Indonesia: CPO Export Drops But Price on the Rise

TEMPO.CO, Jakarta – Indonesia`s export of crude palm oil (CPO) and its derivatives fell by nearly 2 percent to 25.7 million tons in 2016 from 26.2 million tons in 2015.

Despite export decline, the price of crude palm oil (CPO) is on the rise, reflecting a good trend, and has reached Rp9.140 per kilogram (kg), as recorded by the Joint Marketing Office (KPB) of PT Pekebunan Nusantara on January 9.

“The CPO business was now thriving well because apart from the improving price, the demand for this commodity is also increasing,” Chairman of the Indonesian Palm Oil Association (Gapki) for North Sumatra, Setia Dharma Sebayang, said in Medan on Saturday.

In Rotterdam, the CPOs price was US$180 per metric ton. He said the CPOs price was improving on account of many factors, such as an improvement in the global economy.

The price of and demand for CPO is predicted to remain positive, he added.

“While the price of CPO and its demand are improving in North Sumatra, North Sumatras foreign exchange reserves are also expected to increase,” Sebayang noted.

The head of North Sumatras Central Bureau of Statistics (BPS), Bismark Soar Pardamean Sitinjak, explained that in 2016, export of CPO from North Sumatra had fallen but the decline was increasingly small when compared to the situation in 2015.

Until November 2016, the CPOs exports had come down by 0.84 percent from the 2015 level, reaching US$2.996 billion.

In Jambi Province the CPO price was also raised by Rp20 per kg to Rp8,645 for January 13 to 19, from Rp8,625 per kilogram in the previous week.

“In addition to CPO price, the prices of fresh fruit and palm kernel were also raised from the previous week,” A member of the Jambi palm oil price fixing team Putri Rainun said on Saturday.

The price of palm kernel for next week is raised by Rp43 to Rp8,805 per kilogram, Putri said. She said the prices of fresh fruit bunches (FFB) of oil palm ranged from Rp1,660 to Rp2,143 per kilogram depending on the ages of the trees.

The prices are higher for the FFB of older trees peaking when the trees are at the age of 10-20 years, but the prices decline after the tree are older than 20 years.

The price of FFBs of four years trees are set at Rp1,660 and the prices peak at Rp2,143 per kg for the trees aged between 10 year and 20 years. The prices are set lower at Rp2,081 per kg for FFB of trees 21-24 years in age and Rp1,890 for tree older than 24 years.

The prices are set by a special price formulating team made up of business players, cooperatives and local oil palm farmers.

Jambi is one of the countrys palm oil producing province with 962,000 hectares of oil palm plantations. Indonesia is the worlds largest producer of palm oil.

However, Indonesias export of crude palm oil (CPO) and its derivatives fell by nearly 2 percent to 25.7 million tons in 2016 from 26.2 million tons in 2015 from after-effects of the El Nino weather phenomenon.

“At the end of 2015, oil palm fruit production fell due to the El Nino-induced drought for all of 2015. Exports fell 2 percent by volume as production dropped by 7 to 30 percent,” President Director of the Oil Palm Plantation Fund Managing Board (BPDP) Bayu Krisnamurthi said at a press conference in Jakarta Tuesday (Jan 10).

Although the export volume of CPO, palm kernel oil (PKO) and their derivatives went down by 2 percent, the export value of palm oil rose by 8 percent to US$17.8 billion or Rp240 trillion from $16.5 billion or Rp220 trillion a year earlier, he said.

The increase in the export value was caused by the improving global CPO prices which increased by 41.4 percent in 2016. The CPO prices stood at $535 per ton in June 2015, rose to $558 per ton in January 2016 and further moved up to $789 per ton in December 2016.

Yet, the BPDP has asked exporters to pay attention to the latest CPO price which is too high because it can reduce Indonesias competitive edge in the vegetable oil market.

“We know that Indonesian palm oil has to compete with soybean oil, so if the palm oil price is too close to the soybean oil price, our competitive edge will decline,” he said.

Indonesia is currently the worlds biggest CPO producer.

In 2015, Indonesias CPO production reached 32.5 million tons, with exports reaching 26.4 million tons. The export value went down from $21.1 billion in 2014 to $18.6 billion in 2015.

Currently, Indonesia has 10 million hectares of palm oil plantations. Of this total, some eight percent are managed by state companies, 49 percent by private CPO industries, and the remaining percentage belongs to small farmers.

Oil palm plantations could serve as a regional and international economic power in the agricultural sector through various innovations and breakthroughs by the government and the private sector.

In 2013, the worlds CPO import had reached US$42.7 billion. Of that amount, Indonesia had contributed some US$17.3 billion, or about 43.68 percent of the global requirement, while Malaysia had supplied US$14.9 billion, or about 36.4 percent.


Source: https://en.tempo.co/read/news/2017/01/15/056836272/CPO-Export-Drops-But-Price-on-the-Rise