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Palm drops 5% for second day as Indonesia cuts reference price

Malaysian palm oil futures on Tuesday slumped by more than 5% for a second consecutive session, as Indonesia lowered its export tax reference price and raised its overseas volumes quota.

Palm oil contract for October delivery on the Bursa Malaysia Derivatives Exchange ended down 219 ringgit, or 5.39%, at 3,841 ringgit ($862.56) a tonne.

Indonesia has lowered its crude palm oil reference price to $872.27 per tonne, effective Aug. 1-15, senior economic ministry official Musdhalifah Machmud said. This would reduce its export duty, making it attractive compared to rival Malaysian palm oil.

The world’s largest producer will allow exporters to ship nine times the amount sold locally under a domestic sales rule, up from seven times previously, as part of measures to reduce high palm oil stocks.

Palm prices were also weighed down by weakness in the soybean complex as U.S. House of Representatives Speaker Nancy Pelosi’s visit to Taiwan sparked some sell-off, a Kuala Lumpur-based trader said.

Global stocks slipped and bond yields fell, compounding fears of a global recession, on concerns that a visit by Nancy Pelosi to Taiwan would further harm relations between China and the United States.

Dalian’s most-active soyoil contract DBYcv1 fell 2.3%, while its palm oil contract slumped 6%. Soyoil prices on the Chicago Board of Trade BOcv1 were down 3.1%.

Palm oil is affected by price movements in related oils as they compete for a share in the global vegetable oils market.
Source: Reuters (Reporting by Mei Mei Chu; editing by Uttaresh.V and Vinay Dwivedi)

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