Oil Palm Planters May Have To Pay Windfall Tax Again

PETALING JAYA: Oil palm companies in Peninsular Malaysia may start paying windfall tax again should the price of crude palm oil (CPO) continue to stay above RM2,500 per tonne. For planters in the peninsula, the CPO threshold price was raised to RM2,500 per tonne from RM2,000 and that in Sabah and Sarawak to RM3,000. Planters stopped paying the windfall tax when CPO prices dropped to below RM2,000 per tonne last year. Analysts said the RM2,500 price level, where the windfall tax levy would kick in for companies in the peninsula, had become the psychological resistance level. Last year, the CPO price rallied and breached the RM4,000 level and peaked at RM4,486 per tonne in March. Following its peak, the CPO price entered into a correction mode and fell to levels between RM3,000 and RM3,500. When the commodity bubble burst in July 2008, the CPO price fell further to RM1,417.50 per tonne in October. “We cannot tell what is going to happen anymore, given the events that took place over the past 12 months. “I cannot predict what will be the movement to the CPO price but if you have a situation where the petroleum crude price is going up, then chances are CPO prices will go up too,” a local bank-backed analyst said. He said the wild swings in CPO prices last year, ranging from RM4,400 to RM1,400 per tonne, were unlikely to be repeated again next year. However, he said, CPO prices were expected to climb again in the long term as the global economic situation improved and demand for biofuel kicked in. “If the price continues to maintain its uptrend, the possibility of plantation companies needing to pay windfall tax is higher,” he added. The analyst expects CPO prices to trade between RM2,300 and RM2,400 per tonne. Interband Group senior trader Jim Teh believes CPO prices will fall below the RM2,500 per tonne threshold next week in order for it to rise again. He said the uptrend was limited as most traders were not in the market at the moment. “The current CPO prices are mainly boosted by speculative interest as trading volumes are low. There’s no physical trading, mainly paper trading,” he said, adding that the current CPO price was considered high. He said the production cost of CPO was RM1,200 to RM1,500 per tonne. The new year would present a good opportunity for the Securities Commission to start “doing some homework” to monitor whether there was real trading or just paper trading on CPO prices, Teh said, adding that he expected CPO prices to average RM2,300 to RM2,500 per tonne in the first half of 2010. Jupiter Securities head of research Pong Teng Siew anticipates the RM2,500 per tonne psychological resistance level to be broken in the long term. He said prices tended to “hesitate and slow down” once it reached the resistance level but a gradual crippling was expected due to cyclical and seasonal factors. Pong expects an immediate correction in March 2010 due to the seasonal production period. However, he said, prices would not come down drastically as the El Nino weather phenomenon would cushion the situation. Source: The Star by Leong Hung Yee

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