Palm prices dip anew after tax reforms fall short
The rally in palm oil prices went into reverse as long-awaited measures by Malaysia to support values fell short of expectations, with the government delaying a tax perk, and not specifying its amount.
Bernard Dompok, Malaysia’s commodities minister, revealed in a statement much-anticipated by investors a range of measures to “strengthen the competitiveness of the palm oil industry” in response to a rise in inventories which sent prices earlier this month to a three-year low.
Measures included a plan to raise to 10%, from 5%, the level of palm oil-based biofuel into Malaysian forecourt diesel, which would raise domestic consumption of the vegetable oil by 300,000 tonnes a year.
Mr Dompok also revealed he was considering proposals to incentivise the replanting of “old and unproductive” palm trees, a move which stands to temporarily quell output while boosting output prospects for the future, when world demand is expected to have risen to soak up extra supplies.
“It is estimated that a planted area of 100,000 hectares needs to be replanted and this is envisaged to reduce supply of 300,000 tonnes of crude palm oil,” he said.
‘Bit of a sideshow’
However, investors questioned the efficacy of the measures in the context of a country which produces some 18m-19m tonnes of palm oil a year, from more than 5.0m hectares of plantations.