CPO firms asked to cut exports to control prices

CPO firms asked to cut exports to control prices

JAKARTA (JP): House members yesterday asked crude palm oil
(CPO) producers to restrict exports in order to fulfill their
share of the buffer stocks the government is building to keep
down cooking oil prices.

Members of the House of Representatives' Commission IV, which
oversees agricultural and forestry affairs, questioned the
nationalism of major private CPO producers for their preference
in exporting their products, rather than selling it on the
domestic market to stabilize cooking oil prices.

The commission held a hearing yesterday with the executives of
two major private CPO producers -- the plantation divisions of
the Salim Group and Raja Garuda Mas group -- about palm oil
supply and cooking oil prices.

Legislator L. Tomasoa said the inadequate supply of CPO -- the
raw material for cooking oil -- on the domestic market "gives an
impression that CPO producers don't care about the domestic
demand".

"CPO producers should try harder to demonstrate their
nationalism," he said.

The National Logistics Agency early this year required private
and state CPO producers to participate in its buffer stock
program designed to bring down cooking oil prices from around Rp
1,600 in June to Rp 1,400 by December.

The scheme needs a buffer stock of 75,000 tons, of which 50
percent is expected from the private sector and the other 37,500
tons from state companies.

So far, however, private companies have been reluctant to meet
their commitments, saying they are already bound by export
contracts with foreign buyers.

As a result, Bulog has so far built up a buffer stock of only
16,000 tons, of which only 6,000 tons were supplied by private
producers while the remaining 10,000 tons were derived from state
plantation companies.

Minister of Agriculture Sjarifudin Baharsjah said recently
that private CPO producers had reduced their exports as
international prices began to fall.

"Now, when the international prices are declining, they (the
private companies) offer the logistics agency their CPO at prices
agreed months ago, which are higher than current prices," he
said.

The logistics agency initially agreed to pay Rp 1,235 (54 U.S.
cents) per kilogram of CPO for the buffer stock but it intends to
revise downward the prices to approximately Rp 1,100 per kg
because of the price decline in the international market.

Rudian Kopot, the director of Salim Group's oil palm
plantation division, and Semion Tarigan, the general affairs
director of PT Raja Garuda Mas' plantation division, contended
that they had not exported since early this year but used their
CPO production entirely for their cooking oil industries.

The House members, however, doubted the executives'
statements, claiming that the country's cooking oil industry
required only 2.5 million tons to three million tons out of the
national CPO output of around five million tons a year.

Both executives conceded they would agree on any price set by
the government as long as it was reached through negotiations.

"If a price has been fixed by the government, what more could
we do?" Tarigan said.

The Salim Group currently owns 158,000 hectares of oil palm
plantations in Aceh, Riau, Jambi, South Sumatra, South and
Central Kalimantan and Central Sulawesi. Of the total, 81,000
hectares have been yielding crops.

Last year, the group's palm oil production contributed
approximately eight percent (287,000 tons) to the national palm
oil output which reached 3.63 million tons.

Raja Garuda Mas currently owns 108,000 hectares of oil palm
plantations in North Sumatra, Riau and Jambi, with an annual
production of about 210,000 tons. (pwn)