KUALA LUMPUR, April 24: Malaysian crude palm oil futures fell 2.5 per cent on Thursday on expectations Indonesia would slash its export tax on the vegetable oil amid growing fears demand was struggling to gain momentum.

Palm oil prices, which have fallen around 23 per cent from record highs last month, were expected to head lower in coming weeks on a firm ringgit and a higher production cycle, traders said.

The benchmark July contract settled down 90 ringgit to 3,460 ringgit ($1,101) per ton. Other traded months fell between 41 and 84 ringgit.

The general feeling is that Indonesia is likely to reduce export taxes and this will divert Indian demand to Indonesia rather than Malaysia, said a trading manager with a foreign broker.

India traditionally gets most of its crude palm oil from Indonesia, the world’s largest palm oil producer.Indonesia is expected to lower the base export tax for crude palm oil for May to 15 per cent from 20 per cent this month on either Thursday or Friday, traders said. The government usually adjusts the base export tax to reflect international price movements.

Malaysian traders are also awaiting palm oil export data for April 1-25, due to be issued by cargo surveyors Societe Generale de Surveillance and Intertek Testing Services on Friday.

Malaysian palm oil exports in April have pulled back from steep declines earlier in the month on buying from China and Europe, data from the cargo surveyors showed.

But the ringgit, which hit its highest in more than a decade on Wednesday, could make ringgit-based palm oil more expensive for price-sensitive consumers, such as China and India.

Production in the Southeast Asian country had moved to a higher gear, with an analyst forecasting output in April would likely rise 5 per cent from last month on the back of widespread rains.

In Malaysia’s physical market, crude palm oil for April shipment in the southern region was quoted at 3,480/3,490 ringgit a ton. Trades were done between 3,470 and 3,490 ringgit.—Reuters