Palm oil competitive despite higher rupiah<\/p>\n
KUALA LUMPUR (Dow Jones): The sharp decline in the local price
\nof Indonesian crude palm oil as a result of the stronger rupiah
\nhas reduced returns to local farmers, but has ensured that
\nIndonesian palm oil remains competitive in the international
\nmarket, traders and industry participants say.<\/p>\n
The rupiah's weakness has been one of the factors that enabled
\nIndonesian producers to sell oil cheaply in the international
\nmarket in recent months, ensuring its market share despite the
\nglobal supply glut.<\/p>\n
But even as the rupiah rises this week, the Indonesian oil
\nwill continue to maintain its competitive advantage vis-a-vis the
\nMalaysian oil, traders said.<\/p>\n
Indonesia is the world's second largest producer and exporter
\nof palm oil after Malaysia and has recently posed stiff
\ncompetition to Malaysian exports because of the rupiah's
\nweakness.<\/p>\n
To reflect a steady U.S.-dollar denominated export market, the
\nlocal prices for Indonesian CPO fell Thursday to Rp 2,750\/kg, ex-
\nfactory Thursday in Medan, from Rp 3,750\/kg last Friday.<\/p>\n
Cost of production in Indonesia is still low, while the
\nstronger rupiah may also work to the advantage of growers in the
\nlong run by reducing the cost of imported fertilizer, analysts
\nsaid.<\/p>\n
\"Local (palm oil) prices are lower because of the rupiah, but
\nthe international market is still firm. I think Indonesian oil is
\nstill very cheap compared to Malaysia's,\" said Derom Bangun,
\nchairman of the Indonesian Palm Oil Producers' Association.<\/p>\n
The rupiah rallied to its highest level since February, after
\nthe national assembly Thursday voted in Hamzah Haz, the Muslim-
\nbased United Development Party's head as the country's new vice
\npresident.<\/p>\n
Hamzah's victory lifted the Indonesian rupiah to Rp 9,775 to
\nthe U.S. dollar, from Rp 9,960 before the result. It built on its
\nMonday's sharp gains when Megawati Soekarnoputri was named
\nIndonesia's new president by the People's Consultative Assembly,
\nfollowing the ouster of Abdurrahman Wahid.<\/p>\n
At Rp 2,750\/kg, Thursday's CPO price in Medan is equivalent to
\nUS$281\/ton. Crude palm oil in Malaysia was traded at 1,130
\nringgit ($297) a metric ton, ex-factory, and equivalent to
\nUS$300\/ton.<\/p>\n
Derom said the local Indonesian price included a value-added
\ntax of around 10 percent, which Indonesian exporters aren't
\nrequired to pay.<\/p>\n
Subtracting the tax out of the price, the actual cost price to
\nan Indonesian refiner and exporter to be around US$253\/ton, some
\nUS$47\/ton cheaper than the Malaysian oil.<\/p>\n
The export price in the international market is steady
\nThursday. Spot shipments of RBD palm olein Thursday were at
\nUS$342.50\/ton, free-on-board Malaysian ports and US$340.65\/ton,
\nFOB Java.<\/p>\n
Indonesia has a natural competitive advantage over Malaysia
\nbecause of the substantially lower cost of production there, says
\nJohn K. Kuruvilla, executive director of Agro Hope Bhd., which
\nowns plantations in Malaysia and Indonesia.<\/p>\n
Plantations also stand to gain from a stronger rupiah because
\nmost of the fertilizer is currently imported.<\/p>\n
A stronger rupiah would bring down the cost of operations
\nfurther because the lower import costs would neutralize the
\nadverse impact of lower returns in local currency terms from the
\nsale of oil, Kuruvilla said.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/palm-oil-competitive-despite-higher-rupiah-1447893297",
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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