Belitung Timur, Babel – The Indonesian Palm Oil Association (GAPKI) Chairman Eddy Martono underlined the importance of the government’s policy to make Indonesia’s palm oil products more competitive at the global market.
Eddy cited the example of China, one of the main country destinations of Indonesia’s palm oil products, which has started reducing its palm oil imports from Indonesia because the price of Indonesian palm oil is more expensive than the prices of other vegetable oils, such as sunflower.
“The price of palm oil is now more expensive than that of other vegetable oils. As a result, they reduce import from Indonesia and turn to other vegetable oils,” Eddy said in Belitung Timur, Babel, on Wednesday (28/08/2024) in response to the declining trend Indonesia’s export to China.
According to Eddy, the government can apply a fiscal instrument to support the palm oil industry. One of steps that can be taken is to reduce tax in order to reduce palm oil price when it is not competitive at the global market, and raise it again when the palm oil price becomes more competitive.
Eddy reminded that although the palm oil dominates the global market of vegetable oils, its market share is actually only 33 percent. It means, the other 67 percent is controlled by other vegetable oils, including the sunflower.
He said that the palm oil can only control the global price if it has a market share of more than 50 percent at the global market of vegetable oils. “Only if our palm oil products have market share of more than 50 percent, we can control the price. Controlling in a sense that we can play it to our benefits, but we don’t fix it,” he said.
Although Indonesia is the world’s largest producer of palm oil, Eddy said that Indonesia could not determine the price unilaterally. The global price of palm oil is determined by the market mechanism of supply and demand. “Even Malaysia, as the world’s second largest producer of palm oil, could not determine the prices. The global price of palm oil is determined by global supply and demand,” added Eddy.
Based on data from Statistics Indonesia (BPS), Indonesia’s export volume of crude palm oil (CPO) and derivative products in July 2024 reached 1.62 million tons, which sharply decreased year on year (yoy) from that of July 2023 at 2.75 million tons. The export value of CPO and derivative products also dropped by 39.22 percent (yoy) from US$2.28 billion in July 2023 to US$1.39 billion in July 2024. Month on month (mtm), the export value of CPO and derivative products also dropped by 36.37 percent to US$2.18 billion in July 2024. (*)
