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Indonesian palm groups point to output recovery

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Indonesia's palm oil output may be matching Malaysia's in showing a second-quarter revival, according to data from producers including REA Holdings, which flagged potential signs of price recovery too.

REA Holdings, which manages plantations in Indonesia, has seen palm oil output recover in the past two months, after a period when weather problems reduced production on the island of Borneo.

"The early months of 2015 saw generally lower palm oil production throughout East Kalimantan and East Malaysia," the group said, noting "unusually high rainfall in February" and a hangover on yields from dry weather in September and October.

However the group noted that palm fruit production in April and May has been "improving to normal monthly levels".

"Upward trend"

Nonetheless, the group said that, thanks to the early-year downturn, palm fruit production over the first five months of 2015 fell 11% to 230,000 tonnes.

By contrast, MP Evans, another major palm group operating in Indonesia, reported that an "upward trend" in production had left palm oil production for the first five months of 2015 higher than last year, despite the adverse weather effects.

A revival in output in Indonesia, the top producing country, following an early-year setback would mirror that in second-ranked Malaysia, for which data on production are more readily available.

Data from the Malaysian Palm Oil Board this week showed Malaysia's production rising by 9.3% last month, to 1.81m tonnes, following an 8.8% increase in April – and an 11.8% decline in the January-to-March period.

Prospect of upturn

REA also held out hopes for a recovery in palm oil values from "depressed" levels, saying that "the first signs may now be visible… of an upturn in prices".

Kuala Lumpur August palm oil futures closed at 2,290 ringit a tonne today, up more than 10% from a low of 2,070 on April 29.

The price the group achieved for its palm oil in the first five months of the year was, at $590 a tonne, down 18.2% year on year.

Export tax

The group also restated an idea voiced to in April that a fresh Indonesian export tax may not be as severe as officials have outlined.

"The previously announced new Indonesian levy on exports of crude palm oil has not yet been implemented and the amount of the levy is still under discussion with suggestions that this may be reduced from the level of $50 per tonne initially proposed," REA said.

"The planned use of levy proceeds to support increased mandatory blending of biodiesel in fuel sold within Indonesia is likely to improve biodiesel offtake and may well result in further firming in the crude palm oil price.

REA Holdings shares in London were up 4.1% to 320.40p a share at time of writing.


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