Felda urges tax-free palm oil to combat reserves

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Felda Global Ventures Holdings Bhd said that palm oil shipments from Malaysia, the largest producer after Indonesia, should be allowed duty-free for some companies until midyear to help reduce near-record stockpiles.

There’s a risk reserves will be carried into the second half unless they are cleared, Sabri Ahmad, chief executive officer of the third-largest operator of palm plantations, said in a Bloomberg interview.

Government programs, such as increased blending of palm in biodiesel, known as B10, should be speeded up, Sabri said yesterday. Exports in March are set to be taxed at 4.5 percent after two months of duty-free shipments.

The world’s most-used cooking oil is mired in a bear market as supply and stockpiles have surged to records, and Sabri’s comments reflect producers’ concern that the reserves need to be reduced to pave the way for a rebound in prices.

While Sime Darby Bhd said yesterday that it expects palm to rally in the second half, Dorab Mistry, a director at Godrej International Ltd who’s traded the oil for more than three decades, has said the outlook is bearish as global oilseed supplies increase.

"If you have duty-free from Malaysia just for a short period only until June to clear stocks, this will help," Sabri said in his office in Kuala Lumpur, proposing that the break apply to so-called integrated companies that have local estates and refineries overseas.

"If something new isn’t done, it’s going to be burdensome stocks going into October,” he said.

Malaysian supply typically peaks in September or October.

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