Malaysia may cut export tax on palm oil

Kuala Lumpur — Malaysia’s commodities ministry has proposed cutting an export tax on palm oil by as much as half to help ease a global edible oil shortage and increase the market share of the world’s second-biggest producer of the edible oil.

Plantation industries and commodities minister Zuraida Kamaruddin said in an interview on Tuesday her ministry has proposed the cut to the finance ministry, which has set up a committee to look into the details.

Malaysia could cut the tax, which is likely to be a temporary measure, to 4%-6% from 8%, Zuraida said, adding a decision could be made as early as June.

Malaysia is looking to boost its share of the edible oil market after Russia’s invasion of Ukraine disrupted sunflower oil shipments and Indonesia’s move to ban palm oil exports further tightened global supplies.

“During these times of crisis, probably we can relax a little bit so that more palm oil can be exported,” Zuraida said.

The proposal also asked the finance ministry to expedite the tax cut for state-linked palm oil producer FGV Holdings — Malaysia’s largest — and companies with overseas oleochemical production, she said.

Malaysia will also slow the implementation of its B30 biodiesel mandate, which requires a portion of the nation’s biodiesel to be mixed with 30% of palm oil, to prioritise supply to global and domestic food industries.

“We have to prioritise to give food to the world first,” Zuraida said.

Palm oil — used in everything from cakes to detergent — accounts for almost 60% of global vegetable oil shipments and the absence of top producer Indonesia has roiled the market.

The benchmark palm oil contract fell as much as 2.3% in the morning session on Tuesday, paring some losses after the report on a possible cut to the export tax.

Zuraida said importing countries have asked Malaysia to reduce its export taxes.

“They feel it is too high because of the high costs across the supply chain, because of the price of edible oil,” she said.

Crude palm oil futures have surged about 35% so far this year to all-time highs, further worsening global food inflation.

The Food and Agriculture Organization has warned that food prices, which hit a record high in March, could rise by as much as 20% since the Russia-Ukraine war, raising the risk of increased malnutrition.

Zuraida said buyers India, Iran and Bangladesh are proposing to barter agriculture products such as rice, wheat, fruit and potatoes for Malaysian palm oil.

Malaysia’s production has been strained for more than two years due to a severe labour crunch after coronavirus border curbs that halted the entry of migrant workers.

With travel curbs now being eased, foreign workers will start arriving in mid-May, Zuraida said.

Malaysia’s production and exports of palm oil are expected to rise 30% by the end of this year, she said in a separate statement on Tuesday.

Reuters