VEGOILS-Palm oil edges to 1-week top, record stocks may cap gains
Wed Oct 10, 2012 1:56am EDT
* September stocks jump 17 percent to record 2.48 million
tonnes
* Palm oil to end rebound around 2,503 ringgit -technicals
* Malaysia's Oct 1-10 exports slip 1 pct -ITS
(Updates prices, adds details)
By Chew Yee Kiat
SINGAPORE, Oct 10 (Reuters) - Malaysian palm oil futures
edged up on Wednesday to their highest in more than a week,
tracking other vegetable oil markets, though gains were limited
as traders stayed cautious ahead of stocks data.
Malaysia's palm oil stocks in September surged 17.4 percent
from a month ago to a record 2.48 million tonnes, the Malaysian
Palm Oil Board said after the midday break.
The rise in September stocks exceeded market expectations of
2.46 million tonnes and could weigh on the market later when it
reopens.
Prices fell to a near 3-year low last week but have since
been recovering steadily on bargain-hunting and prospects of a a
cut in export tax by the Malaysian government.
"The market is still rangebound, trading between 2,400 and
2,500 ringgit," said a trader with a foreign commodities
brokerage in Malaysia. "Prices were supported as U.S. soybean
oil was up last night and Dalian soybean oil was also up a
little bit."
By the midday break, the benchmark December contract
on the Bursa Malaysia Derivatives Exchange had edged up
0.7 percent to 2,456 ringgit ($798) per tonne. Prices earlier
went as high as 2,476 ringgit, a level last seen on Oct. 1.
Total traded volumes stood at 17,513 lots of 25 tonnes each,
higher than the usual 12,500 lots.
Malaysia's palm oil exports for Oct. 1-10 fall 1 percent to
448,624 tonnes from a month ago, cargo surveyor Intertek Testing
Services said on Wednesday.
Another cargo surveyor, Societe Generale de Surveillance,
will release exports data later in the day.
Technical analysis showed palm oil was expected to end its
current rebound around a resistance at 2,503 ringgit per tonne,
and fall towards 2,230 ringgit, said Reuters market analyst Wang
Tao.
In a bearish sign for palm oil, Brent crude slipped near
$114 on Wednesday, with a cloudy economic outlook offsetting
fears about disruptions to Middle East oil supply as a conflict
between Turkey and Syria escalated.
In other vegetable oil markets, U.S. soyoil for December
delivery edged up 0.1 percent in Asian trade. The most
active January 2013 soybean oil contract on the Dalian
Commodity Exchange gained 0.3 percent.
OECD asks Indonesia to reconsider farm import curbs
By Michael Taylor
JAKARTA | Wed Oct 10, 2012 12:41am EDT
(Reuters) - Indonesia must reform export taxes and import curbs on farm commodities to spur investment in the sector and improve national food security, the OECD grouping of the world's top economies said on Wednesday.
Agriculture contributes around 15 percent to the GDP of Indonesia, Southeast Asia's largest economy, employing about 42 million people of a population of roughly 240 million.
Import protection hinders competitiveness of the farm sector, limits productivity and growth and increases food costs for poor consumers, the Organisation for Economic Cooperation and Development said in a review of Indonesia's farm policies.
"If the aim is to improve access to food for Indonesian consumers, you wouldn't think raising the price of that food would be a good place to start," Ken Ash, director of the OECD trade and agriculture directorate, told Reuters in an interview.
"That's exactly what an import measure does, whether a tariff, quantitative restriction or standard constraint at the border."
CRISIS POLICY REFORMS SEEN REVERSED
Indonesia sets import limits and tariffs on several food items such as sugar, wheat, rice and soybeans, although it often scraps them when global prices spike.
Last week, an industry group in the country, Asia's top importer of wheat, urged the government to fix a 20 percent import tariff on wheat flour to protect domestic grain millers.
Although it is the world's biggest sugar buyer, Indonesia restricts imports of the sweetener to protect local farmers and aid domestic sugarcane mills.
The OECD report said many of the agriculture policy reforms introduced by Indonesia in line with IMF loan conditions after the 1998 Asian financial crisis had now largely been reversed.
Among these were the abolition of national purchase agency Bulog's monopoly on many farm imports, reducing tariffs and eliminating fertilizer subsidies.
"You may try to protect some processors, but at the cost of the consumer," said Andrzej Kwiecinski, a senior farm policy analyst at the Paris-based policy laboratory for the world's top economies.
Export taxes on agricultural products are hurting the country's primary producers, while also making the sector unfriendly for investors, OECD's Ash said.
Indonesia, the world's tenth largest agricultural producer, is the top producer of palm oil and the third largest cocoa grower.
But it has introduced export taxes on palm oil and cocoa beans to ensure domestic supplies, boost revenues and support domestic processing industries.
"In doing that, there is a discouragement that's being given to the primary producer," added Ash.
"If you have money and want to invest, are you going to invest in an environment that allows you to take advantage of domestic and international opportunities by moving across borders ... or in a country that is blocked?"
To increase investment in its agriculture sector, Indonesia could reduce export taxes, enforce forest laws, improve its infrastructure, enable easier access to credit, tackle land rights issues and increase funding on agriculture research.
Other suggestions in the report include replacing Indonesia's costly fertilizer subsidies with a voucher scheme, improving water supplies, and offering greater education and help to agriculture workers who want to leave the sector.
TACKLING POVERTY
Economic growth in the world's fourth most populous country is estimated to surpass 6 percent this year, but around half of its people still live on less than $2 per day.
Spikes in global food prices, such as those in soybeans and corn this year, often hit Indonesia's rural poor the hardest.
To help combat this, the country has extended the role of Bulog beyond rice in order to build bigger food stockpiles.
While it was feasible to ensure emergency reserves of food commodities to combat price spikes, Ash said, policies that tried to manage market forces were usually an expensive failure.
Indonesia has also set itself a number of self-sufficiency targets for 2014, such as beef, rice and corn, but the OECD said such a focus was misplaced, with a greater emphasis needed on food diversity away from rice.
The country, self-sufficient in rice in the 1980s before farmland was converted to build housing for a booming population, has tried to rein in rice consumption and expand paddy fields, but still relies on imports to keep up stocks.
Indonesia could replace its rice for the poor scheme with cash payments to give households greater choice and help reduce their dependence on the staple grain, the study said.
"It would be better to provide direct income support and to leave the people the choice of what they would like to buy," said Kwiecinski.
"If you want to diversify, you should change the system of supporting both rice consumers and producers, and look closer at other commodities which would bring higher incomes."
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