Palm | Kelapa Sawit

Kuala Lumpur. Malaysian refiners snapped up more Indonesian crude palm oil to meet orders from China and India after floods in a key growing area submerged estates and cut off roads, adding to Asia’s escalating food costs.

Although La Nina-driven rains have slowed in Malaysia’s southern Johor state on Tuesday, the floods have killed three people, forced 50,000 from their homes and turned towns surrounded by oil palm estates into islands.

Malaysia’s worst flood in four years may force big Asian buyers to shift some of their rice and soybean stockpiling efforts to include palm oil, a key ingredient in cooking oil, as they struggle to keep the lid on inflation.

Government officials from neighboring Thailand were set to meet later on Tuesday to decide whether they need an extra 50,000 tons to 100,000 tons of crude palm oil to tackle their domestic supply shortage.

With 70,000 tons of crude palm oil now delayed for processing, refiners in Malaysia’s key export port of Pasir Gudang in Johor are eyeing Indonesian palm oil stored in floating barges in the Malacca Strait.

“The roads leading to Pasir Gudang port still have some floods and trucks can’t get through, but on the other side Indonesian tankers are lining up to offload since many of them escaped this month’s higher tax,” a Malaysian refiner said.

To ensure domestic cooking oil supplies, Indonesia raised its export tax on crude palm oil to 25 percent in February from 20 percent as international prices rose on tight global vegetable oil stocks and resilient demand.

Another Malaysian refiner said at least 20,000 tons of Indonesian palm oil was waiting to be unloaded at Pasir Gudang in Johor.

Although Malaysia is the second-largest palm oil producer in world after Indonesia, its refining industry is the biggest.

Factories in Malaysia usually slow down ahead of the Lunar New Year, but refiners need to secure more supplies after the holiday as Malaysian stocks are at a five-month low in December and demand is likely to pick up.

Malaysian palm oil futures ended up 3 percent on Monday at a one-week high as traders covered positions ahead of the long holidays over the floods.

Malaysian markets were closed on Tuesday for a public holiday and will re-open today for the morning trading session before being shut for the rest of the week.

Malaysia’s floods come as a massive cyclone is due to slam into northeast Australia this week, potentially hurting a third of the sugarcane crop and fueling agriculture commodity prices.

“Palm oil and sugar could also be the next hot food items for governments to scramble for. We could be seeing a lot of government policy reactions in the coming week,” an analyst with an investment bank in Singapore said.

Rice is already trading higher as governments from Indonesia to Bangladesh stock up to prevent food shortages, which in the past have provoked protests.


Reuters

http://www.thejakartaglobe.com/business/demand-for-indonesian-palm-oil-up-as-flooding-in-malaysia-stirs-price-fears/420256