Robust domestic demand on crude palm oil (CPO) for biofuel is likely to compensate losses from declining prices of CPO on world markets, a ministry official says.
"With a demand on CPO for biofuel, there will be a new market of about 1 million tons," said Bayu Krisnamurthi, deputy head of agriculture and marine affairs at the Coordinating Ministry for the Economy.
Indonesia's CPO price currently stood at around US$850 per ton, Bayu said, but was likely to rebound to between $900 and $1,000 per ton this year despite it being way below the $1,200 mark recorded in March and April.
CPO was sold at 2,653 ringgit ($794.55) per ton in Kuala Lumpur, Malaysia, down 41 percent from a record high of 4,468 ringgit on March 4, Bloomberg reported. Malaysia is the second biggest CPO producer in the world after Indonesia.
Bayu said, "a price of US$900 to $1,000 per ton would create a balance between the biofuel industry and the CPO industry".
The government's plan next year, he added, was to increase CPO production to 20 million tons, of which 15 million tons would be for export. According to the Agriculture Ministry, Indonesia's CPO production this year will reach around 17 million tons.
Following the decline in prices, the government is slated to cut export tax for CPO and the base price of CPO to calculate the levy on shipments of the commodity next month.
The base price to calculate the tax will be set at $902 per ton in September, while the tax rate will be cut to 10 percent.
The base price for this month is $1,106 per ton and the tax rate is 15 percent. -- JP/Aditya Suharmoko