CPO price fall this year predicted to continue in 2013

CPO price fall this year predicted to continue in 2013

Palm oil. (ANTARA/Rosa Panggabean)

"This year`s production is predicted to reach only 25.5 tonnes."
Jakarta (ANTARA News) - This year, the Indonesian crude palm oil (CPO) industry has witnessed a decline in its commodity prices.

The CPO industry had recorded a good performance in 2011 when palm oil production increased by 7.3 percent, reaching 23.5 million tonnes. The export value of palm oil increased by 5.7 percent and reached 16.5 million tonnes.

The price of palm oil had also increased by 24 percent, and it had reached US$1.125 (CIF Rotterdam) per tonne in 2011. However, this year, the price fell to US$900 per tonne," said Indonesia`s Palm Oil Council Chairman (DMSI), Derom Bangun.

Even, he said, it is predicted to decline further to US$850 per tonne because of the ongoing global crisis.

Although the production of palm oil has increased to 25.5 million tonnes this year, the world`s CPO price in 2012 fell to about US$900 per tonne, lower than what experts had predicted (US$1,100 per tonne).

There has been a stark increase in the world`s CPO price because some countries feel that CPO is not an environmentally friendly product.

France, Indonesia`s main CPO export market in Europe, is threatening to impose a 300 percent import duty, which can reduce the competitiveness of Indonesia`s CPO in France.

The Indonesian Palm Businessmen Organisation (GAPKI) has urged the Indonesian government to fight against the proposed hike of CPO`s import tax (300 percent in France).

"The government should prevent this new regulation from coming into force by urging French officials not to increase the import tax. They should convince the French officials that CPO is healthy and environmentally friendly," said Fadil Hasan, GAPKI`s executive director.

"As our palm commodities and CPO enter the global market, the European nations want Indonesia to export oil palm products of superior quality," he noted.

According to Derom Bangun, threats against Indonesia`s CPO in France are becoming more intense with each passing day. France will be launching an anti-CPO campaign by putting CPO-free labels (Sans Huile de Palme) on the packaging of its food products.

"Threats are increasing because France is planning to impose additional taxes on Indonesia�s CPO. It is considering raising the CPO import tax from 98.74 Euros per tonne to 300 Euros per tonne," said Derom Bangun.

The Indonesian government has worked hard to convince the world that CPO is environmentally friendly. It had also tried to convince the world during the Asia-Pacific Economic Cooperation (APEC) forum last September.

However, leaders and representatives from 21 member countries did not include CPO in the list of 54 environmentally friendly goods.

Products on the list can be exported to countries, with a reduction in the import tax by up to 5 percent by 2015.

The Indonesian Association of Palm Oil Companies (GAPKI) is unhappy that the APEC had not added CPO to the list.

Yet, the Indonesian Chamber of Commerce and Industry (Kadin) is optimistic that CPO will be added to the list of APEC`s green products at a later stage. The approved items are environmentally friendly products.

"The exclusion of CPO from the list of environmentally friendly products is not a failure. It is only a matter of time (before crude palm oil is included in the list). The Indonesian government is still fighting to ensure that CPO is added to the list," said Suryo B Sulisto, chairman of the Indonesian Chamber of Commerce and Industry.

GAPKI`s chairman, M Fadhil, added that the demand for Indonesia`s CPO will continue to grow in the world market. "There is a possibility that import duties on CPO will be reduced, based on several bilateral trade agreements," he said.

The Head of the Fiscal Policy Agency, Bambang Brodjonegoro, said Indonesia can propose a tariff reduction facility through the Free Trade Agreement (FTA) mechanism.

"Indonesia can propose a free trade agreement with Pakistan. We can export CPO to Pakistan with a free import tax tariff," he said.

Indonesia, the world`s largest crude palm oil producer signed a preferential trade agreement (PTA) with Pakistan in February. Under the PTA, Indonesia hopes that it can boost its annual exports of palm oil to Pakistan to over US$550 billion in the coming years.

The value of Indonesia`s palm oil exports to Pakistan had once reached US$550 million per annum, though it had fallen by nearly 75 percent, to below US$100 million, after Malaysia, the world`s second largest producer, concluded a PTA with Pakistan.

"I hope Indonesia will regain the value of its past exports of about US$500 million. This means that we will be able to increase our total exports to Pakistan to US$1.5 billion - 1.6 billion. Indonesia`s total exports to Pakistan now account for about US$1 billion," said the Trade and Industry Minister, Gita Wirjawan.

In 2011, Indonesia`s CPO production was recorded at 23.5 million tonnes, of which 16.6 million tonnes were exported. Palm oil production in 2010 was recorded at about 22 million tonnes, with only 15.6 million tonnes being exported.

By 2020, the country expects to increase its annual production of CPO to 40 million tonnes.

Derom Bangun said the country`s crude palm oil production in 2013 is estimated to increase by around 10 percent, reaching 28 million tonnes.

"This year`s production is predicted to reach only 25.5 tonnes," he said, adding that it will be difficult to increase the production by more than 10 percent, because in the past few years, development of new plantations had not been significant.

In addition, efforts to develop oil palm plantations have also been hindered by various domestic and foreign government policies, including the oil palm moratorium, he said.

"Between 1990 and 1995, Indonesia's national production had increased by 13 percent every year, but after that, production has never reached that level, due to land procurement problems," he said.

Bangun believes that the demand for CPO will rise because of the growing population and industries.

"In 2013, the price of palm oil is projected to remain low, at around US$850 per tonne because of the ongoing global crisis," he said.