There is limited to no room for palm oil prices to rise in the remainder of 2015 as crude palm oil (CPO) reserves have climbed while exports are down. CPO production in Indonesia, the world’s largest producer and exporter of this commodity, may have hit the one-year high of 3.20 million tons in August (from 2.86 million tons one month earlier) as trees reached their peak production period. Meanwhile, India introduced higher taxes for overseas purchases of palm oil in order to protect domestic growers.

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Indonesia’s production of crude palm oil (CPO) is expected to reach 40 million tons in 2020, in line with the government’s national program and downstream CPO roadmap. At the 3rd Indonesia International Palm Oil Processing Machinery & Technology Exhibition, Pranata, Director of Forest and Plantation Industries at the Indonesian Industry Ministry, said that, based on the roadmap, targeted CPO production growth should average 6.8 percent per year up to 2020, so the country will produce 40 million tons by that year.

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After introducing palm oil export levies earlier this month, the Indonesian Finance Ministry announced on Tuesday (28/07) that it has implemented another change in the country’s palm oil industry. From now on, export taxes for crude palm oil (CPO) and other palm oil products will be expressed in US dollar instead of a percentage of the price. Indonesia’s palm oil export tax kicks in when the government’s reference CPO price exceeds USD $750 per metric ton. If the price is below this level, palm oil exporters only need to pay the new export levies.

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On 19 July 2015, Indonesia Investments released the latest edition of its newsletter. This free newsletter, which is sent to our subscribers once per week, contains the most important news stories from Indonesia that have been reported on our website in the last seven days. Most of the topics involve economic subjects such the ADB’s updated economic growth forecasts for the Asian region, Indonesia’s interest rates regime, the June trade balance, the ASEAN Open Skies policy, an update on Indonesia’s palm oil industry, and more.

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Indonesian government officials announced that the recently-unveiled palm oil export levies will be imposed starting from Thursday (16/07). The new rules require that a USD $50 per metric ton levy is imposed on crude palm oil (CPO) exports, and a USD $30 per metric ton levy is imposed on exports of processed palm oil products. These palm oil export levies only need to be paid by exporters when the government’s reference CPO price falls below USD $750 per metric ton, effectively cutting the palm oil export tax to zero.

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Uncertainty remains about the timing of the implementation of Indonesia's new palm oil export levies. In May 2015 Indonesian President Joko Widodo signed a new regulation stipulating that a USD $50 (per metric ton) levy is to be imposed on crude palm oil (CPO) exports, and a USD $30 (per metric ton) levy on processed palm oil product exports. Proceeds from these export levies will be used to fund the Indonesian government’s biodiesel (subsidy) program. However, implementation of the new regulation has been delayed several times.

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Indonesia’s new palm oil export levy is to be implemented in late May 2015. Rida Mulyana, Director General of Renewable Energy at Indonesia’s Ministry of Energy & Mineral Resources, stated that President Joko Widodo signed the regulation last night (05/05). The new levy means that a USD $50 (per metric ton) levy is to be imposed on crude palm oil (CPO) exports, and a USD $30 (per metric ton) levy on processed palm oil product exports. Proceeds from these export levies will be used to fund the government’s biodiesel (subsidy) program.

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Due to rising output amid the start of the seasonal increase in production in Indonesia and Malaysia, the world’s two largest crude palm oil (CPO) producers, CPO prices may touch a six-year low in 2015. According to Dorab Mistry, Director at Godrej International, there is one factor that may be able to block CPO prices from reaching this low and that is the successful implementation of Indonesia’s biodiesel program as this would absorb a significant portion of Indonesian CPO output hence reducing downward pressures on CPO prices.

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After having decided to introduce export levies for palm oil, the Indonesian government is considering to impose similar measures on rubber, coffee and other commodities in a move to generate capital to invest in the country’s agriculture industry. Per April 2015, a USD $50 (per metric ton) export levy is imposed on crude palm oil (CPO) shipments, and a USD $30 (per metric ton) export levy on processed palm oil export products. Proceeds from these CPO levies will be allocated to finance the government’s biodiesel program.

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Crude palm oil (CPO) shipments from Malaysia climbed 18 percent month-to-month (m/m) in March as firms rushed to export CPO ahead of the (re)introduction of a 4.5 percent CPO export tax in April. This export tax had been scrapped since September 2014 in an effort to boost global CPO demand and prices. A median suggests that CPO production in Malaysia rose 18 percent (m/m) to 1.32 million tons in March, which would mean that palm oil production in Malaysia rose for the first time in seven months.

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It is now about one month after the national Idul Fitri holiday when millions of city-dwellers travelled by air, road, rail and water back to their places of origin to spend a couple of days with their (extended) families. The positive news is that this huge movement of people did not lead to an increase in the number of COVID-19 cases in Indonesia.

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Over the past couple of months we have informed on the shortage of cooking oil on the Indonesian market, the subsequent inflationary pressures this shortage caused, and the policies that were imposed by the government to tackle this shortage. But, we did not devote an entire article to this topic.

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The crude palm oil (CPO) price is expected to strengthen in the first quarter of 2018 due to the impact of the La Nina weather phenomenon and rising CPO demand in the traditional big CPO importing countries. This is good news for stakeholders in the palm oil industry as the price has been sliding around 16 percent so far this year (toward the 2,700 Malaysian ringgit per ton level).

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The crude palm oil (CPO) price touched its highest level so far this year. On Tuesday (20/09) palm oil futures (December delivery) - traded on the Kuala Lumpur exchange - ended the day at 2,690 ringgit (approx. USD $651 per metric ton). Palm oil prices are rising as CPO production in Indonesia and Malaysia will remain subdued this year due to droughts that were brought by the El Nino weather phenomenon earlier in 2016, while there is expectation of a rather wet season later this year due to the La Nina weather phenomenon.

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Indonesia's crude palm oil (CPO) exports rose 9 percent month-on-month (m/m) to 2.29 million tons in February 2016 on the back of growing CPO demand in Africa, Bangladesh, India and the European Union. Indonesia's February CPO export volume was better than estimated previously. Analysts had expected a figure below 2 million tons. Combined, Indonesia's palm oil exports reached 4.39 million tons in the first two months of 2016, up 22 percent (y/y) from the 3.59 million tons of CPO that Indonesia exported in the same period one year earlier.

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The crude palm oil business received a blow when France announced it plans to impose progressive tax on imports of crude palm oil and its derivatives. French authorities approved a bill on 21 January 2016 that will raise the import tax on palm oil from around 100 euro per ton currently to 300 euro per ton in 2017. This tariff will then be raised to 700 euro per ton in 2019, and to 900 euro per ton in 2020. Through this tax hike France aims to discourage the palm oil industry, hence curtailing global deforestation as well as to protect its citizens from the negative health effects caused by the consumption of palm oil.

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Agribusiness company Astra Agro Lestari, one of Indonesia's leading crude palm oil (CPO) producers, is expected to show a better performance in 2016 on an expected rise in palm oil prices. Although palm oil futures currently feel the negative effects of tumbling global crude oil prices, these futures are estimated to have risen to about 2,700 ringgit per ton by May 2016 from around 2,385 (approx. USD $540)  per ton currently.

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The world's two largest crude palm oil (CPO) producers and exporters - Indonesia and Malaysia - signed an agreement on Saturday (21/11) for the establishment of an intergovernmental palm oil council, called the Council of Palm Oil Producer Countries (CPOPC), that aims to control the global CPO supply, stabilize prices, promote sustainable practices in the palm oil industry, and enhance the welfare of oil palm smallholders. Both countries will invest USD $5 million each for the set up of this new council. Its headquarters will be located in Jakarta.

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The declining crude palm oil (CPO) price in the world market and the imposition of the USD $50 per ton export levy on CPO by the Indonesian government, effective from 16 July 2015, has severely affected Indonesian oil palm planters with the worst affected being the small holders and plasma farmers as they carry the highest production cost.

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Malaysia, the world’s second-largest crude palm oil (CPO) producer and exporter, will continue its duty-free export tariff for CPO in January 2015 according to information from the Malaysian customs department. Starting from September 2014 Malaysian authorities have implemented a duty-free CPO export policy in an effort to boost global demand and support international CPO prices (which have fallen nearly 20 percent this year). Indonesia, which has seen duty-free CPO shipments since October 2014, is expected to follow suit.

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