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)