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Palm Oil Drops as Malaysian Shipments Seen Falling on Export Tax

Palm oil fell for the first time in four days on speculation that exports from Malaysia, the world’s second-largest producer, may decline for a fifth month as a tax on shipments curbs demand among importers.

The contract for May delivery lost as much as 1.5 percent to 2,413 ringgit ($777) a metric ton on the Malaysia Derivatives Exchange and ended the morning session at 2,434 ringgit in Kuala Lumpur. Futures have lost 27 percent in the past year on rising global oilseed supplies and slowing demand.

Exports fell 14 percent to 1.4 million tons in February for a fourth monthly drop, according to the Malaysian Palm Oil Board. The government said in October it would cut the export tax to between 4.5 percent and 8.5 percent, from about 23 percent, from Jan. 1, to clear stockpiles. The duty for March was fixed at 4.5 percent after a zero rate in January and February as the base price in the first two months of the year was below the threshold that triggers the minimum tax.

“In March, we may see a decline in crude palm oil exports as well, as the 4.5 percent export tax come into effect and may deter price sensitive buyers from countries like India,” Arhnue Tan, an analyst at Alliance Investment Bank Bhd., wrote in a report. “With production retreating further due to the seasonal downcycle, we expect further moderation in inventories, albeit at a slow rate as exports are not expected to be strong.”

Output slumped 19 percent to 1.3 million tons last month, while inventories shrank to 2.44 million tons, the board said yesterday. Malaysian reserves reached a record 2.63 million tons in December. Shipments were little changed at 441,025 tons in the first 10 days of March from 440,830 tons in the same period in February, surveyor Intertek said yesterday.

Soybean oil for May delivery declined 0.6 percent to 50.14 cents a pound on the Chicago Board of Trade. Soybeans for May delivery retreated 0.6 percent to $14.7025 a bushel.

Refined palm oil for delivery in September dropped 0.7 percent to 6,534 yuan ($1,051) a ton on the Dalian Commodity Exchange. Soybean oil for delivery in the same month declined 0.2 percent to 8,180 yuan a ton.

To contact the reporter on this story: Ranjeetha Pakiam in Kuala Lumpur at rpakiam@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net

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