/kg and 5,500 rupiah/kg respectively.

"There was very little trading activities today," said a Medan-based trader.

Supply of olein in the country has been tight as the volume of exports of crude palm oil (CPO) surged with the weakening of the rupiah as producers find it more profitable to sell in foreign markets.

However, traders expect exports to slowdown next week following the recent increase in export tax for CPO.

"Exports will slow down a bit next week because of the increase in taxes but smuggling is expected to be on the rise as exporters try to avoid taxation", said a Jakarta-based trader.

Last week, the export tax for CPO was raised to 60 percent from 40 percent.

The trader forecasted prices to fall as low as Rp 5,700/kg next week.

According to industry sources, Indonesia is not likely to reimpose a ban on palm oil exports as it could lead to more smuggling of the commodity.