KUALA LUMPUR, Oct 10 (Reuters) - - Malaysia's September palm oil stocks hit record levels as production grew more than four times faster than exports, thanks to an upswing in yields, potentially weighing on prices and piling pressure on the government to change its export tax policy.
Stocks in the world's second largest palm oil producer surged 17.4 percent to an all-time high of 2.48 million tonnes, the Malaysian Palm Oil Board said on Wednesday, exceeding market forecasts, with production jumping more than 20 percent to an all-time high of 2.00 million tonnes.
Exports rose at the slower pace of 4.5 percent, to 1.50 million tonnes, as the government's efforts to boost the tax-free export quota of crude palm oil found fewer customers than expected and big buyers looked to top producer Indonesia for cheaper refined palm oil.
Indonesia has been grabbing more market share from Malaysia after it slashed its export taxes for the refined grade, raising margins for its processors, who can then offer cheaper cargoes to Asian customers such as China.
"The Malaysian government has to do something about the tax. Stocks are overflowing and demand is also seasonally slowing in places like India, where they are harvesting their domestic oilseed crop," a Malaysian trader said in reference to the world's largest palm oil buyer.
Malaysia is looking to cut its export tax of crude palm oil to 8 to 10 percent from 23 percent now, to push out more of the grade to India. The country's cabinet is expected to make that decision on Friday. (Full Story)
Since the 1980s, the Southeast Asian country has not taxed refined exports in a bid to boost its domestic processing sector.
But since last September when Jakarta tweaked its taxes, Malaysia has struggled to sell refined palm oil at competitive prices due to limited production and a duty free export quota for crude palm oil pushing up feed stock prices.
Stocks have steadily risen as Malaysia's production recovers from weak yields in the first half of this year and exports slow, weighing on prices that have lost more than a fifth so far this year.
Before the data release, benchmark December contract on the Bursa Malaysia Derivatives Exchange 0#FCPO: rose 0.7 percent to 2,456 ringgit.
