CPO Export Levy Removed Temporarily, Oil FFB Prices Crawled Up

The Indonesian Palm Oil Farmers Association (Apkasindo) noted that the price of fresh fruit bunches (FFB) has climbed to above Rp 1,000 per kg earlier this week. The increase in FFB prices was driven by the government’s policy regarding the Export Levy (PE) of crude palm oil (CPO) of 0% which was applied from July 15 to August 31.

Based on Apkasindo data, the average price of FFB from independent smallholders is IDR 1,084 on July 16, 2022. Before the export levy policy was announced, the price of FFB from independent smallholders was IDR 916 per kg on July 14, 2022.

The lowest prices for independent smallholders’ FFB are in four provinces, namely West Sumatra, Aceh, East Kalimantan, and Gorontalo. Meanwhile, the lowest price of FFB from partnered smallholders is Rp. 1,050 in East Kalimantan.

The chairman of Apkasindo, Gulat Manurung, said that the 0% export levy policy could boost CPO prices. According to him, the acceleration of exports is very important because a high volume of palm FFB harvest is projected to occur in August 2022. This means that there is a potential for palm oil FFB to not be absorbed by PKS with the current condition of storage facilities.

“Delay in making a decision (to export CPO) could have fatal consequences nationally and the investment of 6.72 million hectares of oil palm farmers will lose mass. We, at the farmer level, can calculate a little more carefully,” said Gulat.

However, Gulat considered that the policy to eliminate PE CPO was still not enough. According to him, the government needs to evaluate the policy on domestic market obligations (DMO), domestic price obligations (DPO), and Flush-Out (FO) taking into account the decline in CPO prices on the international market over the past 2 weeks.

Based on data from the Indonesian Palm Oil Association (Gapki), domestic CPO prices have penetrated Rp 18,000 per Kg in June 2022. However, CPO prices have continued to weaken and were lower than Rp 7,000 per Kg in early July 2022.

In addition, Gulat recorded that the domestic CPO stock at the end of July 2022 had reached 10.9 million tons. This figure is three times higher than CPO reserves under normal conditions of 3 million tons per month.

If the DMO, DPO and FO do not apply, the cost of exporting CPO that must be paid by exporters is only US$ 288 per ton as export duty (BK). Thus, the price of smallholder FFB can be sold for Rp. 3,980 per kg per day, Monday (18/7).

0% Export Fee

The Ministry of Finance reduced the export levy for palm oil products and their derivatives to 0% which is valid until the end of August. This policy aims to accelerate exports of these commodities, which were hampered by the export ban policy last May.

Minister of Finance Sri Mulyani said the tariff change was as stated in Minister of Finance Regulation (PMK) No. 115 of 2022. This tariff change is effective from the date of promulgation on July 15 until the end of next month.

“Until August 31, 2022, the export levy will be reduced to 0 dollars for all products related to palm oil,” Sri Mulyani told reporters in Nusa Dua, Bali, Saturday (16/7).

However, the tariff reduction incentives will be revoked starting in September. Export levy tariffs will again become progressive following prices starting September 1st.

This means that if the price of palm oil products is low, the tariff will also be low. Sri Mulyani did not specify how many progressive tariffs will be imposed from next September. The implementation of progressive tariffs after more than a month of being given a 0% tariff is intended so that the support program by the Palm Oil Plantation Fund Management Agency (BPDPKS) can return to normal.

“This is with the aim that we through BPDPKS can get funding to then provide price stability programs such as through biodiesel and also cooking oil price stability,” he said.

The Indonesian Palm Oil Association (Gapki) stated that the total export of Indonesian palm oil products in April 2022 was 2.01 million tons. This number is lower than exports in April 2021 which reached 2.63 million tons.

Reporter: Andi M. Arief