Indonesian Palm Oil Association Predicted the Crude Palm Oil in 2019 will Grow 5 Percent - Photo by GAPKI 

JAKARTA (TheInsiderStories) – The Indonesian Palm Oil Association predicted that the production of crude palm oil (CPO) in 2019 will grow 5 percent.  In 2018, the palm oil exports (CPO and derivative products, biodiesel, and oleochemicals) posted an increase of 8 percent from 32.18 million tons (MT) of CPO in 2017 to 34.71 MT of CPO in 2018.

Joko Supriyono, head of the association said in the written statement on Wednesday (02/06), this targets based on the improvement of the economic growth, investment, exports to non-traditional markets, national productivity, lowered poverty and thinning economic disparities.

Significant increases were recorded by biodiesel, which amounted to 851 percent from 164.000 tons of CPO in 2017 to 1.56 MT of coal in 2018. The increasing was due after Indonesia winning cases of allegations of anti-dumping biodiesel by the European Union and the World Trade Organization.

The increase in exports was also followed by derivative products of CPO (refined CPO and lauric oil) by 7 percent, from 23.89 MT of CPO in 2017 to 25.46 MT of CPO in 2018. Moreover, oleochemical exports also recorded a 16 percent increase, from 970,000 tons in 2017 to 1.12 MT of CPO in 2018.

In contrast, CPO products showed a decrease of 8 percent or from 7.61 MT of CPO in 2017, declining to 6.65 MT of CPO in 2018. This decline shows that Indonesia’ palm oil downstream industry continues to grow so that products with added value or derivative products are higher in exports compared to CPO.

Meanwhile, the average CPO price in the year was US$595.5 per metric ton or decreased 17 percent compared to 2017 amounting to $714.3 per MT.

This significant decline in prices was due to several factors, for example the world’ vegetable oil stocks including Indonesian and Malaysian oil, United States (US) – China trade war, weak buying days in export destination countries and regulatory issues of export destination countries. In addition, the weak global palm oil prices also eroded the foreign exchange generated even though the export volume increased.

The value of Indonesia’ palm oil foreign exchange revenues contribution in 2018 is estimated to reach $20.54 billion, or decrease 11 percent from 2017 amounting to $22.97 billion. Even so, in 2018 there was an increase in the volume of exports to various countries.

China for example, posted an increase in imports of 4.41 MT of CPO, up 18 percent compared to 2017 of 3.73 MT of CPO. Then followed by Bangladesh (16 percent), Pakistan (12 percent), and the US (3 percent).

Conversely, there was a decline in imports in countries such as India  dropped 12 percent to 7.63 MT of CPO from 2017 6.71 MT of CPO, Middle East slashed 9 percent to 1.94 MT of CPO compared to 2017 2.12 MT of CPO, and the European Union lowered 5 percent from 5.03 MT of CPO to 4.78 MT of CPO in 2018.

The cause of the sharp decline in exports to India in April and May 2018 was due to the policy of the Indian government which increased 44 percent CPO import duties and 54 percent refined products which came into force from March 1, 2018.

Nevertheless, the absorption of domestic CPO in 2018 has increased. Through the mandatory B20 program the absorption of biodiesel in 2018 reached 3.8 MT of CPO, up 72 percent compared to 2017 which was only 2.22 MT of CPO. This shows that the B20 program runs consistently and the possibility of B30 acceleration this year.

If B30 can be realized faster and Indonesia state-owned power producer PT Perusahaan Listrik Negara can quickly absorb biodiesel around 2.4-2.5 million kiloliters, of course the domestic market needs will be even greater.

Therefore, the association has committed to several issues, including improving the domestic investment climate, advocating for various regulations in the region, encouraging the acceleration of sustainability, increasing export volumes and making the palm oil rejuvenation program and replanting programs successful fostering self-help of oil palm farmers.

This is in line with the government’s efforts to encourage increased exports in the short term through eliminating the obligation of Surveyor Reports on exports of certain commodities as well as reducing export-limited restrictions.

In the initial stage, the government has identified four export commodity groups that will be abolished by their export SR obligations, namely CPO and derivatives, gas exported through pipes, semi-finished rattan and log wood from industrial plants.

However, the association still requested that the government need to clarify which surveyor’s report would be abolished. For example, palm oil exporters also complement SR because they are often required by buyers in export destinations.

Written by Daniel Deha, Email: theinsiderstories@gmail.com

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