When Indonesia's benchmark palm oil price - a price that is adjusted every month - is set between USD $750 and $800, then a USD $3 per ton export tax is applied. However, when the benchmark price is set between USD $800 and $850, then the export tax rises to USD $18 per metric ton. Meanwhile, the Indonesian government had also imposed a USD $50 per ton levy two years ago (when palm oil prices remained low for a sustained period of time implying that the government failed to generate enough revenue from this sector). This levy still applies as well and therefore the competitiveness of Indonesia's palm oil shipments are somewhat undermined now.

Read more: Overview of Indonesia's Palm Oil Industry

Fadhil Hasan, Executive Director at the Indonesian Palm Oil Producers Association (Gapki), said the higher export tax may encourage local producers to sell more of their palm oil output on the domestic market, specifically to the domestic biodiesel industry. Reduced palm oil exports from Indonesia would also imply that global palm oil prices should rise.

Indonesia's Reference Crude Palm Oil Price:

Month      2015
     Price
(in USD/ton)
     2016
     Price
(in USD/ton)
     2017
     Price
(in USD/ton)
January      669.4      557.2      788.3
February      678.5      628.9      815.5
March      662.0      618.8
April      654.6      713.1
May      653.2      703.1
June      665.0      689.5
July      630.6      658.0
August      593.3      734.8
September      526.9      768.6
October      578.2      722.0
November      552.2      743.2
December      560.2      749.5

Source: Trade Ministry of Indonesia

Indonesian Palm Oil Production and Export Statistics:

  2008 2009 2010 2011 2012 2013 2014 2015  2016
Production
(million tons)
 19.2  19.4  21.8  23.5 26.5  30.0  31.5  32.5
Export
(million tons)
 15.1  17.1  17.1  17.6 18.2  22.4  21.7  26.2  25.7
Export
(in USD billion)
 15.6  10.0  16.4  20.2 21.6  20.6  21.1  16.5  17.8

¹ indicates forecast
Sources: Indonesian Palm Oil Producers Association (Gapki) & Indonesian Ministry of Agriculture

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