I

ndonesia is preparing itself for a frenzy of palm-oil exports as producers look to take advantage of the the ensuing tax cut set by the government.

Exports of crude palm oil (CPO) will likely be exempt from export tax in October, down from 9 percent this month, if prices continue to plunge from US$740 per metric ton to around the $650-660 benchmark, according to Deputy Trade Minister Bayu Krisnamurthi.

'€œ[The export tax] in October will likely be zero percent because the prices are lower [than the average price set in a regulation],'€ he said on Friday.

Indonesia sets the monthly export tax according to a formula based on average prices in Jakarta, Rotterdam and Kuala Lumpur. Crude shipments attract no tax if the average rate is $750 or less over a four-week period, with rates escalating from 7.5 percent to 22.5 percent at higher average prices.

In addition to CPO, exports of 27 other palm products, including olein, will likely also be free from tax.

As a consequence of the zero export tax, exporters will have free rein to lure more buyers amid unprecedented high palm-oil output in Southeast Asia to prevent a build-up in stockpiles.

Bayu, however, warned oil-palm growers that offsetting the balance would further drive down prices.

'€œI urge growers and exporters not to ship excessive volumes [of CPO] because that would drive down demand, which remains unchanged at the moment,'€ he said.

Food prices fell to the lowest in almost four years in August as the cost of cooking oils tumbled along with milk and cheese, the United Nations'€™ Rome-based Food and Agriculture Organization said on Sept. 11, Bloomberg reported.

The FAO vegetable-oil index slipped to 166.6 points from 181.1 points amid an improved outlook for palm-oil production in Southeast Asia and lower-than-forecasted import demand from China and India.

Malaysia, the world'€™s second largest palm-oil producer after Indonesia, removed its export tax on CPO for September and October to help push up outbound shipments and avert a further slide in prices, which has already plunged to a
five-year low.

The tax removal was expected to boost Malaysia'€™s exports by 600,000 metric tons and help contain stockpiles at 1.6 million tons at the end of this year.

Previously, production in Indonesia was expected to reach an all-time high of 30.5 million tons or more this year, compared to Malaysia'€™s output of around 19.7 to 19.9 million tons, according to Dorab Mistry, director of Godrej International Ltd.

Together, Indonesia and Malaysia make up 86 percent of global palm-oil production.

'€” JP/Tama Salim