Indonesia Cuts Palm Oil Levy to Be Competitive, Boost Exports

This is expected to add pressure on benchmark palm oil futures, which have fallen over 10% locally since April.

Indonesia has reduced its export levy on palm oil in a bid to boost shipments of the tropical commodity. (Bloomberg pic)

The world’s biggest grower set the crude palm oil levy at 7.5% of the reference price, according to a decree posted on the finance ministry’s website.

The new rule, effective from Sept 21, will cut the duty to US$63 per ton from US$90 for September.

The levy for processed palm products will be between 3% and 6%.

The changes will help the Southeast Asian nation to become more competitive than neighboring Malaysia, the second-largest producer.

That could add further pressure on benchmark palm oil futures, which have fallen more than 10% in Kuala Lumpur since a high in April.

Indonesia collects an export tax and an additional levy on palm exports.

The levy, which is utilized to fund replanting programs and provide biodiesel subsidies, was previously set every month in US dollars.

The reference rate – a weighted average based on palm oil prices – is set every month by the trade ministry to calculate export duties.