CPO futures tumbled following reduction in Indian soft oils import duty but recovers to close higher | Financial chart 3


CPO futures traded 50 points lower to below 4200 on the most active month after India slashed the base import duty on crude soybean oil and sunflower oil from 15% to 7.50% for 6 weeks only while leaving crude and refined palm oil unchanged at 10%. This makes the effective duty on CPO and crude soybean and sunflower oil on par at 30.25% after taking into account the other taxes, while palm olein stays the most uncompetitive at 41.25%. Futures rebounded to close up 25 points at 4263 but RM191 lower than the start on Monday.

Crude and refined palm oil import tax was last reduced in July to battle the spike in food price inflation, but palm price escalated since then offsetting the duty reduction.

With the latest import tax adjustment and decreasing palm discount to bean oil, buyers will be increasingly looking to soft oils rather than palm to meet their pent up demand as the various lockdown measures are eased in the country. Palm discount to soft oil narrowed to below US$150 from US$200-250 in June and July. CPO on the Indian MCX lost 3% from intraday high following the announcement today.