Malaysian palm oil futures fell more than 5% on Tuesday after Indonesia cut its export tax reference price and raised its exportable volumes, with sharp losses in rival edible oils further dragging down the market.
Palm oil contract FCPOc3 for October delivery on the Bursa Malaysia Derivatives Exchange slid 217 ringgit, or 5.34%, to 3,843 ringgit ($862.82) by the midday break, extending losses for a second day.
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 more 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.
In global markets, there are jitters about an escalation in Sino-U.S. tension with Pelosi set to begin a visit to Taiwan against the objections of China, which regards the self-governed island as a breakaway province.
Dalian’s most-active soyoil contract DBYcv1 fell 3.3%, while its palm oil contract DCPcv1 slumped 6.4%. Soyoil prices on the Chicago Board of Trade BOcv1 were down 2.3%.
Palm oil is affected by price movements in related oils as they compete for a share in the global vegetable oils market.
