Indonesia's export tax on crude palm oil (CPO) shipments will remain at zero percent in October 2015 as the government's reference CPO price fell 13 percent (month-on-month) to USD $529.51 per metric ton for October. When this reference CPO price is below the USD $750 per ton threshold, then the government scraps the export tax in an attempt to make shipments more attractive. However, exporters are still subject to the recently introduced palm oil exports levy. When the export tax is cut to zero percent, exporters are required to pay a USD $50 per ton levy for CPO and USD $30 for processed palm oil products shipments (part of these funds are channeled to Indonesia's biodiesel subsidy program).
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Today's Headlines Soybean Oil
It is estimated that Indonesia’s export of crude palm oil (CPO) and its derivatives have fallen in February 2015 due to sluggish demand from India and China, the world’s two largest palm oil importers, while the globe’s soybean output increased (soybean oil is a close substitute to palm oil for food and biodiesel uses). Based on a median of six palm oil growers, analysts and official estimates, Indonesian shipments of palm oil (including palm kernel) fell six percent month-to-month (m/m) to 1.7 million metric tons in February.
Due to the Indonesian government’s plan to increase biofuel subsidies from IDR 1,500 per liter to IDR 4,000 per liter - in a move to protect the domestic biofuel industry - palm oil futures climbed the most in 28 months. Amid the world’s current low crude palm oil (CPO) prices, Indonesian biofuel producers have it rough as production costs exceed market prices and therefore requested the government to raise biofuel subsidies to offset losses. If approved by Indonesian authorities then this move should result in higher palm oil demand.
The Indonesian Palm Oil Producers Association (Gapki) believes that it is difficult for Indonesia to achieve the government’s target of collecting USD $36 billion by 2019 through crude palm oil (CPO) exports as several government policies disturb the performance of CPO exports. Moreover, global commodity prices (including palm oil) are still showing a downward trend - hence limiting foreign exchange earnings - as global economic growth remains sluggish. Economic growth of China, a major CPO importer, is expected to slow further this year.
The government of Indonesia will lower the export duties on crude palm oil (CPO) from 10.5 percent in August to 9 percent in September if the CPO price continues to stay between USD $800-850 per ton. This lower tax policy is done in order to stimulate export revenues amid persistent weak global commodity prices. The international palm oil market is expected to remain stagnant in August and September. Stockpiles of CPO in Malaysia and Indonesia are projected to rise between September and December 2013.
Latest Columns Soybean Oil
Crude palm oil (CPO) production in Indonesia and Malaysia is expected to decline due to the impact of the El Nino weather phenomenon (that brought a prolonged dry season to Southeast Asia). CPO production in Malaysia could fall between 1.5 and 2 million tons this year according to Dorab Mistry, Director at Godrej International. Declining output in the world's two leading palm oil producers and exporters implies that palm oil prices should be able to rise further. At the start of this week palm oil futures traded in Kuala Lumpur (June delivery) rose to 2,779 ringgit (approx. USD $695) per ton, the highest level since March 2014.
The price of crude palm oil (CPO), which has been under downward pressure for a long time as global turmoil lingers on, started to rebound due to falling stockpiles in Indonesia and Malaysia. Reserves of the commodity fell because of weather conditions and because of an increase in demand ahead of the Islamic fasting month (Ramadhan). The price of crude palm oil is expected to hit the USD $900 per ton mark in late 2013, up from USD $828-865 per ton in May and June. This price recovery is expected to continue.
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