CPO exports fall in response to strong rupiah

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)