CPO production predicted to rise to 6m tons

JAKARTA (JP): Indonesia's oil palm plantations are expected to yield 6 million tons of crude palm oil this year, up from the 4.9 million tons produced last year, an industry executive has said.

The chairman of the Federation of Palm Oil Producers, Derom Bangun, said on Monday production would likely pick up due to an improvement in the climate and the first harvests of trees planted four years ago.

"With the weather getting back to normal and the maturing of new trees, I'm optimistic our production will reach 6 million tons this year," Derom told The Jakarta Post via telephone from Medan.

Last year, the abnormal weather pattern called El Nino which caused a long drought in certain areas in the country dragged down local oil palm production.

Meanwhile, a researcher of the Medan-based Center of Oil Palm Research, Ponten Naibaho, said he expected an increase in oil palm plantation areas in the country by 100 to 200 hectares this year, from the current 2.3 million hectares.

Naibaho attributed the expansion of the oil palm plantation to the return of investor interest in the oil palm sector, following a recent significant cut in the export tax on palm oil products.

"The export tax cut will stimulate export activities of CPO and boost productivity in the oil palm sector," Naibaho was quoted by Antara as saying on Monday.

The government has slashed the export tax on CPO, palm oil kernels, and crude palm olein to 40 percent each from 60 percent beginning Monday. It has also lowered the tax of refined bleached deodorized (RBD) palm oil and RBD palm olein to 32 percent each from 55 percent.

In the past three years, foreign and local investors lost interest in expanding their oil palm plantations here because prices of oil palm fruits had fallen, while prices of fertilizers and pesticides continued to rise as did the theft of the fruit from the plantations.

Naibaho said CPO production this year would help stabilize domestic prices of cooking oil and boost exports.

However, Derom Bangun said the difference of 8 percentage points between the export taxes of RBD olein and CPO would likely boost domestic prices of cooking oil.

"People will likely export olein and cooking oil instead of CPO, causing the price of cooking oil to increase in the local market," he said.

He said the normal difference between the price of RBD olein and CPO is Rp 300 (33 U.S. cents), but with the former's 32 percent export tax, the difference would reach Rp 700 to Rp 800.

This would give large margins to processors and boost the prices of cooking oil, he said.

"Cooking oil prices domestically would increase but, this time, not because of the export of CPO," he said. (das)