Jakarta, CNBC Indonesia – After the price shot up for three consecutive weeks, the price of palm oil (crude palm oil/CPO) this week’s benchmark immediately turned upside down.
Throughout this week, the price of CPO on the Malaysian stock exchange for the June 2022 contract fell by 16.07% on a global basis point-to-point ke level RM 5.629/ton.
From late February to last week, CPO prices shot up quite high, even touching a record high of US$ 7,074/ton on March 9.
After the price rose, investors began to realize their profits this week and the price began to reverse direction. Even so, the price of CPO itself is still around the level of RM 5,000/ton.
Apart from profit-taking by investors, the price of crude oil, which fell more than 4% this week, also affected the movement of CPO prices.
This week, The price of Brent contract oil fell 4.21% compared to last week’s closing position to the level of US$ 107.93/barrel. Meanwhile, West Texas Intermediate (WTI) contract oil fell 4.23% to US$ 104.7/barrel.
According to The Straits Times, Hong Leong Investment Bank Bhd, also known as HLIB Research, said that CPO prices will remain high for a while, possibly until the end of June.
This is supported by the disruption of palm oil supply in Malaysia that will persist in the next few months, the uncertainty of production in sunflower seed oil from the Russia-Ukraine conflict, as well as the drought crisis in South America for soybean oil.
Although the Malaysian Palm Oil Board projects that Malaysia’s CPO production will increase by 4.9% or 19 million tonnes this year, production will depend on the arrival of foreign workers and adequate fertilizers.
In the midst of the collapse in CPO prices, the Indonesian government announced to abolish the Domestic Market Obligation (DMO) policy which requires CPO producers to sell 30% of their CPO production domestically.
However, the government changed the policy by significantly increasing the CPO Export Levy (DP) and Export Duties (BK), in an effort to control local oil prices after previous policies failed to address domestic problems.
According to a Ministry of Trade regulation, the latest policy will increase the export tariff from US$375/ton to US$675/ton. The maximum limit for levies is increased from US$1,000/ton to US$1,500/ton
The government said it would use the funds to subsidize the sale of bulk cooking oil for the next 6 months with an estimated subsidy cost of 202 million liters per month which is equivalent to a value of US$500 million.
Indonesian CPO exporters are required to pay an export tax on palm oil shipments above the maximum export levy of US$200/ton.
CNBC INDONESIA RESEARCH TEAM
(chd / chd)
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