The imposition of mandatory domestic sales on palm oil will suppress the price of palm oil fresh fruit bunch (TBS), according to the Indonesia Palm Oil Farmer Association (Apkasindo).
Apkasindo Head Gulat Manurung stated here on Friday that the policy will spark the palm oil industry to slash the price of TBS from the farmers’ side.
“The policy is only aimed at saving cooking oil consumers, but on the other hand, it victimizes us, the farmers,” Manurung stressed.
The increased price of crude palm oil (CPO) would reflect on the price of fresh fruit bunches, though it would not significantly increase the farmers’ profits as fertilizer prices had skyrocketed.
In 2021, the price of fertilizers had jumped by 185 percent.
Hence, Apkasindo has called on the government to prepare a policy that necessitates industries, while buying palm oil fresh fruit, to refer to the commodity’s price in the international market (CIF Rotterdam).
The government has imposed Domestic Market Obligation (DMO) and Domestic Price Obligation (DPO) on crude palm oil, olein, and cooking oil in a bid to curtail a rise in the domestic cooking oil prices that have climbed about 40 percent from a year earlier.
Sharing the same opinion, Executive Director of Indef Tauhid Ahmad believes that the imposition of DMO and DPO would potentially curb the TBS price and be disadvantageous to palm oil farmers.
According to Ahmad, such an unfavorable market would discourage farmers to manage their plantations, and this could reduce the supply of palm oil FFB.
Ahmad cautioned of fraud occurring in the event of the cooking oil price differences.
Under the DMO policy, cooking oil price was segregated into three categories: Rp11 thousand per liter for bulk cooking oil, Rp13,500 for simple-packed cooking oil, and Rp14 thousand for premium-packed cooking oil.
Ahmad noted that of the total 53 million tons of CPO and Palm Kernel Oil production, some 30 million tons were exported.
Of the total exports, 20 percent, or some six million tons, are processed into cooking oil.
National cooking oil consumption has reached 5.6 million tons per year.
Source: Antara News