CPO exports fall in response to strong rupiah
JAKARTA (JP): Producers of crude palm oil (CPO) have cut back on exports as the rupiah gains some strength against the U.S. dollar and the government maintains a high export tax on the product, an industry executive has said.
The chairman of the Association of Indonesian Palm Oil Producers (Gapki), Derom Bangun, said on Wednesday exports were no longer profitable due to the rupiah's strength, and most of the producers were now selling the commodity on the local market.
"The price that the local processors (of crude oil) pay is slightly higher than the profit we get from exporting," Derom told The Jakarta Post by telephone from Medan.
The international free-on-board price of CPO is currently US$660 per metric ton, or 66 U.S. cents per kilogram.
At the current exchange rate of about Rp 8,800 per U.S. dollar plus a 60 percent export tax, it amounts to about Rp 2,100 per kilogram, compared to the domestic price of around Rp 2,300, he said.
Last June, the government raised export taxes on CPO and its by-products to up to 60 percent in a bid to discourage exports of the commodities, the main ingredient in local cooking oil.
The rupiah revived to about the 8,000 level in recent weeks after it traded at around 12,000 in August and early September.
However, Derom said local processors of cooking oil could not absorb all the CPO output in the country, resulting in at least 400,000 tons stored in tanks awaiting processing into olein.
Half of the amount was produced by the state-owned CPO producers and the rest belonged to private firms.
This created opportunities for local processors to suppress the CPO price in the domestic market, he added.
"Several weeks ago the domestic price of CPO was better than the profit we get from exporting, but the domestic price continued to go lower and lower. Now, the domestic price and export prices are almost at the same level."
Several producers have begun exporting again as the domestic price lowers, but others are currently waiting for government to lower the CPO export tax, he said.
Minister of Trade and Industry Rahardi Ramelan on Tuesday reiterated that the government would not lower the taxes on CPO and its by-products until after the Moslem Idul Fitri festivities in January to ensure the local supply.
Derom said demand for cooking oil normally rose by 20 percent to 30 percent during the Idul Fitri holiday from the average monthly demand of 160,000 tons.
The state-owned plantation companies (PTPNs) are required to sell all their production to the Indonesian Distribution Cooperatives (KDI), he said.
KDI was appointed by the government in September to replace the State Logistics Agency (Bulog) in distributing cooking oil in the country after subsidies on the commodity were lifted.
Derom said the PTPNs' tanks were overflowing while KDI bought in volumes below the companies' productions.
"Some of the companies had stocks of 40,000 tons of CPO in their tanks while they could not get cash flow because KDI was buying in very small volumes."
Some PTPNs could no longer finance their operations from the sales of CPO, forcing them to obtain bridging finance from banks which imposed interest rates of 35 percent to 40 percent, he said.
Production of CPO this year is expected to reach 4.8 million tons from the initial target of 5.9 million tons. (das)