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Indonesia May Raise Palm Export Tax to 14-Month High on Rally

Indonesia may increase the export tax on crude palm oil to the highest level in 14 months after prices entered a bull market on concern that output in the world’s largest producer may trail estimates. Futures jumped.

The tariff may be raised to 12 percent in December from 9 percent this month, Faiz Achmad, director of food and fishery at the Industry Ministry, said in a text message today. That would be the highest since 13.5 percent in October 2012, according to data compiled by Bloomberg. The government normally announces the tax by the 25th of every month.

Indonesia will join Malaysia in increasing taxes as futures are headed for a second month of gains after rallying 11.8 percent in October, the most since 2010, on concern that production in the top growers may fall short of analysts’ estimates. Yields may drop 15 percent to 20 percent this year on bad weather, the Indonesian Palm Oil Association estimates.

The contract for delivery in February rallied as much as 2.6 percent to 2,648 ringgit ($826) a ton on Bursa Malaysia Derivatives today, the highest level for the most-active futures since September 2012. Malaysia raised the levy on exports of crude palm oil to 5 percent for December after keeping it unchanged at 4.5 percent since March.

“Exporters will probably boost sales before the new tax,” Hariyanto Wijaya, an analyst at PT Mandiri Sekuritas, said by phone from Jakarta. “We would be further less competitive against Malaysia, but an increase in domestic consumption, especially with the boost in biodiesel use, will help producers.”

Indonesia raised the blending rate for biodiesel in subsidized fuel to 10 percent in September from 7.5 percent and the mandate will be expanded to non-subsidized fuel and for industrial users next year.

Indonesian plantations are on the cusp of a low-yield cycle and the country could produce less than 27 million tons this year, falling short of the 30 million tons to 31 million tons estimated initially, Standard Chartered Bank said in a note Nov. 13, citing industry reports.

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