Malaysian palm oil prices drop as India considers tax hike

Malaysian palm oil futures fell as fears grow over potential import tax hikes in India, which could reduce demand. Meanwhile, Indonesia’s palm oil exports increased in June but faced a slight decline year-on-year. Despite these issues, global prices of the commodity are expected to remain stable due to anticipated lower production in Indonesia and increased biodiesel use.

Malaysian palm oil futures fell on Wednesday as worries grew that India might raise import duties on vegetable oils. This potential tax hike could reduce demand for palm oil and lead to fewer imports from Malaysia.

India is considering increasing these import taxes to support its local farmers, who are struggling with low crop prices. This move could have a significant impact on palm oil demand, affecting international trade.

In addition to the tax concerns, India’s palm oil industry faces its own challenges. The country needs more investment and research to improve palm oil yields, particularly given the difficulties posed by harsh winter conditions.

Meanwhile, Indonesia, a major palm oil producer, experienced a 71.8% rise in palm oil exports in June compared to May, though exports were down 1.88% from the previous year. Malaysia, on the other hand, saw a 14.1-14.9% drop in palm oil exports over the past month, though the rate of decline slowed towards the end of August.

Despite these export challenges, the outlook for palm oil remains cautiously optimistic. Indonesia is expected to produce less palm oil this year due to weather issues and aging trees. Additionally, the country plans to increase its use of palm oil for biodiesel in the future, which could help sustain higher prices.