InfoSAWIT, JAKARTA – The soaring prices of palm oil are no longer a boon for industry players; Indonesia should be the one controlling the prices. On the other hand, productivity is facing unsatisfactory conditions. The palm oil sector needs good governance.
In a recent discussion, the Chairman of the Indonesian Palm Oil Council (DMSI), Sahat Sinaga, sharply criticized the state of the palm oil industry in Indonesia. He pointed out the anomalies in palm oil prices in the global market, declining productivity, and weak management that have led to significant losses for Indonesia, the world's largest producer.
According to Sahat, the current global palm oil price is at US$ 1,390 per ton, while the domestic price is only US$ 1,328 per ton. This situation is deemed unfavorable for Indonesia because price management is entirely in the hands of brokers in the global stock exchange, not by domestic authorities. “Indonesia, as the largest palm oil producer, does not have control over global market prices. This is a serious weakness that must be addressed immediately,” Sahat asserted.
Sahat also highlighted the continuous decline in palm oil productivity. In 2022, global productivity was still at 4.8 tons of CPO per hectare per year, but it is projected to drop to 4.1 tons of CPO by 2024. In Indonesia, productivity is even lower, at 3.6 tons of CPO in 2023, and is expected to continue declining.
He cited the slow replanting process as a major factor. Replanting, which should be conducted annually, has only reached 8.8 million trees, far below the ideal requirement. "If this is not addressed soon, losses for the Indonesian palm oil sector could reach Rp 300 trillion," he warned.
Furthermore, Sahat elaborated on the unresolved governance issues regarding forest areas. Approximately 3.3 million hectares of palm oil land are said to be in areas with unclear status. "This must be resolved immediately. If forest areas are not addressed, how can we build good palm oil governance?” he questioned.
He also emphasized the need for clear regulations and support from the government to create a conducive business environment. "The government should not interfere too much in the technical management of palm oil but focus on strategic policies, as neighboring countries like Malaysia do,” Sahat concluded. (T2)
For more details, read the April 2025 edition of InfoSAWIT Magazine.
