KUALA LUMPUR: Malaysian palm oil futures fell more than 1 percent on Wednesday due to expectations of rising inventories in Malaysia and a change in Indonesia's export levy rules.
Indonesia relaxed rules on palm oil levies and derivative products effective immediately following a drop in prices, the country's finance ministry said on Wednesday.
It will not collect levies from palm exporters when prices are below $570 per tonne, but will charge $10-$25 a tonne once prices are in a range of $570-$619 per tonne. The levy will rise to $20-$50 when prices hit above $619 per tonne.
The benchmark palm oil contract for February delivery on the Bursa Malaysia Derivatives Exchange fell 1.2 percent to 1,995 ringgit ($480.43) a tonne by the close of trade, after earlier dropping as much as 1.5 percent to 1,990 ringgit.
Trading volumes stood at 27,937 lots of 25 tonnes each.
"Palm is down on worries over the end-November stocks outlook and the confirmation of a temporary abolishment in Indonesia's export levy," said a Kuala Lumpur based trader, explaining that while this would make Indonesian palm more competitive, it could dampen demand for Malaysian products.
A Reuters poll also showed that Malaysia's palm oil stocks at end-November are likely to touch the 3-million-tonne mark, their highest in recent years, as a drop in exports outpaced lean production.
Production is seen down 2.1 percent at 1.91 million tonnes, while exports are forecast to fall 10.6 percent to 1.41 million tonnes.
In other related oils, the Chicago December soybean oil contract was trading flat at 1040 GMT, while the January soybean oil contract on the Dalian Commodity Exchange fell 0.3 percent.
Meanwhile, the Dalian January palm oil contract edged up 0.1 percent.
Palm oil is impacted by movements of other edible oils, as they compete for a share in the global vegetable oil market. - Reuters