InfoSAWIT, KUALA LUMPUR – The latest regulation published by the Government of Indonesia that obliges palm oil producers to sell 20% of their production to domestic mills at fixed price does not deliver profits to Malaysia’s palm oil plantations that significantly have exposure in this country.
PublicInvest Research mentioned that the latest policy in Indonesia delivers negative impacts to Malaysia’s plantations that expand in Indonesia. “They must sell some of their crude palm oil (CPO) production in cheap price,” PublicInvest Research mentioned, as quoted from The Star.
“The limitation policy, big numbers of CPO export tax and Leavy in Indonesia make CPO average price get bigger than those in Malaysia,” PublicInvest Research reported.
It also revealed this is bad for Malaysia’s companies, such as, TSH Resources Bhd, Kuala Lumpur Kepong Bhd., Sime Darby Plantation Bhd., and Genting Plantations Bhd., that massively develop palm oil plantations in Indonesia. the companies do not get profits from the expensive CPO.
By publishing Domestic Market Obligation (DMO), the Government of Indonesia mandates 20% of CPO exports to be sold in this country at Rp 9.300 (RM 2,70) per kg for CPO and Rp 10.300 (RM 3) per kg for olein.
PublicInvest Research showed that the numbers cut CPO price significantly for about RM 2.715 per ton for CPO and RM 3.024 per ton for olein. “One thing for sure, CPO and olein in Malaysia is RM 5.700 per ton and RM 5.717 per ton for each. Ministry of Trade Indonesian Republic regulates the latest policy to stabilize palm cooking oil price as it was before,” it said.
Considering the latest trade policy, the research institution predicted, CPO exports from Indonesia will not be much in the next several months. This will have something to do with CPO supplies in the globe. It is predicted too, about 6,6 million tons or 12% of CPO supplies will be reducing in the export activity in the globe.
“There will be close CPO supplies in the globe which was influenced by lack of new planting in the last few years,” it said.
Indonesia could only export 33,2 million tons of CPO and palm kernel in 2022. That is why PublicInvest Research maintain recommendation “neutral” in plantation sectors. (T2)
