Jakarta, CNBC Indonesia – The price of crude palm oil (CPO) fell in today’s trading. On Thursday (5/5) at 11:15 WIB, the price of CPO on the Malaysian stock exchange plunged 3.7% to a level of RM 6,841 per tonne.
The drop in CPO prices is the opposite of what happened last week. As is known, CPO trading on the Malaysian stock exchange is closed Monday-Wednesday (2-4 April 2022) due to the Eid holiday. At the end of last week’s trading, CPO price closed at 7,104 ringgit/ton. This is the highest record in history.
In a week, CPO prices fell 3.7% point to point. In a month, CPO prices rose 15.71% while in a year rose 62.3%.
Last week, the price of CPO shot up after President Joko Widodo banned the export of CPO and its derivative products. The prohibition policy applies to all products, be it CPO, RPO (Red Palm Oil), RBD (Refined, Bleached, Deodorized) Palm Olein, Pome, and used cooking oil.
The contribution of CPO in global vegetable oil exports is estimated at 60%. With total exports reaching 33.67 million tonnes in 2021, Indonesia is the largest exporter of CPO and the third largest vegetable oil exporter in the world.
As the largest producer and exporter of CPO in the world, Indonesia’s policies greatly affect the rate of global CPO prices. After soaring last week, CPO prices began to fall this week.
“Indonesia’s policies in the short term will affect global vegetable oil prices. CPO prices will soar. However, this will only be temporary and in the short term,” said Datuk Zuraida Kamaruddin, Malaysian Minister of Commodities and Plantation Industries, as quoted from The Sun Daily Malaysia.
He added that global supply would find its balance again. In the long term, supply and demand will be balanced as production increases in Malaysia and South America.
Domestically, the price of Fresh Fruit Bunches or FFB in Indonesia continues to decline following the ban on exports of CPO and its derivative products. The abundant supply in the country makes prices continue to fall. Referring to data from the Indonesian Palm Oil Association (GAPKI) North Sumatra which is accessed from the website gapkisumut.orgFFB prices from 27 April to 10 May 2022 decreased by 7.8% on average compared to the previous week.
The price of FFB for 3 years of planting is sold at Rp. 11,219.42 per kg, down from the previous week which was recorded at Rp. 3,073.23 per kg. For 5-year-old FFB, this week’s price was recorded at IDR 3,279.22 per kg, much lower than last week’s IDR 3,555.05.
Meanwhile, for FFB with a planting age of 10-20 years, the FFB price this week was recorded at Rp. 2,651.15 per kg, down from the previous week, which was Rp. 3,959.61.
Board Member Center for Indonesian Policy Studies (CIPS) Arianto Patunru warned that the ban on the export of CPO and its derivatives would result in Indonesia being flooded with domestic palm oil stocks.
“As a result, the price of fresh fruit bunches will fall freely and this will harm oil palm farmers. This prohibition will also disrupt economic recovery. Exports of CPO and its derivatives can reach around 10% of Indonesia’s total exports,” he said in an official statement.
With the export ban, Indonesia’s Gross Domestic Product (GDP) will decline so that the economic recovery process will be disrupted.
CNBC INDONESIA RESEARCH TEAM
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