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.