Indonesia lowers CPO reference price for 2H Oct, export tax falls

Indonesia has lowered its crude palm oil (CPO) reference price for the October 16-31 period to $713.89/mt from $792.19/mt in an official circular issued by the Indonesian trade ministry Saturday.

The drop in reference price effectively lowers the export tax for CPO from the previous $33/mt to $3/mt, based on the current export tax structure.

With the export levy for palm oil products waived until end of this month, the payable export tax for CPO for the second half of October stands at $3/mt, keeping Indonesian CPO much more competitively priced against Malaysia, where the October CPO tax is at $69/mt (MYR 322.68/mt) on a like-for-like comparison basis.

Export duties for other key palm oil products were also lowered in line with the drop in reference price.

Market participants are keeping a close watch over the Indonesian government’s decision to extend the export levy waiver beyond end-October to the end of the year.

Chief economic minister Airlangga Hartarto said earlier this month that the government was considering extending the export levy waiver till end of the year, although no official announcement has been made so far.

The levy waiver, together with other measures, was introduced to encourage more export volumes out of Indonesia to ease its domestic supply glut, which was caused by a three-week export ban in April-May.

However, some traders told Agricensus that a waiver extension may no longer be necessary if Indonesian supply levels have almost normalized.

Inventory levels in end-August fell 31.7% on the month to 4.04 million mt, according to data from the Indonesian Palm Oil Association (Gapki).

End-month stock levels have typically ranged between 3-4 million mt prior to the export ban.

In addition, some producers are also expecting output to stay flat to slightly lower for September and October, which could further eat into stock levels with exports remaining firm.