Traders, producers believe cooking oil prices will fall<\/p>\n
JAKARTA (JP): Prices of cooking oil are likely to stabilize
\nthis week as stocks of crude palm oil (CPO), the main raw
\nmaterial in its production, are growing in the domestic markets,
\ntraders and CPO producers have said.<\/p>\n
Traders said at the weekend the government's recent increase
\nin the CPO export tax to 60 percent from 40 percent succeeded in
\nsignificantly increasing domestic stocks.<\/p>\n
\"This will help cut the price of cooking oil in the domestic
\nmarket, which have sharply fluctuated in the last several weeks,\"
\na dealer said.<\/p>\n
He said the price would be more realistic thanks to the
\ngovernment's effort to gradually reorganize the distribution
\nsystem of the oil, disrupted following unrest in May.<\/p>\n
The trader said the strengthening of the rupiah in the last
\nseveral days, which was expected to continue at least for the
\nshort term, would also contribute to stability of the price.<\/p>\n
\"If the rupiah continues gaining ground, selling CPO products
\noverseas will no longer be viable, given the high export tax of
\nthe commodity.\"<\/p>\n
The chairman of the Association of Indonesian Edible Oil
\nIndustries (AIMMI), M. Nafis Daulay, said that he was also
\noptimistic the retail price would drop because of the better
\nperformance of the rupiah.<\/p>\n
\"The strengthening rupiah, along with the higher export taxes,
\nwill discourage CPO producers from exporting their products. It
\nwill in turn cause a drop in the retail prices of cooking oil in
\nthe domestic market,\" Nafis told The Jakarta Post from his home
\nin Medan.<\/p>\n
He said a more robust rupiah would automatically lower prices
\nof CPO at home, which are usually based on international prices,<\/p>\n
As a consequence, the CPO price would drop to below Rp 4,850
\nper kilogram from between Rp 4,850 and Rp 5,300 at present.<\/p>\n
Selling CPO products overseas with a 60 percent export tax
\nwould also be unattractive for producers.<\/p>\n
\"If we sell CPO overseas at $600 per ton minus an export tax
\nof 60 percent or $366, we only can get $244 per ton, or Rp 3,400
\nper kilogram at Rp 14,000 per U.S dollar. It will be more
\nprofitable if we sell it at home,\" he said.<\/p>\n
Nafis criticized the government's recent decision to reappoint
\nthe State Logistics Agency (Bulog) to distribute cooking oil on
\nthe domestic market, a measure which shut out state trading
\ncompanies PT Dharma Niaga and PT Pantja Niaga.<\/p>\n
\"Bulog lacks experience in distributing cooking oil in the
\nlocal market. In the past, it only sold cooking oil through its
\nmarket operation.<\/p>\n
\"In addition, we know Bulog has long been criticized for
\ninefficiency and nontransparent practices in distributing cooking
\noil.<\/p>\n
Private trading companies are more business oriented and they
\nhave more experience in distributing cooking oil.\"<\/p>\n
In May, the government ended Bulog's role in the distribution
\nof domestic cooking oil and appointed the state trading companies
\nin its place.<\/p>\n
Under the new scheme which came into effect Friday, state
\nplantation companies will sell their CPO to private refineries
\nand Bulog will buy it at Rp 3,400 per kilogram, and then sell it
\nto retailers at Rp 3,900 per kilogram.<\/p>\n
Bulog will buy cooking oil produced by private companies at
\ndomestic prices, or import cooking oil at international prices if
\ndomestic prices of cooking oil still exceeded Rp 4,000 per
\nkilogram this week, or if domestic supply was not sufficient to
\nmeet local demand.<\/p>\n
Any subsidies necessary in the procurement of CPO will be
\nfinanced by proceeds from the export tax on CPO and its by-
\nproducts.<\/p>\n
Nafis said the price of cooking oil would reach the
\ngovernment's reference level if the system went according to
\nplan, but was still skeptical of Bulog's capabilities.<\/p>\n
\"The cooking oil price will be stable not because of the
\nchange in the distribution system but more on the fundamental
\nfactors such as the strengthening rupiah.\"<\/p>\n
After reaching about 15,000 to the dollar in the last several
\nweeks, the rupiah gained ground at the end of last week to hit
\n13,000 following the International Monetary Fund's approval of
\nthe next tranche of its standby loan to Indonesia.<\/p>\n
Money market analysts expect the currency will further
\nstrengthen in coming weeks as more loan commitments are likely to
\nfollow the IMF's show of confidence. (gis)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/traders-producers-believe-cooking-oil-prices-will-fall-1447893297",
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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