Palm oil ends two-day losing streak on short-coverage

After a two-day losing streak traders filled short positions on the market. However, India, which is the largest buyer of vegetable oil in the world, imposed higher import taxes, which limited gains.

The benchmark palm-oil contract for delivery in November on the Bursa Derivatives Market closed up 22 Ringgit (0.56%) to $3,942 Ringgit ($915.04) per metric ton.

Lingam Supramaniam said that there is some short covering in the palm oil markets today. He noted that prices had fallen earlier in the session due to the possibility of an increase in tax rates in India, concerns about demand amid the competitive prices of other oils, and the strength of the ringgit.

Two government sources told reporters on Wednesday that India may increase import taxes on vegetable oil to protect farmers from falling prices of oilseeds.

The announcement of the move is expected to take place in the next few weeks. It could reduce demand for palm oil and decrease overseas purchases.

Indonesia will set its palm-oil reference price, export tax and levy by the end the month.

Data from Intertek Testing Services, a cargo surveyor, and AmSpec Agri Malaysia, an independent inspection company, showed that Malaysian palm oil exports between Aug.1-25 fell between 14.1% to 14.9% compared with a month ago, but the export pace increased from a drop of 16.7% in August 1-20 to 18.4%, earlier this week.

Dalian's palm oil contract, which is the most active contract in Dalian, fell by 0.37%. The Chicago Board of Trade soyoil price rose 1.33%.

As they compete to gain a share of the global vegetable oil market, palm oil is affected as well by changes in prices in other oils.

(source: Reuters)