Indonesia Cuts Palm Oil Export-Tax to Boost Sales as Prices Drop

Indonesia, the world’s largest palm oil producer, reduced the duty on shipments of the crude variety for the first time in four months to increase sales after prices tumbled to a three-year low.

The tax will be cut to 9 percent in September from 10.5 percent this month, Faiz Achmad, director of food and fishery at the Industry Ministry, said in a text message today. The rate will match that of June when it was kept unchanged from May, according to data compiled by Bloomberg.

Futures in Kuala Lumpur slumped to the lowest since October 2009 last month as supplies outpaced demand. While the cut in tariff will narrow the gap with the levy in Malaysia, it will still be double the rate in the second-largest grower that kept the tax unchanged at 4.5 percent for a seventh month in September.

“It means nothing for exports,” said Joelianto, trading director at PT Sinar Mas Agro Resources and Technology. “Indonesia is still losing to Malaysia as they have better margins.”

Exports fell 1.6 percent to 1.59 million tons in July, according to the Indonesian Palm Oil Association, while shipments from Malaysia rose 0.5 percent to 1.42 million tons, according to the nation’s palm oil board.

World stockpiles of the oil that’s used in everything from candy to biofuel will surge 21 percent to a record 9.7 million metric tons by the end of 2013-2014, while demand expands 4.6 percent, the least in 12 years, the U.S. Department of Agriculture says. Output in Indonesia may climb to a record 28 million tons this year from 25.7 million in 2012, Derom Bangun, chairman of the Indonesian Palm Oil Board, said July 25. Exports may gain to 19 million tons from about 18 million tons, he said.

Futures, which fell to a three-year low of 2,137 ringgit ($644) a ton on July 26, ere at 2,349 ringgit on the Bursa Malaysia Derivatives today.

The Indonesian government reviews the tax rates and base export prices every month, based on average rates in Kuala Lumpur, Rotterdam and Jakarta. The tax will be set at 9 percent if price falls in the range of between $800 to $850.

To contact the reporters on this story: Yoga Rusmana in Jakarta at yrusmana@bloomberg.net; Eko Listiyorini in Jakarta at elistiyorini@bloomberg.net

To contact the editor responsible for this story: Jake Lloyd-Smith at jlloydsmith@bloomberg.net

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