Malaysia's help sought for CPO price hike

Malaysia's help sought for CPO price hike

JAKARTA (JP): Indonesia is seeking the possibility of
establishing joint forces with Malaysia in a bid to prop up
prices of crude palm oil (CPO) on international markets.

Minister of Forestry and Plantations Muslimin Nasution said on
Tuesday initial talks with the Malaysian government for the
possible cooperation were progressing.

The plan has won the Cabinet's support, the minister said,
adding that the planned cooperation would be focused on ways to
promote the use of CPO on the world market amid the increasingly
popular use of other edible oil such as soybean.

"The cooperation then will be expanded to all CPO producing
countries. We feel that all CPO producing countries should get
together to establish certain efforts to lift the prices," he
told reporters.

Muslimin said the cooperation between the countries could be
directed to form a joint marketing agreement to control supply
and demand in order to make prices stable.

Malaysia, the world's number one CPO producer and Indonesia,
the world's second, were expected to pioneer the cooperation.

Muslimin said the joint marketing agreement would not operate
as a cartel since it would not set prices.

"All soybean producing countries, led by the United States,
established such a marketing agreement in the early 1990s after
seeing that the price of soybean oil kept falling. Why don't we,
as CPO producers, get together and create such an agreement,
too," he said.

He added such an agreement was established among coffee
producing countries, grouped in the Association of Coffee
Producing Countries, the Organization of Petroleum Exporting
Countries (OPEC), the International Rubber Organizations (INRO)
and others.

CPO prices, he said, plummeted to a current US$255 per ton
from over $700 in the fourth quarter of last year.

The director general of plantations, Agus Pakpahan, said the
drop in prices was due to the use of cheaper soybean and canola
oil to substitute CPO, which then caused an oversupply and pulled
down prices.

He predicted that prices would continue to fall due to the
expected good harvest of oil palm plantations in Malaysia and
Indonesia in the coming months.

Muslimin said the government would now focus on an all-out
effort to boost exports of CPO and its by-products, which were
hit by high export taxes.

"I had asked the government to remove the CPO export tax. The
current 10 percent export tax no longer encourages CPO producers
to export the oil," he said.

"The proposal will be discussed at the next Cabinet meeting."

Muslimin said many Indonesian CPO buyers had turned to other
CPO producing countries, especially Malaysia, due to the high
export tax imposed on its products.

Muslimin also said the government would also ask the Malaysian
government to help Indonesia curb smuggling of CPO.

He said many Indonesian oil palm kernels and CPO were smuggled
into Malaysia following the implementation of the high export
tax. The oil palm kernels and CPO were then processed into olein
in Malaysia and exported to other countries.

Meanwhile, Director General of Chemical, Agriculture and
Forest Products Industries Gatot Ibnu Santoso said separately on
Tuesday that the current plunge in prices should be used as an
opportunity to develop the country's oleochemical industry and
other downstream industries using CPO and its by-products.

"The domestic market is still wide open for investors who want
to develop the oleochemical industry," he said.

He said domestic cooking oil and the oleochemical industry
were expected to absorb 3.9 million tons of CPO out of six
million to be produced this year. (gis/prb)