Change in Indonesian Tax Rate Drives Rally in Palm Oil Soybean oil prices rose on Friday. However, despite sharp gains in palm oil and a rally in soybean futures, the increases in nearby contracts were minimal, and the benchmark contract settled slightly lower (March contract -3 basis points per pound). Contracts with summer or later deliveries rose about 3/4 percent (December contract +27 basis points). The liquidation of bull spreads ahead of the monthly Fats and Oils report, scheduled for release on Monday, may have driven the weakness in the front end of the curve may have been. However, technically-driven selling above the upper Bollinger band also likely contributed to the drop in the nearby contract. The benchmark palm oil contract gained about three percent (April contract +102 ringgit per tonne) as trading resumed after a national holiday on Thursday. News that the Indonesian government would raise export taxes and levies on palm oil shipments contributed to the bullish tone. The increase will make Malaysian exports more competitive, which could drive a recovery in shipments following a drop of more than 35 percent during the first 25 days in January compared with the same period in December. The expectation that Malaysian shipments would accelerate when production is nearing the bottom of the seasonal decline and stocks are historically tight will likely continue to support gains in palm oil. A plan released by the Indian government to boost domestic oilseed production had a limited impact on the market. Solid gains in vegetable oil futures on the Dalian exchange highlighted the potential for increased exports to China to offset any future decrease in shipments to India. The relative movements continued to narrow the spread between soybean oil and palm oil contracts. The spread for March contracts dropped below 3 1/2 cents, more than two cents below the peak set on Tuesday. The May spread fell below 6 1/2 cents, about 1 1/2 cents below the peak of 7.7 cents set on Wednesday. The Jacobsen expects the spreads to continue to narrow and believes the May contracts could ultimately drop below two cents.