State firms asked to sell CPO at discount prices

JAKARTA (JP): Minister of Agriculture Sjarifudin Baharsjah has ordered all state-owned oil palm plantation firms to sell crude palm oil (CPO) at discounted prices on the domestic market to help stabilize cooking oil prices.

The minister said yesterday the state-owned firms would sell about 100,000 tons of CPO and olein per month, almost 100 percent of their production.

The instruction, issued Tuesday, states that ministry- appointed distributors, including the Association of Edible Oil Industries, is to sell olein at below Rp 3,300 per kilogram.

Olein was priced at about Rp 4,400 per kilogram last week in Jakarta.

The Ministry of Agriculture overseas several oil palm plantations which operate under PT Perkebunan Nusantara (PTPN).

The minister said olein prices had already started to fall due to the ministry's market operation.

Reuters reported yesterday that olein was quoted between Rp 2,750 and Rp 2,800 per kilogram in Jakarta.

"If the price becomes stable and there is enough supply in the market, there would no more complaints about inflated cooking oil prices and we would then be able to stop banning exports," he said after a hearing with the House of Representatives Commission III for agriculture, forestry, transmigration and food affairs.

He said PTPN produced 109,000 tons of CPO last month, an amount which could make 70,000 tons of olein.

Olein is a raw material of cooking oil.

He said Indonesia produced 6 million tons of CPO to make 4.8 million tons of olein every year.

Local demand of olein totals about 3.5 million tons every year.

"Our supply should meet domestic demand. But what is happening now is an abnormal demand because many consumers are stockpiling cooking oil because they are scared that supply might dry up. The situation is getting worse because many producers have withheld CPO from the market to wait for higher market prices," he said.

He said PTPN currently produces about 1.8 million tons of CPO a year, about 35 percent of the country's total production.

Sjarifudin asked retailers to be satisfied with a "reasonable" profit margin, keeping the price of cooking oil affordable in the market and not burdening consumers.

He said the supply of cooking oil to the domestic market has been unstable, but with a constant flow of the commodity into the market prices should eventually fall.

Minister of Industry and Trade Tunky Ariwibowo announced Tuesday that the government has extended its export ban of any kind of palm oil, olein and CPO derivatives for an indefinite time period.

The continued export ban will violate the government's International Monetary Fund (IMF) agreement last month to stop palm oil export restrictions and restrictions on other commodities from March.

The agreement is part of IMF's requirements to provide US$43 billion in bailout funds for the country's ailing economy.

Last December, the government banned the export of CPO, olein and other CPO derivatives until March to ensure an adequate domestic supply of cooking oil and to stabilize its price.

The measure failed to stop cooking oil prices from soaring and food stores have had difficulties keeping cooking oil in stock.

CPO producers are reportedly withholding their products in anticipation of gaining from sales overseas when the export ban is lifted.

Many retailers also are reportedly stockpiling cooking oil to sell when prices go up again after the export ban is lifted.

Sjarifudin said the export ban was necessary, although it would create losses for palm oil producers, traders and the government.

Indonesia is the world's second largest producer of CPO after neighboring Malaysia. (gis)