CPO Export Ban, Indonesia to Have Excess of 32 Million Tons of Palm Oil

Arfi Bambani
Oil Palm Fruits in Mulieng Manyang Village, North Aceh Utara, Aceh
Oil Palm Fruits in Mulieng Manyang Village, North Aceh Utara, Aceh - An economist from Mulawarman University Muhammad Ikbal said the government's decision to stop exporting palm oil to foreign countries, especially China and India, had a tremendous impact on domestic palm oil supply and Indonesia would have an excess of 32 million tons of palm oil. Another watchdog says the ban will increase CPO prices.

"The domestic palm oil production is around 50 million tons with a Domestic Market Obligation (DMO) of only 18 million tons, which is divided into several industries, including biodiesel and cooking oil," explained Ikbal in Samarinda, Thursday, April 28, 2022.

"The rest, Indonesia will overproduce around 32 million tons. This is a problem because palm oil must be harvested and must be produced," he said.

Palm oil is different from coal commodity, which if left for a while after being mined will not reduce its price. Meanwhile, if China and India give a reply, he admits that it will have no impact on East Kalimantan (Kaltim) because some of the products imported from China and India are chemical raw materials such as metal, synthetic rubber, paper, iron, and steel.

"This is not a problem because there are other sources of imports that we can divert, namely Brazil and Japan, which are exporters to Indonesia for these industrial raw materials," he explained.

He emphasized that if there was a retaliatory attack from China and India, it was likely that Java and its surroundings would be affected because the chemical industry in East Kalimantan was relatively small. One threat to East Kalimantan is that in the short term, oil palm farmers will experience a decline in prices so they cannot sell and resulting in low incomes.

"In the end, there will be a degradation in people's purchasing power, especially oil palm farmers. If they are big planters, they have the capital to survive," he said.

The Accounting Lecturer at Mulawarman University believes that the government's policy is to take action from the supply side. That is, when the supply is more, it can reduce the price of domestic cooking oil.

"The government has also promised that this policy will only last a short time, about 20 days to two months. After domestic prices have stabilized, exports will be reopened," he explained.

Will Raise CPO Prices

Founder and Executive Director of PalmOil Agribusiness Strategic Policy Institute (PASPI) Tungkot Sipayung said the temporary ban on exports of crude palm oil (CPO) should increase the price of fresh fruit bunches (FFB) sold by farmers due to the rising international CPO prices due to this policy. Sipayung said at the GenSawit Corner Talkshow in Jakarta, Thursday, that the price of FFB is based on international CPO prices, so if the world CPO price increases, the price of FFB sold by farmers will also increase.

"The price of FFB at the farmer level is basically the international price of CPO. Did the international price increase or decrease due to the export ban? In fact, the world CPO price has gone up, the FFB farmers should have increased," he said.

He explained that the temporary suspension of CPO exports had nothing to do with FFB prices at the farmer level and CPO production. According to him, palm oil mills (PKS) should not be difficult to absorb FFB produced by farmers during the policy of banning palm oil exports.

"Is it difficult for PKS owners to accommodate farmers' FFB because there is no distribution? No. Because so far 97 percent of CPO has entered the refinery, it can be used as cooking oil, it can be biodiesel," he said.

Sipayung explained that currently, palm oil entrepreneurs are getting higher profits because the price of CPO is rising again.

Management of the Communications Division of the Indonesian Palm Oil Association (Gapki) Fenny Sofyan said that if there was a fall in FFB prices at the farmer level due to the export ban policy, it was only a temporary panic reaction. Fenny confirmed that the FFB price was based on the previous month's international CPO price.

In addition, the price of FFB is also evaluated every month based on the world CPO price and is determined jointly and cannot be determined unilaterally. "So it can't go up or down," she said.

Tag # indonesia palm oil # cpo export ban # indonesia palm oil industry # indonesia industry # indonesia export # palm oil

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