JAKARTA, Oct 29: Malaysian palm oil futures finished lower on Wednesday amid worries that buyers will seek palm oil from rival Indonesia after Jakarta scrapped a tax on palm oil exports, traders said.

Indonesia’s finance minister said on Tuesday the export tax on crude palm oil had been cut to zero per cent as part of a package of measures intended to shore up confidence in financial markets.

I think in the long run, a lot of importing countries, especially those with refining capacity like India, will import crude palm oil from Indonesia, said a trader at a Kuala Lumpur-based brokerage.

The benchmark January contract on the Bursa Malaysia Derivatives Exchange finished 24 ringgit lower, or 1.64 per cent, at 1,435 ringgit ($401) a ton.

The January contract hit a low of 1,331 ringgit per ton on Tuesday, the weakest since mid-August 2005.

Contracts of other traded months dropped between 13 ringgit and 63 ringgit. The overall volume stood at 11,970 tons.

The Malaysian government, however, said Indonesia’s move to scrap export tax on crude palm oil should not hurt Malaysian CPO exports or prices.

It’s not a major factor, he said, adding that Malaysia, unlike Indonesia, exports mostly processed palm oil rather than crude palm oil.

The Indonesian government had previously set a 2.5 per cent tax rate for palm oil exports in November, down from 7.5 per cent for October. Indonesia, the world’s top producer of palm oil which is used in a wide range of products from soap to biodiesel - is forecast to produce 18.6 million tons of crude palm oil this year, compared with 17.2 million tons in 2007.

In Jakarta, the state marketing centre said it failed to sell palm oil in an auction on Wednesday.

The tax cut supported local prices and I think it is necessary to help our farmers, a trader in Medan said.

In Jakarta, refiners sold refined, bleached deodorised (RBD) palm olein, which is used in cooking oil, at 4,850 rupiah per kg, unchanged from Tuesday.

—Reuters