Govt urged to open palm oil futures trading

Jakarta (JP): The Indonesian vegetable oil and fat trade federation (FAMNI) cautioned the government yesterday against intervening in the crude palm oil (CPO) trade to push its price down and proposed instead the opening of the futures trading Bourse for agricultural produce it closed last year.

The federation's vice chairman Tarmidzi Rangkuti voiced doubts about a recent government appeal to the joint marketing board of state plantations in the country to cut their CPO selling price to Rp 900 per kilogram.

The official appeal will not work as the prevailing price of Rp 1,000 per kilogram is the outgrowth of strong market demand shored up by rising consumption.

Tarmidzi warned that official intervention into pressing down CPO prices would only benefit speculators who would buy from the joint marketing board at the official price and sell to cooking oil mills at prevailing market prices.

Cooking oil prices to consumers would remain high, he said, referring to reports of price hikes in several provinces that spurred the government to make its appeal.

He ascribed the hikes to rising consumption and rumors of management streamlining at state oil palm plantations.

As an alternative, Tarmidzi recommended opening a futures trading bourse for agricultural commodities.

He said Malaysia, the world's biggest CPO producer of six million tons a year, has opened futures trading in Kuala Lumpur facilitating producers-consumers exchanges by which consumers judge their capital needs for future purchases.

Indonesia exported 30 percent of its 3.7 million ton production last year. (17)