On 1 May 2016, 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 over the last seven days. Most of the topics involve political and economic matters such as the 12th economic policy package, problems related to the land reclamation project off the coast of Jakarta, an update on inflation, the palm oil industry, smartphone usage, the most profitable companies, and much more.

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For the first time since October 2014, Indonesia's palm oil exporters will have to pay an export tax on crude palm oil (CPO) shipments as the government's reference CPO price was set at USD $754.10 per ton in May (the level of USD $750 per ton separates taxable from non-taxable shipments). The Indonesian government announced that it will impose a USD $3 per ton tax on CPO exports in May 2016. Palm oil is the key foreign exchange earner for Indonesia in terms of non-mining export products. The country is the world's largest producer and exporter of CPO, followed by Malaysia.

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Franky Oesman Widjaja, Chairman of Sinar Mas Agribusiness & Foods, expects Indonesia's crude palm oil production in 2016 to drop by 5-10 percent (y/y) due to the impact of the El Nino weather phenomenon that brought extreme dry weather to Southeast Asia in 2015. However, in several Indonesian regions palm oil plantations are now being plagued by floods giving rise to speculation whether El Nino is to be followed by La Nina. La Nina - the opposite of El Nino - brings cooler than average sea temperatures in the central and eastern tropical Pacific Ocean causing wetter-than-usual weather in Southeast Asia.

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On 24 April 2016, 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 over the last seven days. Most of the topics involve political and economic matters such as Joko Widodo's visit to Europe, the monetary policy of Bank Indonesia, Indonesia's Gini ratio, the palm oil and coal sectors, foreign ownership of property in Indonesia, the problems surrounding infrastructure spending in Indonesia, and more.

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Riset Perkebunan Nusantara, a state-owned research firm, expects Indonesia's crude palm oil (CPO) production to drop 4.2 percent (y/y) to 32 million tons in 2016. The firm further adds that in 2015 Indonesia had a total of 11.3 million hectares of palm oil plantation, consisting of plantations owned by the state (750,000 hectares), plantations owned by the private sector (5.97 million hectares) and plantations owned by smallholders (4.58 million hectares). The palm oil sector is one of Indonesia's key foreign exchange earners. Indonesia is the world's largest producer and exporter of palm oil, followed by Malaysia.

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Bayu Krisnamurthi, President Director of the Indonesian Oil Palm Estate Fund (BPDP-KS), said total exports of palm oil and its derivatives in the first quarter of 2016 reached 7.42 million tons. It is interesting to note that 87.2 percent of this total figure (or 6.47 million tons) comprises processed palm oil products, while the remainder consists of crude palm oil (CPO), implying that the downstreaming of the palm oil sector is developing smoothly. Krisnamurthi says the imposition of export levies on CPO has managed to encourage the development of downstream industries in the nation's palm oil sector.

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On 17 April 2016, 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 over the last seven days. Most of the topics involve hot topics and economic matters such as an update on GDP growth, Bank Indonesia's new benchmark monetary tool, the palm oil sector, the coal price, the trade balance, an excise tax on plastic items, and more.

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Nine or ten crude palm oil (CPO) producers want to join the Council of Palm Oil Producer Countries (CPOPC), the intergovernmental palm oil council set up by the world's two largest CPO producers and exporters: Indonesia and Malaysia. These two initiators signed an agreement in November 2015 for the establishment of the CPOPC - headquartered in Jakarta - that aims to control the global CPO supply, stabilize palm oil prices, promote sustainable practices in the palm oil industry, and enhance the welfare of oil palm smallholders; more or less the role that OPEC has in the crude oil industry.

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On 3 April 2016, 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 over the last seven days. Most of the topics involve economic matters such as Indonesia´s 11th economic policy package, the latest inflation and manufacturing figures, an update on palm oil export, tenders for geothermal power development, fruit export, the fuel price policy, and much more.

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Global ratings agency Fitch Ratings cut its outlook on three Indonesian palm oil companies - Sinar Mas Agro Resources and Technology (SMART), Ivo Mas Tungkal, and Sawit Mas Sejahtera - from stable to negative. The rating of the three companies was cut to AA (idn) by Fitch Ratings Indonesia. However, an AA (idn) rating still denotes a low probability of default for the company and its bonds. The rating of bonds of SMAR, due in 2017 and 2019, were also cut to AA (idn). The three palm oil companies are owned by Golden Agri Resources, part of the Sinar Mas Group that is controlled by Eka Tjipta Widjaja, one of the richest Indonesians.

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Indonesia's largest supplier of crude palm oil (CPO), Astra Agro Lestari, is expected to see improving corporate earnings in the years ahead on the back of the rising CPO price and expectation of the company's climbing CPO production volume. The year 2016 was a good year for Astra Agro Lestari as it reported a 224.2 percent year-on-year (y/y) jump in net profit and a 7.6 percent (y/y) increase in sales, led by sales of CPO and derivative products. This was a great recovery from the preceding year. CPO and derivative products account for more than 86 percent of the company's total sales.

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The completion of its factory and being granted an additional sugar import quota is expected to boost corporate earnings of Tunas Baru Lampung, one of Indonesia’s leading producers of vegetable cooking oil (covering palm and coconut cooking oil). Furthermore, the company will feel the positive impact of rising crude palm oil (CPO) prices. Tunas Baru Lampung is part of the Sungai Budi Group, an Indonesia-based manufacturer and distributor of agricultural consumer products.

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The higher crude palm oil (CPO) price will have a positive impact on the corporate earnings of Indonesian CPO producers, including Sampoerna Agro. Benchmark palm oil futures for March 2017 delivery on the Bursa Malaysia Derivatives Exchange were at 3,161 ringgit (approx. USD $706) per ton at the end of last week, near a four and a half year high. However, not all analysts advise investors to purchase shares of Sampoerna Agro, a company that is listed on the Indonesia Stock Exchange.

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Indonesia's Industry Ministry selected the industrial estate in Berau (East Kalimantan) as the center for the downstream palm oil industry in Kalimantan. Furthermore, Panggah Susanto, the Industry Ministry's Director General for Agriculture industry, said the government proposes to select Berau as one of the palm oil centers within the Palm Oil Green Economic Zone (POGEZ) scheme. Berau is chosen to replace Bontang because the former has 3,400 hectares of (clear and clean) industrial land available, while land in Bontang still falls under "protected forest" status.

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Non-governmental environmental organization Greenpeace blocked all import and export channels of crude palm oil (CPO) trader IOI on Tuesday morning (27/09) in the harbor of Rotterdam (the Netherlands), the city that acts as palm oil’s gateway into Europe. Greenpeace activists decided to take action after a Greenpeace International report showed that palm oil from companies that are reportedly involved in forest destruction, peatland fires and child labor is still flowing into Europe and the USA through IOI facilities.

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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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Expectation of rising fresh fruit bunches (FFB) and crude palm oil (CPO) volumes in the second half of the year should boost the corporate earnings of Astra Agro Lestari, one of Indonesia's leading agribusiness companies. Meanwhile, sentiments related to the La Nina weather phenomenon and rising CPO demand on the back of the Indonesian government's biodiesel program should support CPO prices. Astra Agro Lestari is the plantation unit of diversified conglomerate Astra International.

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Indonesian President Joko Widodo has ordered the nation's Minister of Environment and Forestry Siti Nurbaya to issue a moratorium on new palm oil concessions in a number of provinces. Although Widodo wants Indonesia - the world's top producer and exporter of crude palm oil (CPO) - to raise CPO output, he believes this increase can be achieved by increasing productivity of existing palm oil plantations, not by adding new plantations. Indonesia is often criticized by environmentalist groups for its forestry policies and poor law enforcement (which led to the severe haze that spread through Southeast Asia last year).

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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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Crude palm oil (CPO) production in Indonesia and Malaysia is expected to decline due to the impact of the El Nino weather phenomenon (that brought a prolonged dry season to Southeast Asia). CPO production in Malaysia could fall between 1.5 and 2 million tons this year according to Dorab Mistry, Director at Godrej International. Declining output in the world's two leading palm oil producers and exporters implies that palm oil prices should be able to rise further. At the start of this week palm oil futures traded in Kuala Lumpur (June delivery) rose to 2,779 ringgit (approx. USD $695) per ton, the highest level since March 2014.

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