Bulog to spend $55.5m on CPO procurement

Bulog to spend $55.5m on CPO procurement

JAKARTA (JP): The National Logistics Agency (Bulog) will spend
up to Rp 125 billion (US$55.5 million) on the importation of
olein and the procurement of crude palm oil (CPO) from domestic
producers in order to amass an edible oil reserve of 75,000 tons.

Bulog Chief Beddu Amang told reporters after meeting with
private CPO producers and related government officials yesterday
that Rp 90 billion of the funds would come from Bank Indonesia
(the central bank) as an interest-free loan.

"Hopefully the olein imports and CPO procurement will be
enough to stabilize the price of edible oil on the domestic
market without any more government subsidies," he said, adding
that the government would also continue to impose taxes on CPO
exports and resort to imports whenever it was felt necessary.

He said that between July 2 and July 15 Indonesia imported
19,000 tons of olein and cooking oil from Malaysia -- the world's
biggest CPO producer. The imports were unloaded in the ports of
Surabaya, East Java (5,823 tons), Cirebon, West Java (4,275
tons), Semarang, Central Java (1,500 tons) and Jakarta (8,000
tons).

Beddu announced earlier this month that a buffer stock was
required for market operations aimed at gradually cutting the
price of cooking oil to Rp 1,400 per kilo -- the same level
recorded before the Idul Fitri holidays in March -- by September.

The current price of cooking oil is between Rp 1,550 and Rp
1,560 per kilo.

Beddu called on both private and state oil palm plantation
companies to participate in the building of the buffer stock,
with each contributing an equal amount.

The collection of the stock, he said, would be adjusted to the
cycle of CPO production. Bulog has targeted the procurement of
20,000 tons of CPO this month, 25,000 tons in August and 30,000
tons in September.

Beddu said that, by retaining a buffer stock of CPO -- the raw
material for cooking oil -- cooking oil would no longer be a
component that might raise the country's inflation rate.

"Hopefully, it will have a negative effect on inflation and
become an affordable commodity for everyone," he said.

Food stuffs currently contribute about two-thirds of
Indonesia's inflation rate.

Beddu said yesterday that private producers had agreed to the
buffer stock scheme and would supply 37,500 tons, or half, of the
75,000 tons of the planned buffer stock.

The nine CPO producers which have agreed to join in Bulog's
market operations are the Sinar Mas group, which will contribute
9,000 tons; the Salim Group, 8,500 tons; Sucofindo, 5,000 tons;
Raja Garuda Mas, 3,500 tons; Tolam Tiga Indonesia, 3,000 tons;
Lonsum Indonesia, 2,600 tons; Astra, 4,000 tons; Duta Permai, 900
tons and Indecda, 1,000 tons.

Contracts covering CPO prices and the size of the contribution
from each producer would be signed today, he said.

"This is expected to bind them to their allocation because, so
far, Bulog has only requested that they participate in the market
operation," Beddu said.

He said Bulog would purchase the CPO from producers at Rp
1,235 per kilo, including tax, for the buffer stock.

"With the current CPO prices of Rp 1,387 per kilo, private
producers will be contributing about Rp 150 for each kilo of
CPO," he said.

Tarmizi Rangkuti, vice chairman of the Federation of Vegetable
Oil Associations, who also attended yesterday's meeting and press
conference, said he hoped that the government would reconsider
the level of CPO export taxes after the prices of the commodity
came down again.

"As partners of the government, we are willing to join the
market operations. However, we hope that the government will
review export taxes once prices have improved," he said.

Cooking oil is a primary foodstuff in Indonesia. Two million
tons, or 80 percent, of Indonesian cooking oil is made from palm
oil, while the remainder comes from coconut oil. (pwn)