Malaysian palm oil price inches up, wary of Indonesian levy enforcement

KUALA LUMPUR: Malaysian palm oil futures rose for the first time in three sessions on Tuesday as the tropical oil tracked gains in comparative soy markets, but was weighed down by doubts on the effectiveness of Indonesia's levies to boost its biodiesel consumption.
    The September palm oil contract on the Bursa
Malaysia Derivatives exchange inched up 1.1 percent to 2,290
ringgit ($610.83) per tonne by the day's close. 
    After a strong start in June which lifted the contract to
over three-month highs of 2,362 ringgit, prices are now stuck in
range-bound trade as they struggle to find a footing amid
prospects of dwindling demand and a volatile ringgit currency. 
    "The market is still range-bound, between 2,250 and 2,300
ringgit," said a trader with a foreign commodities brokerage in
Malaysia, adding that firmness in U.S. and Chinese soyoil
markets in early Asian trade provided some support. 
    Total traded volume was 38,062 lots of 25 tonnes each,
higher than the usual 35,000 lots.
    Analysts say that Indonesia's new implementation date of
July 1 for its palm export levies may end the uncertainty for
exporters. However, the success of its biodiesel mandate, for
which the levies are collected, will depend on enforcement in
the top palm grower. 
    "Our view is that if the government can successfully utilise
the funds and enforce the 15 percent biodiesel mandate, this
would provide a major positive boost to CPO prices as it could
soak up to 5.5 million kilolitres of biodiesel," said Ivy Ng,
regional head of plantations research at CIMB Investment Bank.
    But reports that only 40 percent of the levies collected
will be used to fund the biodiesel mandate could dampen
prospects of the mandate, Ng added. 
    "This means only $280 million biodiesel subsidy for the
industry, and we estimate that this can only cover 0.9 million
kilolitres of biodiesel a year, which is much lower than its
target."
    Indonesia's crude palm oil output likely rose 4 percent to
2.774 million tonnes in May to its highest level since at least
August, a Reuters survey showed, due to a seasonally high
production month and as many plantations mature. 
    In vegetable oil markets, the U.S. July soyoil contract
 rose 0.9 percent by 1004 GMT, while the most active
September soybean oil contract on the Dalian Commodity
Exchange gained 1.4 percent.            
    In other markets, U.S. crude oil prices edged up on Tuesday,
supported by warnings that a tropical storm was about to hit the
coast of the oil-producing state of Texas, while oversupply kept
Brent steady.   
  
  Palm, soy and crude oil prices at 1005 GMT
                                                                                                  
  Contract        Month    Last   Change     Low    High  Volume
  MY PALM OIL      JUL5    2290   +38.00    2249    2290     973
  MY PALM OIL      AUG5    2292   +27.00    2258    2298   11798
  MY PALM OIL      SEP5    2290   +24.00    2261    2297   17883
  CHINA PALM OLEIN JAN6    5204   +52.00    5106    5210  740552
  CHINA SOYOIL     JAN6    5920   +84.00    5790    5924  479556
  CBOT SOY OIL     JUL5   32.99    +3.70   32.69   33.08    8201
  INDIA PALM OIL   JUN5  453.90    +3.70  451.00  455.20     727
  INDIA SOYOIL     JUN5  609.10    +1.90  608.00  609.70    1670
  NYMEX CRUDE      JUL5   59.80    +0.28   59.48   60.37   30455
                                                                                                  
  Palm oil prices in Malaysian ringgit per tonne
  CBOT soy oil in U.S. cents per pound
  Dalian soy oil and RBD palm olein in Chinese yuan per tonne
  India soy oil in Indian rupee per 10 kg
  Crude in U.S. dollars per barrel
 
 ($1 = 3.7490 ringgit)
 ($1 = 6.2084 Chinese yuan)
 ($1 = 64.23 Indian rupees)
- Reuters