* Aims to reduce feedstock prices for refiners, help them
offer cheaper cargoes
* Changes to take effect from Jan. 1, 2013
* Markets tumbled 4 pct on news as traders had expected
moves to take effect sooner
* Measures come as Malaysia's stocks hit record near 2.5 mln
(Adds link to table on tax structure)
By Niluksi Koswanage
KUALA LUMPUR, Oct 12 Malaysia, the world's No.2
producer of palm oil, will scrap a tax free export quota for the
crude grade from 2013 in a bid to reduce feedstock prices for
refiners who have lost market share to top supplier Indonesia.
Malaysia plans the step in tandem with a cut in crude palm
oil export taxes, also slated for 2013, as it moves to help
refiners offer cheaper cargoes, Commodities Minister Bernard
Dompok said on Friday.
The measures could help boost exports next year and give
some support to benchmark Malaysian palm oil futures <0#FCPO:>,
which have lost 23 percent so far this year.
Minutes after the government announced the plan on Friday,
the market tumbled more than 4 percent as traders had expected a
more immediate policy move to help cut into Malaysian stocks
that hit a historic high of 2.48 million tonnes in September.
"If these policies actually happen in 2013, it will have a
good long term effect on the palm oil market," said a trader
with a foreign commodities brokerage in Kuala Lumpur.
"But right now, it seems to me that they are buying more
time to assess the situation," he added.
It has taken Malaysia more than a year to respond to
Jakarta's action last September in cutting its own export taxes
for processed palm oil to boost margins and lure in investment.
As a result, Indonesian refiners offered cheaper cargoes
that prompted demand to shift away from Malaysia.
Malaysia's unexpected move to scrap the tax free crude palm
oil export quota, which was recently hiked to 5 million tonnes,
or a quarter of total national output, is a major step as
refiners blame the quota for artificially tightening supply and
boosting feedstock prices.
The quota, devised initially to help big firms ship out
crude palm oil more cheaply to their overseas refiners, had
since become a way of boosting exports and managing stocks.
But the export quota has not really helped boost shipments.
Malaysian government officials say 2.5 million tonnes of the
quota have been used this year, with demand from key consumer
India slow as it harvests its domestic oilseed crop.
MONTHLY CPO EXPORT TAXES?
Malaysia also said it planned to boost its biodiesel
blending programme, speed replanting and support small farmers
who make up 40 percent of the country's total oil palm area of 5
million tonnes and are a key vote bank for the government.
There was little detail on the widely anticipated cut on
crude palm oil export taxes, although Dompok later told domestic
reporters that the scale of crude palm oil export tax would
range between 4.5 percent and 8.5 percent.
Later, a government official told Reuters that Malaysia
would announce in December new crude palm oil export taxes, set
to be lower than the current 23 percent duty.
The tax will be effective from Jan. 1, said the source, who
declined to be identified as he is not authorised to speak to
"We are following the Indonesian model in setting monthly
export taxes for crude palm oil but the beauty is that our
refined palm oil export duties are always at zero," said the
source. "We are back in the game."
(Reporting by Niluksi Koswanage,; Editing by Clarence