Monday, 8 December 2014


Oil palm is not the only commodity whose piece is sluggish, because other vegetable oils are also experiencing the same thing, such as soybean, rapeseed, and sunflower seed. As stated by Executive Director of the Indonesian Palm Oil Association (GAPKI), Fadhil Hasan, in his press conference on Tuesday (October 21), the weakening of commodities price was due to weak purchasing power, production increase and abundant stocks.

In terms of price, the average CPO price in Rotterdam in September 2014 is in the range of USD 680 – USD730 per MT with average price of USD 712 per MT. Price is down about 5,4% compared to the average price in August at USD 753 per MT. Daily price of CPO in the global market (CIF Rotterdam) is continuously decline starting the first to the third week of October, where prices move in the range of USD 695-USD 730 per MT.

World vegetable oil prices that continue to weaken, including crude palm oil (CPO), is not able to stimulate Indonesian CPO exports. This is reflected in the export performance of CPO and its derivatives from Indonesia in September 2014. Exports of CPO and its derivatives in September only reached 1,685 million tons, down 1.6% compared to the previous month at 1.72 million tons. Export performance year-on-year from January to September 2014 was also down 1.72 compared to the same period last year, i.e. from 15.3 million tons in September 2013 to 15 million tons in September 2014.

The decline in export performance is due to the weak purchasing power of export destination countries (China and India). Although prices are ready low and export duties are also lower than the previous month, it was not able to increase Indonesia’s CPO exports. Weak demand from export destinations was due to economic slowdown in major export destination countries, and prices of other vegetable oils were also low (soybean) so that CPO as substitute oil cannot compete.

In September, the volume of Indonesia’s palm oil exports to India was down 185 thousand tons, or 38% compared to last month, from 490 thousand tons in August to 305 thousand tons in September 2014. The performance of Indonesia’s palm oil exports to India year-on-year was down 26% from 4.5 million tons in January – September 2013 to 3.3 million tons in the same period in 2014. The decline in the performance of experts to India was due some reasons, such as the Indian government plans to raise import duty for palm oil imports, weak Rupee exchange rate against the US dollar, and high inflation in India.

The same thing happens in China. The volume of palm oil exports in September 2014 only reached 56.26 thousand tons, down 31% compared to last month at 81 thousand tons. Export to china year-on-year was down 10% from 1.77 million tons in January-September 2013 to 1.60 million tons in the same period in 2014. Sluggish demand from China is because of the same reason as India, which is the difficulty to obtain bank loan. In addition, china also issued a new regulation on standards for pesticide residues, including edible oils. The volume of Indonesia’s palm oil exports to the European countries also decreased 12% from 341 thousand tons in August to 302 thousand tons. The same thing happened in Pakistan where exports fell 7% from 194 thousand tons in August to 181 thousand tons in September 2014.

What is interesting is that the volume of exports to the United States, where in September 2014 the volume of exports to the United States increased 86% from 36,9 thousand tons in August to 68.8 thousand tons in September 2014. This is interesting because soybean production in South America is abundant and soybean prices are cheap.

Until the end of the month, the price of CPO is predicted to stagnate. GAPKI predicted that CPO prices until the end of October will tend to move in the range of USD 700 – USD 730 per MT. Meanwhile, in October 2014, Export Reference Price is determined by the Ministry of Trade at USD 640 and export duty at 0% with reference to the heightened average price (CPO Rotterdam, Kuala Lumpur, and Jakarta) at USD 710 per MT. Looking at the trend of global CPO prices that move below USD 750 per MT, GAPKI estimated that export duty for October will remain 0%. (E)

Business News - October 24, 2014

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