Crude palm oil prices hit record close of $1,071 per tonne as Indonesia imposes export tax to protect domestic food prices

February 5, 2008

In Malaysia, crude palm oil (CPO) hit a new record closing price of $1,071 per tonne after Indonesia announced increased export taxes in a move to reduce the pressure on domestic food prices. Indonesia also recently pegged its tax rate to the price of CPO on the Rotterdam exchange.

Before the Indonesia tax hike, crude palm oil prices had begun to fall in Malaysia as biodiesel demand dropped off, due to 80 percent price increases over the past 18 months.

April crude palm oil prices fell to $944 per tonne on the Bursa Malaysia Derivatives Exchange Refined, as exports fell 35 to 40 tons according to cargo surveys conducted by Intertek Testing Services and Societe Generale de Surveillance to as low as 567,583 tonnes, from 946,210 tonnes.

In Singapore last week, the executive director of Ginga Global Markets told the Reuters Global Agriculture and Biofuels Summit that palm oil exports to the US and Europe will slow this year due to high prices and soy oil export competition from Argentina. Palm oil prices have flirted with price level approaching $1100 per tonne in recent weeks, nearly halting demand from the biofuels sector. Malaysian palm oil exports to the EU fell 20 percent between January and November.

In Malaysia, the central government has released emergency stocks of palm oil and ordered producers to step up output by 30 percent after a wave of panic buying prompted by shortages and price increases. The world’s largest producer of palm oil has introduced rationing after experiencing a spike in demand associated with Chinese New Year.

As recently as December 18th, the Malaysian government said that “We are happy that crude palm oil is fetching high prices“. Second Finance Minister Nor Mohamed Yakcop said at that time he believed that current CPO (crude palm oil) prices were not ” excessively high” and said that higher prices equated to higher revenues for Malaysia. Palm oil has reaching an all-time high of $925 in late November before settling back to $886 in early December.

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Written by Jim Lane · Filed Under International